U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(MARK ONE)

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

For the Fiscal Year Ended December 31, ~~2012~~2013

¨ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _______________ to _________________

Commission file number: 001-35058

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED

(Exact name of Registrant as Specified in Its Charter)

NEVADA		26-3552213
(State or Other Jurisdiction		(I.R.S. Employer Identification No.)
of Incorporation or Organization)

Unit 1217-1218, 12F of Tower B, Gemdale Plaza, No. 91 Jianguo Road Chaoyang District, Beijing, People’s Republic of China		100022
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code:

(86) 10-8571-2518

Securities Registered Pursuant To Section 12 (b) Of The Act:

Common Stock, Par Value $0.001 Per Share

Securities Registered Pursuant To Section 12 (g) Of The Act:

Name of each exchange on which registered: The NASDAQ Stock Market LLC

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes x No

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 x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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 ¨

(Do not check if a smaller reporting company)

Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The aggregate market value of the 19,~~698~~389,~~799~~787 shares of ~~common~~ common equity stock held by non-affiliates of the registrant was approximately $2328,~~441~~115,~~571~~191 asimmediately prior to the effective time of the ~~June~~Merger 30(as defined below) on April 14, ~~2012~~2014, the ~~last~~day on which the registrant filed Articles of Merger with the Secretary of State of the State of Nevada, pursuant to which Trunkbow International Merger Sub Limited (“Merger Sub”), a Nevada corporation and a direct wholly owned subsidiary of Trunkbow Merger Group Limited (“Parent”), a business ~~day~~company with limited liability incorporated under the laws of the British Virgin Islands, merged with and into the registrant’s ~~most~~(the ~~recently~~“Merger”), with ~~completed~~the ~~second~~registrant ~~fiscal~~surviving ~~quarter~~the Merger as a wholly owned subsidiary of Parent, and the Merger became effective, based on the last sale price of the registrant’s common stock on such date of $1.1945 per share, as reported on the NASDAQ Global Market. Immediately prior to the effective time of the Merger on April 14, 2014, the registrant had 36,807,075 shares of common stock issued and outstanding. Each share of the registrant’s common stock was cancelled at the effective time of the Merger.

There were 36,807,075 shares of common stock of the registrant outstanding as of April 26, 2013.

DOCUMENTS INCORPORATED BY REFERENCE

None.

TABLE OF CONTENTS

PART I			3
	Item 1	Business	3
	Item 1A.	Risk Factors	1825
	Item 1B.	Unresolved Staff Comments	3125
	Item 2	Properties.	3125
	Item 3	Legal Proceedings	3125
	Item 4	Mine Safety Disclosures	3127
PART II			3228
	Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	3228
	Item 6	Selected Financial Data	3228
	Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3228
	Item 8	Financial Statements and Supplementary Financial Data	4137
	Item 9	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.	4137
	Item 9A.	Controls and Procedures	4137
	Item 9B.	Other Information	4238
PART III			4339
	Item 10	Directors, Executive Officers and Corporate Governance	4339
	Item 11	Executive Compensation	5245
	Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	5446
	Item 13	Certain Relationships and Related Transactions and Director Independence	5548
	Item 14	Principal Accounting Fees and Services.	5649
PART IV			5750
	Item 15	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	5750

INTRODUCTORY NOTE

Except as otherwise indicated by the context, references in this Annual Report on Form 10-K (this “Form 10-K”) to the “Company,” “Trunkbow,” “we,” “us” or “our” are references to the combined business of Trunkbow International Holdings Limited and its consolidated subsidiaries. References to “Trunkbow BVI” are references to our wholly-owned subsidiary, Trunkbow International Holdings Ltd., a BVI company; references to “Trunkbow Hong Kong” are references to our wholly-owned subsidiary, Trunkbow (Asia Pacific) Investment Holdings Limited, a Hong Kong company ; references to “Trunkbow Shandong” are to our wholly-owned subsidiary, Trunkbow Asia Pacific (Shandong) Company, Limited, a PRC wholly foreign owned enterprise ; references to “Trunkbow Shenzhen” are to our wholly-owned subsidiary, Trunkbow Asia Pacific (Shenzhen) Company, Limited, a PRC wholly foreign owned enterprise ; references to “Trunkbow Technologies” are to our contractually controlled entity, Trunkbow Technologies (Shenzhen) Company, Limited, and references to “Delixunda” are to Beijing Delixunda Technology Co., Ltd., our contractually controlled entity . References to “China” or “PRC” are references to the People’s Republic of China. References to “RMB” are to Renminbi, the legal currency of China, and all references to “$” and dollar are to the U.S. dollar, the legal currency of the United States.

Special Note Regarding Forward-Looking Statements

This report contains forward-looking statements and information relating to Trunkbow International Holdings Limited that are based on the beliefs of our management as well as assumptions made by and information currently available to us. Such statements should not be unduly relied upon. When used in this From 10-K, forward-looking statements include, but are not limited to, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and similar expressions, as well as statements regarding new and existing products, technologies and opportunities, statements regarding market and industry segment growth and demand and acceptance of new and existing products, any projections of sales, earnings, revenue, margins or other financial items, any statements of the plans, strategies and objectives of management for future operations, any statements regarding future economic conditions or performance, uncertainties related to conducting business in China, any statements of belief or intention, and any statements or assumptions underlying any of the foregoing. These statements reflect our current view concerning future events and are subject to risks, uncertainties and assumptions. There are important factors that could cause actual results to vary materially from those described in this Form 10-K as anticipated, estimated or expected, including, but not limited to: competition in the industry in which we operate and the impact of such competition on pricing, revenues and margins, volatility in the securities market due to the general economic downturn; Securities and Exchange Commission (the “SEC”) regulations which affect trading in the securities of “penny stocks,” and other risks and uncertainties. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward- looking statements, even if new information becomes available in the future. Depending on the market for our stock and other conditional tests, a specific safe harbor under the Private Securities Litigation Reform Act of 1995 may be available. Notwithstanding the above, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) expressly state that the safe harbor for forward-looking statements does not apply to companies that issue penny stock. Because we may from time to time be considered to be an issuer of penny stock, the safe harbor for forward-looking statements may not apply to us at certain times.

PART I

Item 1. Business.

Company Background

Our History and Corporate Structure

Prior to the share exchange transaction described below (the “Share Exchange”), we were a “shell” company with nominal assets organized under the name Bay Peak 5 Acquisition Corp. (“BP5”). We were incorporated in the State of Nevada on September 3, 2004 as a wholly owned subsidiary of Visitalk Capital Corporation (“VCC”). The Company was formed as part of the implementation of the Chapter 11 reorganization plan (the “Visitalk Plan”) of visitalk.com, Inc. (“Visitalk.com”), a former provider of VOIP services. The Visitalk Plan was deemed effective by the Bankruptcy Court on September 17, 2004 (the “Effective Date”). On September 22, 2004, Visitalk.com was merged into VCC, which was authorized as the reorganized debtor under the Visitalk Plan.

On July 28, 2008, pursuant to Stock Purchase Agreements (“SPAs”), we sold 5,971,898 shares of common stock to two parties unaffiliated with us (the “Purchasing Shareholders”) for a total payment of $51,000, or approximately $.008 per share (the “Change of Control Transactions”). On August 29, 2008, the SPAs were approved by our shareholders at a special shareholders’ meeting and all the closing conditions of the SPAs were met. After the Change of Control Transactions, including the impact of a related master settlement agreement, these newly issued shares represented 85.5% ownership of us. One of the parties, Bay Peak, LLC (“Bay Peak”), had contacts with various companies and individuals in Asia, in particular the PRC. Cory Roberts, the managing member of Bay Peak, was appointed to our Board of Directors and elected President in conjunction with the Change of Control Transactions. Mr. Roberts resigned as a member of our Board of Directors on March 30, 2011. On August 28, 2008, shareholders authorized adopting the name of Bay Peak 5 Acquisition Corp. Also on August 28, 2008, shareholders ratified a one-for-seven reverse stock split, which was implemented on January 6, 2010 and in January 2010, authorized a further reverse split of 4.14 for 1, which was implemented on January 27, 2010.

Effective as of September 24, 2008, we entered into a Plan and Agreement of Merger (the “Plan and Agreement of Merger”) with VT Dutch Services, also a subsidiary of VCC, pursuant to which VT Dutch Services merged with and into us. Pursuant to the merger, holders of shares of common stock of VT Dutch Services received the identical number and class of our stock as they held in VT Dutch Services, and holders of warrants of VT Dutch Services received the identical number and class of our warrants as they held in VT Dutch Services. In connection with the Plan and Agreement of Merger, VT Dutch Services also changed its name to “Bay Peak 5 Acquisition Corp.” All shares of common stock of BP5 held prior to the consummation of the transactions contemplated by the Plan and Agreement of Merger were cancelled. The sole purpose of the merger was to change the corporate domicile of VT Dutch Services from Arizona to Nevada and to effect a name change of VT Dutch Services.

In February 2010 we entered into the Share Exchange Agreement with Trunkbow BVI and the shareholders of Trunkbow BVI (the “Shareholders”), who together owned shares constituting 100% of the issued and outstanding ordinary shares of Trunkbow BVI (the “Trunkbow BVI Shares”), and Bay Peak, our former principal shareholder. Pursuant to the terms of the Share Exchange Agreement, the Shareholders transferred to us all of the Trunkbow BVI Shares in exchange for the issuance of 19,562,888 shares of our common stock (the “Share Exchange”). As a result of the Share Exchange, Trunkbow BVI became our wholly owned subsidiary. After giving effect to the Share Exchange, the sale of common stock in the February 2010 Offering (as defined below) and the BP5 Warrant Financing (as defined below) (i) existing shareholders of Trunkbow BVI owned approximately 60.25% of our outstanding common stock, (ii) purchasers of common stock in the February 2010 Offering owned approximately 26.01% of our outstanding common stock (including 7.7% owned by VeriFone, Inc.), (iii) the holders of BP5 warrants owned approximately 8.54% of our outstanding common stock and (iv) the pre-existing shareholders of BP5 owned approximately 5.2% of our outstanding common stock.

Concurrent with the Share Exchange, (i) we entered into a securities purchase agreement (the “Purchase Agreement”) with certain investors (the “Investors”) for the sale of an aggregate of 8,447,575 shares (the “Investor Shares”) and 1,689,515 warrants (the “Investor Warrants”), for aggregate gross proceeds equal to $16,895,150 (the “February 2010 Offering”) and (ii) certain holders of our outstanding warrants issued to creditors and claimants of Visitalk.com, in accordance with the Visitalk Plan, referred to herein as the “BP5 Warrant Investors” exercised the 2,774,500 warrants owned by them for an aggregate exercise price of $5.5 million and received warrants to purchase an aggregate of 554,900 shares of common stock (“BP5 Warrant Financing”).

Following the Share Exchange, we are a leading provider of technology platform solutions for mobile telecom operators in the People’s Republic of China. Our patented platforms provide a comprehensive solution for Chinese telecom operators to deliver and manage the distribution of various mobile value-added service (“MVAS”) applications to their subscribers. The Trunkbow brand is regarded by Chinese telecom operators as a well-managed, trusted provider of technology solutions. Our R&D focused business model provides us with a defensible market position as a technology solutions provider to the telecom operators.

Trunkbow was founded in 2001 by former Silicon Valley engineers with extensive experience in the telecom industry. We have been able to develop first to market application platforms that enable telecom operators to generate significant new revenue streams by leveraging our extensive knowledge of the mobile network technology. Since ~~our~~ inception, weTrunkbow ~~have~~has invested significant time and resources to develop cutting edge technology solutions for our customers. WeTrunkbow ~~were~~was the first to create and develop a Color Ring Back Tone (“CRBT”) application platform for Shandong Unicom in in 2003. Since then, this innovative service solution became the third largest revenue contributor for China Mobile after voice and Short Message Service (“SMS”) until 2009.

We continue to offer superior innovative products to our customers. We believe we are a technological leader among our competitors and will continue to invest significant revenues to maintain our technological leadership.

On February 8, 2011, we consummated our initial public offering of 4 million shares of our common stock and the shares of our common stock were listed on NASDAQ.

On November 2, 2012, ~~we announced that~~ our board of directors had received a preliminary non-binding proposal letter from Hou Wanchun, Chairman of the board of directors, and Li Qiang, Chief Executive Officer and a director (together, the “Consortium Members”), that proposed a “going-private” transaction involving the acquisition of all of the outstanding shares of our common stock not beneficially owned by the Consortium Members at a price of US$1.46 per share in cash. ~~According to the proposal letter, the transaction is intended to be financed with a combination of debt and equity capital.~~

~~Our~~On ~~board~~December of10, ~~directors~~2013, ~~has~~we ~~formed~~entered ainto ~~special~~an ~~committee~~Agreement ofand ~~independent~~Plan ~~directors~~of Merger (the ~~“Special~~"Merger ~~Committee”~~Agreement") ~~consisting~~with ofTrunkbow ~~Dr.~~Merger ~~Tan~~Group ~~Kokhui~~Limited ("Parent"), a business company with limited liability incorporated under the laws of the British Virgin Islands and wholly owned by Dr. Wanchun LvHou, ~~Tingjie~~chairman of our board of directors, and Mr. ~~Huang~~Qiang ~~Zhaoxing~~Li, toour ~~consider the~~chief ~~going-private~~executive ~~transaction.~~officer ~~The~~and ~~Special~~director, ~~Committee~~and ~~has~~Trunkbow ~~retained~~International ~~financial~~Merger Sub Limited ("Merger Sub"), a Nevada corporation and ~~legal~~a ~~advisors~~wholly owned, direct subsidiary of Parent, pursuant to ~~assist~~which itParent will inacquire ~~its~~the ~~review~~Company for US$1.46 per share of the Company's common stock (a "Share") without interest (the ~~going-private~~"Merger ~~transaction~~Consideration").

ToOn ~~date~~April 14, no2014, ~~decisions~~at ~~have~~a ~~been~~special ~~made~~meeting ~~with~~of ~~respect~~the tostockholders of ~~our~~the ~~response to~~Company, the ~~going-private~~Company's stockholders voted in favor of the proposal. ~~There~~to ~~can~~adopt bethe nopreviously ~~assurance~~announced ~~that~~Merger ~~any~~Agreement, ~~definitive~~dated December 10, ~~offer~~2013, ~~will~~by beand ~~made~~among the Company, ~~that~~Parent ~~any~~and ~~agreement~~Merger ~~will~~Sub, pursuant to which Merger Sub would be ~~executed~~merged with and into the Company, orwith ~~that~~the ~~this~~Company orcontinuing ~~any~~as ~~other~~the ~~transaction~~surviving ~~will~~company beafter the merger as a wholly owned subsidiary of Parent (the "Merger"). The Merger Agreement was approved orby ~~consummated~~approximately 81.7% Weof ~~will~~the ~~provide~~outstanding ~~relevant~~shares ~~updates~~of ~~with~~Company ~~respect~~common tostock and approximately 67.5% of the ~~going~~outstanding ~~private~~shares ~~transaction~~of orCompany ~~any~~common ~~other~~stock ~~transaction~~(excluding asthe ~~required~~shares ~~under~~of Company common stock held by Dr. Wanchun Hou and ~~applicable~~Mr. ~~law~~Qiang Li and their respective affiliates), satisfying the voting requirements to adopt the Merger Agreement.

On April 14, 2014, the Merger was completed. As a result of the Merger, Merger Sub merged with and into the Company, with the Company continuing as the surviving company after the Merger as a wholly owned subsidiary of Parent.

On the same date, trading of the Company’s shares of common stock on NASDAQ Stock Market LLC (the "NASDAQ") was suspended and NASDAQ filed a Form 25 with the Securities and Exchange Commission (the "SEC") to delist and deregister the shares of Company common stock.

On April 24, 2014, the Company filed a Form 15 with the SEC to terminate its reporting obligations under the Securities Exchange Act of 1934.

Corporate Structure

Our current corporate structure is set forth below:

(1)

Trunkbow International Holdings Limited (“Trunkbow BVI”) was established in the British Virgin Islands (“BVI”) on July 17, 2009. Trunkbow BVI itself has no significant business operations and assets other than holding of equity interests in its subsidiaries through a series of reorganization activities described below (the “Reorganization”).

(2)

Trunkbow (Asia Pacific) Investment Holdings Limited (“Trunkbow Hong Kong”) was established as an Investment Holding Company in Hong Kong Special Administrative Region of the People’s Republic of China (the “PRC”) on July 9, 2004. As part of the reorganization, on September 16, 2009, the entire issued share capital Trunkbow Hong Kong was transferred to Trunkbow BVI.

(3)

Trunkbow Asia Pacific (Shandong) Company, Limited (“Trunkbow Shandong”) was established as a wholly foreign owned enterprise on December 10, 2007 in Jinan, Shandong Province, the PRC by Trunkbow Hong Kong. It is principally engaged in research and development of application platforms for mobile operators in the PRC.

(4)

Trunkbow Asia Pacific (Shenzhen) Company, Limited (“Trunkbow Shenzhen”) was established as a wholly foreign owned enterprise on June 7, 2007 in Shenzhen, Guangdong Province, the PRC by Trunkbow Hong Kong. It is principally engaged in research and development of application platforms for mobile operators in the PRC.

(5)

(6)

We entered into a series of contractual arrangements with Delixunda and its shareholders on March 10, 2011. Delixunda is a telecom value-added service licensed company and was established as a limited liability company on December 1, 2009 in Beijing, the PRC. Delixunda had no operations prior to February 10, 2011. As a result of the contractual arrangements with Delixunda, we indirectly own the telecom value-added service license, which would enable us to offer telecom wireless value-added content service to individual clients.

Business Overview

We are an innovative mobile application enabler, offering telecom operators in China application platforms on which to offer Mobile Value Added Solutions (“MVAS”) to subscribers. We enable telecom operators to offer their subscribers access to unique mobile applications, innovative tools, value-added services and an overall superior mobile experience. In doing so, we add value to our clients by helping them increase their average revenue per user and decrease subscriber churn. We develop and implement a range of comprehensive platform solutions for our customers that enable MVAS applications for their subscribers. As a technology enabler, our solutions may be generally classified into two categories: MVAS Technology Platforms and Mobile Payment Solutions. We provide both hardware and software solutions that are integrated into our clients’ existing IT infrastructure. We also offer additional services including technical support and system maintenance for our clients.

We currently have significant market presence in the Chinese MVAS and Mobile Payment markets, as evidenced by our contracts with local branches of China Mobile, China Telecom and China Unicom, the “Big Three” Chinese cellular carriers, or resellers who themselves have such contracts. Combined, these contracts span 23 of 30 provinces, municipalities and autonomous regions and represent a significant portion of the geographic market based on the location of the mobile subscriber base in the PRC. Our patented platforms provide a comprehensive solution for Chinese telecom operators to deliver and manage the distribution of MVAS applications to their subscribers. We believe that the expansion of our platforms and services deployment to the Big Three over the past ten years shows that the Trunkbow brand is regarded by these major Chinese telecom operators as a well-managed, trusted provider of technology solutions. Our R&D-focused business model provides us with a defensible market position as a technology solutions provider to the telecom operators.

Developing innovative technology solutions is at the core of our business model. We work extensively with our customers and technology partners in our R&D process to develop cutting edge technology solutions that are relevant to consumer trends and market demand. We have a team of over 100 R&D professionals led by a seasoned senior management team with extensive experience in the telecom industry. Our technology is the subject of ~~123~~217 filed patent applications, of which 7887 have been granted by the National Intellectual Property Administration of the People’s Republic of China. We began in 2012 the process of filing for international and U.S. patents in order to protect our intellectual property globally.

Our customers are primarily telecom service providers in the PRC. We have extensive customer relationships with provincial branches of all three of the mobile service providers in China, specifically, China Telecom, China Unicom and China Mobile. The table below shows our revenues generated from direct sales to each of the Big Three, as well as resales of our products to these carriers through intermediaries (i.e., direct and indirect sales to these carriers), for the fiscal years ended December 31, ~~2012~~2013 and ~~2011~~2012.

	2012			2011
	2013		2012
Percent of revenues from direct sales to China Telecom		938			189
Percent of revenues from direct sales to China Unicom		92			59
Percent of revenues from direct sales to China Mobile		40			14
Percent of revenues from direct and indirect sales to China Telecom through resellers		5640			3056
Percent of revenues from direct and indirect sales to China Unicom through resellers		1618			2416
Percent of revenues from direct and indirect sales to China Mobile through resellers		720			387

The resellers with whom we contract offer value-added services to the carriers, including installation support, hardware sourcing and an established presence and reputation, and they assist us by providing a known quantity aspect to the carrier when doing business with Trunkbow. In addition, once a project is completed, Trunkbow may further rely on these resellers for ongoing maintenance support. We have worked with our resellers for periods between one and five years.

The significant ~~increase~~decrease in revenues generated from sales to China Telecom for ~~2012~~2013 as compared to ~~2011~~2012 is ~~contributed~~caused ~~from~~by the decreased sale in ~~2012~~2013 of ~~the deployment of~~ our systems including mobile payment, mobile business card, mobile newspaper, color numbering and other MVAS systems. The ~~decrease~~increase in revenues generated from sales to China Mobile for ~~2012~~2013 as compared to ~~2011~~2012 is due to more sales of ~~Mobile~~our ~~Business~~number ~~Card~~change notification platforms to China Mobile in ~~2011~~2013. ~~The decrease in revenues generated from sales to China Unicom for 2012 as compared to 2011 is caused by less roll out of our system platforms with China Unicom.~~

We have also entered into a strategic partnership with China UnionPay in order to provide clearing house functions for our Mobile Payment Solutions. In January 2012, we further entered into a partnership agreement with China UnionPay for the development and marketing of the Trunkbow UnionPay mobile payment applet, a UnionPay-certified plug-in applet that will enable m-commerce transactions through UnionPay’s clearing system.

Our relationship with each of the Big Three commences upon the application for, and receipt of, a form of approved vendor certification by the central corporate authority of the relevant Big Three. Following this approval, from time to time we enter into purchase agreements, typically with resellers, who then contract directly with the provincial branches of the Big Three to sell them our equipment, system integration, software licenses and maintenance services. Under the arrangements, we supply the equipment to match the particular specifications set forth in the purchase order, install and integrate the patented software with the hardware and software purchased from third-party suppliers and offer the non-exclusive license of our software and technical support. These contracts generally follow an accepted standard form in the industry and obligate the parties to cooperate to ensure a successful implementation and technology roll-out including testing and remediation requirements, provide for the relevant sharing of revenue received from the mobile subscriber and terms of such payments, contain representations regarding the intellectual property contained in the technology involved and dispute resolution provisions, among other typical provisions for this type of agreement. Our typical form of sales contract or revenue sharing agreement with a reseller is not terminable at will by either party, while our standard mobile payment contracts with a given provincial branch of one of the Big Three allows for termination on written notice of at least two months. Our agreements with resellers typically contain mutually agreed upon sales goals for the resellers to meet that are based on the reseller’s best efforts. The mobile carriers pay us upon receipt and acceptance of the equipment or upon completion of the installation and integration of the software into their IT and networking infrastructure.

Furthermore, we have ~~begun~~commenced ~~stepping~~to ~~into~~be engaged in the business of the construction, management and operation of ~~the cloud~~ data ~~center~~centers through partnership with experienced operators to offer managed hosting, data transmission and connectivity services to the customers of the data centers. It is intended that at a later stage, ~~which~~these data centers will also ~~facilitate~~offer ~~Trunkbow~~value added and cloud computing services to ~~extend~~these ~~its~~customers. This will facilitate the extension of our industry-leading MPS and MVAS ~~services~~products to ~~the~~ cloud, computing services enabling small- and medium-sized businesses (“SMB”) to utilize our technology under Software application as Service (“SaaS”) and Platform application as Service (“PaaS”) models, further expanding in particular the reach of ~~its~~our MPS solutions to a broader range of potential merchant customers.

• We signed a partnership agreement ~~with~~ with Shanghai Telecommunications Engineering (“STE”) on June 6, 2012 to construct and operate a ~~cloud~~ data center located in Shanghai.

• We signed a framework agreement with China Communications Services Corporation (a subsidiary of China Telecom) on February 17, 2012 to construct and operate a ~~cloud~~ data center located in Guangzhou.

• We signed a framework agreement with ~~Shanghai Telecommunications~~ ~~Engineering~~STE on October 10, 2012 to construct aan ~~cloud~~internet data center located in Huzhou City of Zhejiang Province.

Our Strategy

We intend to continue to develop our MVAS application platforms and mobile payment solutions businesses by implementing the following strategies:

Continue to develop cutting edge technology solutions. We intend to continue to commit significant financial and human resources for research and development purposes. We intend to continue to improve our development and pipeline process in order to introduce first to market technology solutions to our customers. We expect to further leverage the know-how from our custom-design and implementation process to develop and introduce new applications and solutions with higher profit margins for a wider market. We expect to continue to fund research at our research center and increase our collaboration with other research facilities.

Leverage our intellectual assets and enter into new markets. We intend to focus our R&D efforts on emerging industries and new market opportunities. We plan to expand our product lines by leveraging our domestic relationships as well as through co-operations with international players.

Expand geographic coverage of current platform solutions. We intend to expand the geographic coverage of our existing product portfolio. We expect to leverage our customer relationships in our current geographic coverage in order to expand into new provinces domestically and new markets globally. We believe our solutions, know-how and successful track record should facilitate our expansion into new and commercially attractive territories.

Continue to build upon our strong relationship with key customers. Our clients include major players in the telecom industry in China. With the rollout of 3G, we expect our clients to offer their customers progressively more sophisticated and captive mobile phone experience. This will require innovative technology solutions for new applications and functions. We intend to help our clients address this demand and continue to work closely with our customers in our development process to ensure that our pipeline is in line with their technology needs.

Attract and retain quality employees. To enhance our development efforts and to support our growth objectives, we intend to continue to attract additional skilled and experienced R&D personnel. We also intend to hire and retain additional sales and service personnel with client and industry knowledge. We expect to continue to build a strong management team with in-house talent and recruit additional management talent, beginning with a CFO with extensive industry and financial background. We plan to continue to leverage our research centers and external resources to provide training programs for our employees.

Form business relationships with strategic partners to expand our presence in the mobile payment business. The MVAS application platform and mobile payment markets are immature and somewhat fragmented. This provides us with the opportunity to assert ourselves and form strategic partnerships to shape the direction of the industry. We intend to enter into synergistic business relationships with key domestic and international players in the mobile payment industry. In February 2010 we entered into an engagement agreement with VeriFone, Inc., a global provider of point of sale payment systems and solutions. We hope to leverage our relationship with VeriFone to expand our market for our mobile payment solutions. In November 2011, we formed a strategic partnership with Tianyi e-Commerce Limited, a wholly owned subsidiary of China Telecom to roll out Bestpay mobile application nationwide, enabling China Telecom’s 28 million 3G users to complete m-commerce transactions. In January 2012, we further established a strategic partnership with China UnionPay in order to provide clearing house functions for our mobile payment solutions, representing an important strategic milestone for our mobile payment business. We plan to ramp our merchant acquisition efforts through the establishment of partnerships with online and offline retailers, service providers and other merchants. In 2012, we leveraged our customer relationships to extend partnership with experienced operators into the construction, management and operation of the cloud data center to offer managed hosting services. In respect of our new cloud data center business, we have been leveraging our customer relationships in entering partnership with experienced operators to assist us in the construction, management and operation of cloud data centers since 2012.

Our Competitive Strengths

We believe the following strengths differentiate us from our competitors and enable us to attain a leadership position in the MVAS application platform and mobile payment markets in China.

“Approved Vendor” to the leading telecom and payment industry participants in the PRC. We have passed a rigorous supplier approval process to become an “approved vendor” to each of the three major telecom providers in the PRC: China Mobile, China Telecom and China Unicom, the “Big Three”. We have entered into business relationships with the provincial branches of the Big Three in 23 provinces in order to better customize their specific application solution needs. Our relationships with market leaders in the PRC telecom industry provide us with reputation, industry knowledge, operational expertise and credibility that we can leverage in marketing to other market participants. As our clients generally prefer to maintain continuity and compatibility among their various systems, we believe our existing relationships favorably position us for selection to address our clients’ future technology needs. We further believe that our continued client relationships allow us to build client trust, anticipate their information technology needs and allow us to better direct our research and development efforts and effectively market to them our solutions and services. We established a strategic partnership with China UnionPay in order to provide clearing house functions for our Mobile Payment Solutions. Our relationship with UnionPay and the three telecom operators allows us to provide a comprehensive mobile payment solution that is fully back-end linked, meaning that due to its redundant hardware and communication links, it offers no single point of failure.

Integrated solutions and comprehensive service offerings. Since 2001, Trunkbow has deployed over 150 application service platforms in China. We offer an integrated and customized solution that integrates seamlessly into our clients’ existing IT and networking infrastructure. Additionally, we offer system integration, system management and maintenance services that provide us with multiple access points to our customers in order to build long term relationships.

Strong R&D capabilities. Our R&D efforts are led by Dr. Hou Wan Chun, Mr. Xu Guodong and Mr. Wang Xin. Dr. Hou is a telecom veteran with numerous telecom application patents. Dr. Hou previously worked for telecom companies like Lucent in the Silicon Valley as an engineer involved in developing new intelligent network applications. Our experienced senior management team leads a group of over 100 R&D professionals with strong telecom and technical backgrounds.

The primary goal of our research efforts is to develop solutions that may be strategically implemented and commercialized. We developed the Bestpay mobile applet and partnered with China Telecom to roll out Bestpay nationwide to enable China Telecom’s 28millions ~~million~~of 3G users to make online transactions through the mobile internet. We also partnered with China Unionpay to develop a UnionPay-certified plug-in applet that can be incorporated into any existing mobile application to facilitate simple, secure online payments from a user's mobile phone.

We are currently developing the next generation of mobile payment solutions and 3G and 4G applications. Our commitment to research and development and our focus on commercializing our research ~~results~~ results will further enhance our competitive edge in the market with the ability to provide a broad range of quality solutions and the potential for sustained long-term growth.

Proven management team with successful track record. Our senior management team consists of telecom industry veterans and entrepreneurs with extensive management experience in the telecom industry. Our management team brings us complementary skills in the areas of R&D, operations, and sales and marketing. Under the leadership of our senior management team, we have substantially expanded our operations and product lines and achieved significant revenue growth.

Our Products and Services

We develop and implement MVAS ~~Application~~application ~~Platforms~~platforms and Mobile Payment System solutions for telecom operators. We work closely with the telecom operators to identify future application trends in order to develop new technologies to meet the changing needs and appetites of their subscribers. Once the applications have been developed, we typically work with the operators to integrate the system into their existing network. This is followed by a roll out of the service in trial service areas prior to nationwide deployment. We have a solid track record of developing popular application solutions that contribute significant new revenue streams for the telecom operators.

Mobile Value Added Service Application Platforms

We have ~~built~~launched amany new and sophisticated MVAS products ~~pipeline~~ and ~~introduced~~ introduced first to market many MVAS application platforms to our customers ~~for~~during the past ten years. We will constantly improve our MVAS development and pipeline process to offer more innovative technology solutions for new applications and functions.

Caller Color Ring Back Tone. We provide a patented technology platform that enables the operator to offer Caller CRBT to the subscribers. Caller CRBT is an application that allows a caller to set the caller’s own personalized dialing tone when dialing out. The convention today with traditional CRBT is to hear the called party’s choice of dialing tones. The Caller CRBT application provides the subscriber with additional optionality in terms of customizing their mobile phone experience. This service has been deployed in two provinces with China Mobile, three provinces with China Telecom and two provinces with China Unicom, with a planned rollout to all major provinces with China Mobile, China Telecom and China Unicom.

Number Change Notification. Our Number Change Notification solution simplifies the process of switching between carriers for the subscriber. Since the Chinese mobile market does not offer subscribers the option of number portability, a subscriber typically has to subscribe to a new number when switching plans to a new carrier. Our solution enables the new carrier to put in place a voice notification when the old phone number is dialed, thus facilitating the process of changing carriers.

Color Numbering. Our Color Numbering solution enables mobile phone users to subscribe to multiple numbers in different regions with one SIM card and one phone without incurring roaming charges. Additional functionalities under this platform include solutions such as secretary services, fax, and SMS and call spam filtration.

New MVAS Roll-out

SMS-In / SMS-Out. Our SMS-In / SMS-Out MVAS application enables mobile phone users to send and receive short messages (SMS) from either their mobile device or via a computer based SMS client associated with the sender’s mobile phone number. Similar to email, a user is able to send a message to multiple recipients or send messages in batches and can refer/archive any message sent. Recipients have no indication that messages are sent from a computer instead of a cell phone. Senders use a full size keyboard which greatly eases the use of SMS.

Mobile Business Card. Our Mobile Business Card MVAS application enables mobile phone callers to send a predefined brief message or graph to a called party. Examples of this brief message or graph include personal contact information, a party invitation, event data or other personalized greeting information. The recipient receives that information much in much the same way he sees a caller name/ID.

Mobile Payment System

Mobile Payment Solutions

Trunkbow’s patented technology platform supports remote mobile payment and contactless mobile payment via various Near Field Communication (NFC) or Radio Frequency ID (RFID) enabled mobile devices. Remote mobile payments are enabled through SMS and mobile phone applets. ~~Contacless~~Contactless mobile payment technology allows ~~NFC~~ NFC or RFID enabled mobile phones worldwide to be utilized as payment tools and authentication devices. Specifically, Trunkbow’s solution enables the end-user to consolidate a variety of functions such as credit/debit cards, public transit cards, employee identification, facility entrance/exit and membership cards into one device and eliminates the need to carry numerous cards. Trunkbow provides users with access to real-time account information whenever they have access to mobile service. In addition, end users can utilize mobile phone or web interface to perform a variety of account maintenance functions including refilling of prepaid cards, modifying user preferences, and archiving transaction records.

Trunkbow uses proprietary technologies to seamlessly transmit secure transaction data between end users and the financial processing infrastructure. A proprietary software technology platform resides within the telecom operators’ network as well as the merchant clearing house network in order to seamlessly facilitate mobile payment transactions.

New Mobile Payment Applets

Bestpay mobile applet. Our Bestpay mobile applet allows China Telecom’s 3G subscribers to complete online transactions, including the payment of telephone and other bills, purchase of lottery, movie and event tickets and online gaming credits, as well as checking transaction records and account balances using Trunkbow’s secure, phone-based application.

China UnionPay-certified plug-in applet. Our China UnionPay applet implements our MPS technology into the inter-bank transaction clearing system. The applet can be incorporated into any existing mobile application from a user's mobile phone to facilitate simple and secure online transactions including the payment of utility and other bills, purchase of lottery, movie and event tickets, online gaming credits, e-books as well as physical goods from online and brick-and-mortar merchants utilizing the applet.

Diagram I –- Mobile Payment Network

Other Products and Services

We also offer other technology solutions that enable value added functionalities on mobile devices. These solutions include missed call reminder, news flash services, roaming greeting, spam intercept and virtual PBX.

Our Revenue Model

We leverage our patented technology platforms to help telecom operators in China to increase their per subscriber revenue and reduce subscriber churn. We generate revenues through direct and indirect revenue sharing agreements with the relevant provincial branch of the telecom operators, one time service and product sales, and maintenance fees. We charge an upfront initial system licensing fee, and an annual maintenance fee of approximately 5 –- 10% of the initial system purchasing amount. We also have monthly revenue sharing contracts in place with resellers and directly with the relevant provincial branch of the telecom providers for up to a 50% share in the revenue generated through our proprietary applications platforms. In addition to one-time sales and revenue sharing, we also generate revenue through transaction fees for our Mobile Payment System solution.

Our current MVAS Application Platform solutions generate revenue through one time sales and recurring revenues. For our Caller CRBT and Color Numbering solution, we have a revenue sharing agreements with telecom providers to receive 50% of the subscription revenues generated for up to 5 years and then renewable upon expiration. For our Number Change Notification solution, we receive revenues from one-time system sales and maintenance fees.

For our Mobile Payment System solution, we generate both one-time and recurring revenues. We generate non-recurring revenues in the following ways:

·Ÿ System sales to telecom providers which enables the mobile payment function on their network; and Ÿ System sales to telecom providers that enables various MPS compatible SIM and mobile payment functions for their corporate clients.

· System sales to telecom providers that enables various MPS compatible SIM and mobile payment functions for their corporate clients.

We generate recurring revenues in the following ways:

·Ÿ Up to a 50% share of the monthly function fee charged by the telecom providers; Ÿ Monthly rental revenues on POS (Point of Sales) machines deployed by Trunkbow; and Ÿ Transaction fees on per-transaction basis from mobile payment applets.

~~· Monthly rental revenues on POS (Point of Sales) machines deployed by Trunkbow; and~~10

·Table ~~Transaction~~I ~~fees on per~~-~~transaction~~ ~~basis~~Summary ~~from~~of ~~mobile~~Our ~~payment~~Revenue ~~applets.~~Model

Table I – Summary of Our Revenue Model

Category	Product	Revenue Model

MVAS Platform	Caller Color Ring Back Tone (CRBT)	Revenue sharing at 50% for 5 years and renewable

	Number Change Notification (NCN)	One time sales and 10% annual maintenance fees

	Color Numbering	Revenue sharing at 50% for 5 years and renewable

Mobile Payment System	Mobile Payment System (MPS)	One time system sales to carriers and corporate clients, revenue sharing on function fee (up to 50%), and/or rental revenue on POS machines and transaction fees
	Bestpay mobile applet	2-4% of the gross value of each transaction, and/or individual commission payments from specific merchants for sales generated through the applet
	China UnionPay applet	0.4% to 2.4% of the gross value of each transaction

For our ~~cloud~~ data centers, we generate revenues through software services, hosting fees and transactions fees as merchants begin to use Trunkbow-hosted cloud-based MPS solution.

· Ÿ For the Shanghai Data Center, we will receive aannual ~~fixed percentage of the hosting fees with~~ minimum revenue guarantees provided by STE of RMB 304.3 million (US$47.9 million) in aggregate over the initial ten-year contract term.

· Ÿ For the Guangzhou Data Center, we will receive a guranteed fixed ~~percentage~~payment of ~~the~~RMB12 ~~hosting fees with minimum revenue guarantees of RMB 164~~ million ~~(US$25.8~~per ~~million)~~annum over the initial ~~20-~~5 year contract term.

Sales and Marketing

We sell our technology platform solutions through our direct sales force and through independent third-party resellers, including telecom operators and electronic payment processors. We also provide services through cooperative efforts with telecom operator affiliated entities as service partners in order to reduce our operating costs and ensure the successful execution of the contracts. These contracts are limited to one transaction and cover a varying number of years, although typically less than 5 years, with renewal provisions. Some contracts contain exclusivity provisions. Those contracts with revenue sharing terms provide that the telecom operators pay us following receipt of funds from subscriber, while those contracts that cover only one time sales allow for only a single payment to us.

Our sales and marketing personnel are based in offices located in ten provinces with local coverage responsibilities in Shandong, Hainan, Hebei, Zhejiang, Henan, Sichuan, Inner Mongolia, Jiangxi, Guangxi, and Guangdong provinces and in Beijing and Shanghai. Our sales teams have local expertise and relationships to succeed in the fragmented Chinese market. Typically, each sales team includes a general manager, account representatives, business development personnel, sales engineers and customer service representatives with specific product expertise in mobile applications and mobile payment as well as financial transaction operations. Our sales force is supported by our R&D and client support teams in order to provide products and services that are tailored to the specific needs of our customers. We continue to put our future sales and marketing efforts on providing mobile payment services platform to the telecom and financial industries. For the domestic market, our sales team covers the major provinces around China including North China, North East China, Central China, East China, South China, South West and North West China.

As of December 31, 2013, we had 50 sales and marketing employees, representing approximately 26% of our total workforce.

Our sales and marketing personnel are based in offices located in ten provinces with local coverage responsibilities in Shandong, Hainan, Hebei, Zhejiang, Henan, Sichuan, Inner Mongolia, Jiangxi, Guangxi, and Guangdong provinces and in Beijing and Shanghai. Our sales teams have local expertise and relationships to succeed in the fragmented Chinese market. Typically, each sales team includes a general manager, account representatives, business development personnel, sales engineers and customer service representatives with specific product expertise in mobile applications and mobile payment as well as financial transaction operations. Our sales force is supported by our R&D and client support teams in order to provide products and services that are tailored to the specific needs of our customers. We will focus our future sales and marketing efforts on providing mobile payment services platform to the telecom and financial industries. For the domestic market, our sales team covers the major provinces around China including North China, North East China, Central China, East China, South China, South West and North West China. For the international market, we have divided the regions into US, Mexico and the Middle East, although we have made only one sale in the Middle East.

As of December 31, 2012, we had 92 sales and marketing employees, representing approximately 35% of our total workforce.

Relationship with VeriFone

Concurrently with the closing of the February 2010 Offering, we entered into a master engagement agreement (“VeriFone Agreement”) with VeriFone, Inc. (“VeriFone”) such that VeriFone is our exclusive provider of point of sale hardware, software and services that are purchased or deployed by us and our affiliates and we have agreed to use our best efforts to ensure that VeriFone will receive at least 80% of the orders for point of sale systems placed by the Company’s mobile operator partners. Pursuant to the terms of the VeriFone Agreement, we submitted a binding, non-cancellable purchase order to VeriFone covering an initial order of $5 million of VeriFone’s point of sale systems for deployment in China as part of its rollout. The full amount of the purchase order was paid upon submission to VeriFone. VeriFone invested $5 million in the February 2010 Offering. We have granted VeriFone the ability to name one of the directors on our Board of Directors so long as it beneficially owns at least 4.99% of our outstanding Common Stock.

Research and Development

Since inception, weTrunkbow ~~have~~has made substantial investments in ~~research~~ research and development. We work with our customers to develop system solutions that address existing and anticipated end-user needs. R&D projects are evaluated by senior management and assigned to our R&D team based upon the potential value of the target markets, as well as the technology, manpower and engineering expertise requirements. Our research and development effort is based primarily in Jinan, the capital of Shandong Province. Jinan is home to several highly ranked universities, allowing us access to a wide range of talent and human resources in order to support our R&D needs. We are building our own research center to provide modern research facilities to enhance our R&D efforts.

The market for our products and services are characterized by changing technology, evolving industry standards and frequent product introductions. We believe our future success depends largely upon our ability to continue to introduce and enhance our lineup of products and services. Our research and development goals include:

·Ÿ developing new solutions and technologies for the next generation of application enabling platforms; Ÿ continue to improve upon existing application platforms in order to provide the best available technology solutions to our customers; Ÿ continue to seek new applications for our existing technologies and patents; and Ÿ cooperate with other technology companies in the area of chip design and user terminals for mobile payment services and other new applications.

·As ~~continue~~of toDecember ~~improve~~31, ~~upon~~2013, ~~existing~~we ~~application~~had ~~platforms~~94 inresearch ~~order~~and todevelopment employees ~~provide~~representing approximately 48% of our total workforce. For the ~~best~~years ~~available~~ended ~~technology~~December ~~solutions~~31, to2013 ~~our~~and ~~customers;~~2012, we spent $1,912,502 and $2,014,797 on research and development expenses, respectively.

· continue to seek new applications for our existing technologies and patents; and

· cooperate with other technology companies in the area of chip design and user terminals for mobile payment services and other new applications.

As of December 31, 2012, we had 115 research and development employees representing approximately 43.4% of our total workforce. For the years ended December 31, 2012 and 2011, we spent $2,014,797 and $1,434,525 on research and development expenses, respectively. .

Employees

Together with our subsidiaries, as of December 31, ~~2012~~2013, we had approximately ~~265~~194 full-time employees, including ~~115~~94 in R&D; 9250 in sales and marketing; 76 members of management and 51 44 others, including accounting, administration and human resources. ~~$1,434,525.~~

We are compliant with local prevailing wage, contractor licensing and insurance regulations, and have good relations with our employees.

As required by PRC regulations, we participate in various employee benefit plans that are organized by municipal and provincial governments, including pension, work-related injury benefits, maternity insurance, medical and unemployment benefit plans. We are required under PRC laws to make contributions to the employee benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time. Members of the retirement plan are entitled to a pension equal to a fixed proportion of the salary prevailing at the member’s retirement date.

Competition

The market for MVAS enabling technology platform is highly competitive and fragmented. Within the MVAS Application Platform segment, our principal competitors are: Huawei and ZTE. Within the Mobile Payment Solutions segment, our primary competitors are: UMPay, HiSun Technology, and Shanghai Huateng. Some of our competitors are larger and have greater financial resources and greater brand name recognition than we do and may, as a result, be better positioned to adapt to changes in the industry or the economy as a whole.

We compete primarily on the basis of the following factors: commercial viability of our application platforms, time to market, end-to-end system solutions, product features, degree of reliability, total cost of ownership, quality of technical and customer support, and compatibility and interoperability of the platforms. Combined with our patented technology, we believe that we compete favorably with respect to these factors.

We expect competition in our industry will be largely driven by the need to respond to the growing consumer appetite to access an increasing variety of information and solutions through their mobile device. Furthermore, increasingly complex technology combined with ever smaller form factors will also drive competition in our industry.

Our principal competitors are Huawei, ZTE, UMPay, Hi Sun Technology, Shanghai Huateng, Fujian Fujitsu, and Digital China Si Tech. These companies can be classified into three categories:

·Ÿ Financial service solutions companies (Hi Sun Technology and Shanghai Huateng);

·Ÿ Telecom value-added software and system integration companies (~~Trunkbow,~~ Huawei, ZTE, Fujian Fujitsu, and Digital China Si Tech); and

·Ÿ ~~Recently incorporated~~ JV companies (UMPay is a China Mobile and China UnionPay JV).

Our largest competitors are telecom value-added software and system integration companies. These competitors already have established relationships with The Big Three. Competitors such as Huawei and ZTE are larger and have greater financial resources and greater brand name recognition than we do and may, as a result, be better positioned to adapt to changes in the industry or the economy as a whole.

~~Our Industry~~12

Our Industries

Overview of the PRC Telecom Market

In May 2008, the Ministry of Industry and Information Technology (“MIIT”), the National Development and Reform Commission (“NDRC”) and the Ministry of Finance carved the PRC telecom industry into three service providers of comparable scale and distribution: China Mobile, China Telecom and China Unicom, or collectively, “The Big Three”.

Two Significant Mobile Revenue Streams: Mobile Value Added Services And Mobile Payment Solutions

Mobile Value Added Services (“MVAS”) is composed of all non-voice services that promote mobile phone usage, the four largest in the PRC being Short Message Service (“SMS”), Multimedia Messaging Service (“MMS”), Wireless Application Protocol (“WAP”), and Color Ring Tone.

Mobile Payment Solutions (“MPS”) allows for the purchase of items with a mobile phone, facilitating both remote mobile payment and point of sale (“POS”) mobile payment. Remote mobile purchases are enabled through SMS, WAP, and WEB interfaces and mobile applets. WAP is a commonly used web browser developed to allow a realistic browsing experience, while WEB usage refers to surfing on the WEB. A mobile app is software that runs on a handheld device (phone, tablet, e-reader, iPod, etc.) than can connect to wireless carrier networks, and has an operating system that supports standalone software. POS mobile payment allows consumers to pay for items by storing bank, credit, or prepayment card information on a mobile phone.

Key Drivers for MVAS and MPS

The development of the MVAS and MPS markets in the PRC is highly correlated with the growth of the overall mobile phone industry in the PRC. According to MIIT, ~~1112 million people had a mobile phone account at~~ the ~~end~~number of ~~2012~~mobile ~~and~~phone ~~according~~users amounted to ~~iResearch,~~approximately ~~the market size of mobile internet reached $8.71 billion for 2012~~1, ~~increasing 96~~228.4%84 ~~year-on-year.~~million ~~The~~people ~~MIIT~~in ~~data~~China ~~also~~at ~~indicated~~the ~~that~~end ~~total~~of ~~revenue~~2013 ~~for~~driven ~~the~~by ~~telecom sector in~~ the ~~PRC~~3G ~~grew to approximately $156 billion for 2012~~technologies. Positive mobile phone industry trends in China are largely driven by the increasing affluence of the middle class, a growing subscriber base, ~~and~~ 3G deployment~~, which officially began~~ in 2009. ~~Moreover,~~and ~~iResearch projects that~~ the ~~market size~~launching of ~~mobile~~4G ~~internet~~in ~~will~~2014 ~~grow~~by ~~64.1%%~~the toBig ~~$14.3~~Three ~~billion~~service ~~for~~providers ~~2013~~in China.

Prospects of our data center business

According to industry sources, IDC grew at a CAGR of approximately 43.5% between 2007 and 2012. This significant growth rate was driven by the rapid growth of the internet industry (online gaming, ecommerce, online media, social networking, big data, cloud computing services) in China driving increasing demand for internet IT infrastructure and services. According to CNNIC, China Internet Network Information Center, internet users have grown to 618 million as of the end of 2013 from 298 million as of the end of 2008, increasing internet penetration in China from 22.6% to 45.8%. The internet population in China is expected to continue to experience rapid growth as internet penetration of 45.8% is still relatively low as compared to that of many other countries such as United States (83.2%), United Kingdom (88.9%), Japan (83.7%) and Germany (86.1%). iRearch projects that the internet population in China will grow to 790 million in 2016. The continuous rapid growth of the internet industry will continue to drive demand of data centers and cloud computing services. In addition, the “Smart City” projects being encouraged by the Chinese Central Government and launched by the municipal governments will further drive demand for cloud-enabled IT infrastructure and services such as data center hosting, shared services, and information exchange platform. The Smart City projects in China are designed to to improve the quality of public services by building a cross-agency data collection, information sharing, and collaborative decision-making platforms.

According to its 2012 Annual Report, China Mobile, which had a total customer base of 710 million at the end of 2012, has enjoyed rapid growth in its value-added businesses, among which, data businesses grew 19.4% from 2011, application and information services businesses up by 11.2% from the previous year.

3G Rollout in China Driving Remote MPS

Although our MPS technology is not dependent on 3G capability, the roll out of 3G networks in the PRC and an increase in smartphone use will increase data speeds and thus encourage more remote MPS transactions through mobile internet. On the network front, China Telecom has the most developed 3G footprint in the PRC and further strengthened the WiFi hotspots coverage in popular areas and adopted the integrated service strategy of ”CDMA+WiFi”, offering customers with high-speed and convenient wireless access. China Telecom’s 2012 Interim Report stated that its mobile subscriber market share increased to 13.8%, of which the net addition of 3G subscribers was 14.67 million in the first half of 2012, reaching a total number of 50.96 million. Meanwhile China Unicom’s 2012 Interim Report stated that its total 3G customer base reached 57.53 million with a net addition of 17.51 million 3G customers in the first half of 2012. China Mobile’s 2012 Interim Report stated that its total 3G customer base reached 67 million with a net addition of 15.87 million 3G customers in the first half of 2012.

2.5G and 3G enabled smartphones are also part of the remote MPS solution, and are expected to become increasingly affordable. At the high-end, China Unicom successfully offered the iPhone series and launched more than 100 customized 3G handset models . Meanwhile China Telecom, the third largest mobile network provider by market share, continues with a 3G smartphone-driven strategy and strengthened its cooperation with vendors to enrich offerings of 3G handsets around RMB1,000, and also launched iPhone to cater the demand for the mid-to-high end markets. Led by its brand “Young” handset, China Telecom proactively expanded in the campus market. Affordable smartphones with higher browser quality may increase mobile internet use and thus encourage greater use of remote MPS payments.

Emergence of POS MPS Market

The key ingredients for creation of successful POS MPS markets are promotion by the telecom carriers, merchant acceptance and ultimately consumer demand. The Big Three are beginning to popularize the concept of the mobile wallet as a convenient cashless alternative to traditional payment methods.

While the technology is already available, consumers must switch to a relatively low cost POS MPS SIM card. For example, China Telecom mobile subscribers can currently switch to a POS MPS SIM card for less than RMB100.

Merchants in China across many verticals, including restaurants, convenience stores and hotels are increasingly offering POS MPS services. Some examples are Lianhua Supermarkets, Wankelong Supermarkets, UBC Coffee, and Formet Laundry. POS MPS services require banks or other third-party vendors to invest in POS payment terminals and merchants to accept POS MPs related transaction fees. VeriFone is a manufacturer and provider of POS electronic payment devices and software.

Payment clearing institutions in the PRC are now cooperating in order to develop MPS for mobile phones. For example, on September 28, 2010, China UnionPay announced a Mobile Payment Industry Alliance with eighteen national and local commercial banks in order to establish a set of technical standards. China Unicom has also recently formed alliances with Agricultural Bank of China and Bank of Communication.

MPS Security

The Big Three are using NFC (13.56MHz), SIMPass (13.56MHz), and RF-SIM (2.4GHz) wireless communication technology, following the lead of carriers in Japan and Korea. NFC and SIMPass technology, developed by Philips and Watch Data, respectively, enables data exchange between two devices within 20 centimeters of one another while offering greater security capabilities than other current MPS mediums such as SMS and WAP. All three wireless communication technologies can generate encryption codes to authenticate MPS transactions.

Real Property

We do not own any real property. We lease our facilities in the PRC pursuant to leases with terms of generally two to three years.

Intellectual Property

Our technology is the subject of ~~123~~217 applications, of which 7887 have been granted by the National Intellectual Property Administration of the People’s Republic of China. All of the patents have a duration period of 20 years starting from submission date. Below is a list of some of granted patents responsible for generating majority of the current revenues.

Table I: Significant Patents Granted

Patent#	Description of use	Expiration Date
ZL 200410009495.0	System and implementation of enabling mobile user to store and search phone book list from network. Provides network phone book store and searching feature from mobile network.	August 30, 2024

ZL 200410009525.8	Equipment and method for realizing hiding calling number in telephone exchange network.	September 8, 2024

ZL 200410009612.3	Device and method for realizing transmitting information to computer network real-time communication terminal by telephone.	September 28, 2024

ZL 200410009830.7	Equipment and method for providing senior secretary service for telephone user.	November 22, 2024

ZL 200410103905.8	Apparatus and method for intelligent communication based on mobile communication network and Internet.	December 31, 2024

ZL 200510011305.3	Device and method for selecting and binding telephone number by mobile communication intelligent card.	February 4, 2025

ZL 200510011343.9	Method for implementing new service of mobile phone based on position renewing operation.	February 23, 2025
ZL 200510011525.6	System, method and implementation of providing instant communication between mobile phone and computer user. Provides forward function between Instant Message client and mobile phone.	April 4, 2025

ZL 200510011542.X	Apparatus and method for realizing main calling set ring back tone based on personalized ring back tone.	April 8, 2025

ZL 200510012089.4	Device and method for realizing to provide short news to mobile phone user and no interference service.	July 4, 2025

ZL 200510012090.7	Equipment and method for providing virtual facsimile business using mobile telephone number.	July 4, 2025

ZL 200610011449.3	Apparatus and method for automatic network storage of short message receive by mobile telephone.	March 8, 2026

ZL 200610011574.4	Device and method for realizing main call customized ring back tone service.	March 29, 2026

ZL 200610011725.6	Device and method for realizing mobile phone turn-off and short message call transfer.	April 4, 2026

1614

ZL 200610112451.X	System and method for realizing secrecy of mobile phone number.	August 18, 2026

ZL 200710065067.3	Method for realizing caller customized ring back tone compatible with called personalized ring back tone.	April 2, 2027

ZL 200710063737.8	System and method for realizing point-to-point short message encryption and message screening.	February 8, 2027

ZL 200710177629.3	System and method for realizing personal electronic check card.	November 19, 2027

ZL 200810224979.5	System and method for adding fixed telephone number to mobile telephone number.	October 29, 2028

ZL 200910091555.0	Method and implementation of integrating different bank cards into one special personal payment device. Provides a method to integrate different bank cards such as gate pass, attendance pass and RFID card into one special personalized payment machine for user to easily control.	August 26, 2029

ZL 200810227676.9	Group communication system and method triggered by mobile telephone on the basis of network group	November 27, 2028

ZL 200810226698.3	System and method for increasing unfriendly communication modes during instant communication	November 19, 2028

ZL 200910084756.8	System and method for providing online yellow pages associated with location information	May 20, 2029

ZL 200910143104.7	System and method for implementing number switching inform by intelligent network mode	May 13, 2029

Table II: Significant Patents Pending

Patent#		Description of use		Expiration Date
ZL 200710121396.5		System, method and implementation of enabling communication between mobile client device and mobile client server. Enables communication between mobile client device and mobile client server.		September 5, 2027

Table II shows patents pending for our intellectual property. Patent requests listed as “pending” have been reviewed by the Chinese Patent Office and will be granted upon the expiration of the two-year waiting period commencing on their respective dates of submission. While pending patents have not been granted, the filings are within the same families as certain patents previously granted to us and as such, we believe that they should result in grants. Trunkbow views this intellectual property as among the core elements of its overall service offerings.

Government Regulations

Each of our PRC subsidiaries, the Shandong WFOE and the Shenzhen WFOE, has obtained all necessary licenses, authorizations, approvals, registrations and permits from PRC government agencies or any other regulatory body having jurisdiction over it (“Authorizations”) for it to own, lease, license and use properties and assets and to conduct its business as described in its business license, to the extent applicable, in so far as such properties and assets and the conduct of such business is governed by PRC laws and regulations, and such Authorizations are in full force and effect. Under the PRC regulations currently in effect, we may operate our business of providing mobile phone technology services and solutions without having to obtain or maintain any Authorizations that are not generally required for all businesses operating under PRC laws.

According to the Provisions on the Administration of Foreign-funded Telecommunications Enterprises of the PRC , ultimate proportion of the foreign investments in any company engaged in telecommunication value-added services shall not exceed 50% of such company’s equity interests. The PRC Telecommunication Regulation further defined “telecommunication value-added services” as providing telecommunication and information services through public networking facilities. As the business operations of our PRC subsidiaries only include the provision of technology support and solutions to the telecom providers and our PRC subsidiaries do not provide any telecom services directly to the end-users, our PRC subsidiaries do not fall into the scope of the “telecommunication value-added service company” defined under the PRC laws. Therefore, the proportion of foreign investments in our PRC subsidiaries is not subject to the restrictions under the PRC laws.

Seasonality

Our quarterly operating results have varied significantly in the past and are likely to continue to vary significantly in the future. Historically, we have generally experienced a slowdown or decrease in generating revenues in the first quarter of the year due to the Chinese Lunar New Year as the majority of the businesses in the PRC shut down for a month-long holiday and slow down for a month prior to the New Year celebration. We believe that this fluctuation will gradually subside as we increase our recurring revenue streams.

Corporation Information

Our principal executive offices are located at Unit 1217-1218, 12F of Tower B, Gemdale Plaza, No. 91 Jianguo Road, Chaoyang District, Beijing, People’s Republic of China 100022, Tel: (86) (10) 8571-2518, Fax: (86) (10) 8571-2528.

Item 1A. Risk Factors.

In addition to the other information in this Form 10-K, readers should carefully consider the following important factors. These factors, among others, in some cases have affected, and in the future could affect, our financial condition and results of operations and could cause our future results to differ materially from those expressed or implied in any forward-looking statements that appear in this on Form 10-K or that we have made or will make elsewhere.

Risks Related to Our Business

We have a limited operating history as a separate wholly owned foreign company which makes it difficult to evaluate our business and future prospects.

Our limited operating history following our separation from Trunkbow Shenzhen Technologies Limited in December 2007 and the early stage of development of the mobile payment industry in which we operate makes it difficult to evaluate our business and future prospects. Although our revenues have grown rapidly, we cannot assure you that we will maintain profitability or that we will not incur net losses in the future. Our business model includes recurring revenues from revenue sharing agreements with resellers and the Big Three. To date, less than five percent of our revenues have been derived from these revenue sharing agreements. There is no assurance that we will generate significant revenue from such agreements. We expect that our operating expenses will increase as we expand. Any significant failure to realize anticipated revenue growth could result in significant operating losses. We will continue to encounter risks and difficulties in implementing our business model, including potential failure to:

·Ÿ increase awareness of its products, protect its reputation and develop customer loyalty; Ÿ manage its expanding operations and service offerings, including the integration of any future acquisitions; Ÿ maintain adequate control of its expenses; and Ÿ anticipate and adapt to changing conditions in the markets in which it operates as well as the impact of any changes in government regulation, mergers and acquisitions involving its competitors, technological developments and other significant competitive and market dynamics.

· manage its expanding operations and service offerings, including the integration of any future acquisitions;

· maintain adequate control of its expenses; and

· anticipate and adapt to changing conditions in the markets in which it operates as well as the impact of any changes in government regulation, mergers and acquisitions involving its competitors, technological developments and other significant competitive and market dynamics.

If we are not successful in addressing any or all of these risks, our business may be materially and adversely affected.

Our business depends to a large extent on mobile telecommunications service providers in the PRC and any deterioration of such relationships may have a material and adverse effect on our results of operations.

We have derived, and believe we will continue to derive, a significant portion of our revenues from a limited number of large customers, such as China Mobile, China Telecom, and China Unicom which are our only major customers and who have been customers for over five years. We have passed a rigorous supplier approval process carried out by each of the three major carriers to become an “approved vendor” to each of them. Our approved vendor status allows us to be eligible to enter into individual customer contracts with the relevant provincial branch of each respective carrier in each province in which we operate. Such individual contracts are similar to purchase orders for our technology platforms, in the form of proprietary software licensing and revenue sharing arrangements with the relevant branch of China Mobile, China Telecom or China Unicom, as the case may be. Currently, China Mobile, China Telecom and China Unicom are the only mobile telecommunications service providers in China that operate mobile payment platforms. Our agreements are generally for a period of less than five years and generally do not have automatic renewal provisions. If any of the carriers is unwilling to continue to cooperate and negotiate with us upon expiration of such agreements, we will not be able to conduct our existing mobile payment business at the levels we anticipate.

Revenues from sales to the Big Three, including revenues generated through the resale of our products to mobile carriers through intermediaries (i.e., direct and indirect sales to these carriers), accounted for approximately 40%, 18% and 20% and 56%, 16% and 7%, of our total revenues for the fiscal years ended December 31, 2013 and 2012. Further, three and one customers accounted for approximately 73.2% and 37.2% of our total revenue for the fiscal years ended December 31, 2013 and 2012, respectively. The loss of our status as an approved vendor to any of China Mobile, China Telecom or China Unicom, or our inability to renegotiate our revenue sharing agreements with resellers on terms as favorable as those under which we presently operate, would have a significant negative impact on our business and on our financial results.

Revenues from sales to the Big Three, including revenues generated through the resale of our products to mobile carriers through intermediaries (i.e., direct and indirect sales to these carriers), accounted for approximately 56%,16% and 7% and 30%, 24% and 38%, of our total revenues for the fiscal years ended December 31, 2012 and 2011. Further, five customers accounted for approximately 66.9% and 56.3% of our total revenue for the fiscal years ended December 31, 2012 and 2011, respectively. The loss of our status as an approved vendor to any of China Mobile, China Telecom or China Unicom, or our inability to renegotiate our revenue sharing agreements with resellers on terms as favorable as those under which we presently operate, would have a significant negative impact on our business and on our financial results.

In addition, if either China Mobile, China Telecom or China Unicom decides to change its content or transaction fees or its share of revenues, our revenues and profitability could also be materially adversely affected.

Our financial condition and results of operations may be materially affected by the changes in policies or guidelines of the mobile telecommunications service providers.

The mobile telecommunications service providers in the PRC may, from time to time, issue certain operating policies or guidelines, requesting or stating their preference for certain actions to be taken in choosing their partners in certain application service platforms. Due to our reliance on the mobile telecommunications service providers, a significant change in their policies or guidelines may have a material adverse effect on our business. Such change in policies or guidelines may result in lower revenue or additional operating costs for us, and as such, we cannot assure you that our financial condition and results of operations will not be materially adversely affected by any such policy or guideline change.

Our customers are concentrated in a limited number of industries and an economic downturn in any of these industries could have a material adverse effect on our results of operations.

Our customers are concentrated primarily in the telecommunications, media and technology industries, and to a lesser extent, the transportation, financial services, and retail industries, where we provide applications for their industries. Our ability to generate revenue depends on the demand for our services in these industries. An economic downturn, or a slowdown or reversal of the tendency in any of these industries to rely on our services could have a material adverse effect on our business, results of operations or financial condition.

The markets in which we operate are highly competitive and we may not be able to maintain market share.

We offer only one Mobile Payment model. Competing technologies from larger, better financed international companies are increasing their effort to gain a foothold in the PRC market. This may result in erosion of our market share in mobile payment services.

Increasing competition among telecommunication companies in greater China has led to a reduction in telecommunication services fees that can be charged by such companies. Within the MVAS Application Platform segment, our principal competitors are Huawei and ZTE. Within the Mobile Payment System segment, our primary competitors are UMPay, HiSun Technology, Shanghai Huateng, Huawei, ZTE, Fujian Fujisu and Digital China Si Tech. If a reduction in telecommunication services fees negatively impacts revenue generated by our customers, they may require us to reduce the price of our services, or seek competitors that charge less, which could reduce our market share. If we must significantly reduce the price of our services, the decrease in revenue could materially and adversely affect our profitability.

Our operating results may fluctuate significantly from quarter to quarter, which could lead to volatility in our stock price.

Our quarterly operating results have varied significantly in the past and are likely to continue to vary significantly in the future. Historically, we have generally experienced a slowdown or decrease in generating revenues in the first quarter of the year due to the Chinese Lunar New Year. In addition, our quarterly revenues are subject to fluctuation because they substantially depend upon the timing of orders. As a result, you may not be able to rely on period-to-period comparisons of our operating results as an indication of our future performance. Our actual quarterly results may differ from market expectations, which could adversely affect our stock price.

The loss of certain employees that are essential to our business could have a material adverse effect on our results of operations.

Li Qiang, Chief Executive Officer, Hou Wanchun, Chairman, and Ye Yuanjun, Chief Financial Officer are essential to our ability to continue to grow our business. Messrs. Li, Hou and Ms. Ye have established relationships within the industries in which we operate. If either of them were to leave us, our growth strategy might be hindered, which could limit our ability to increase revenue. We do not maintain key-person insurance coverage. In addition, we face competition for attracting skilled personnel. If we fail to attract and retain qualified personnel to meet current and future needs, this could slow our ability to grow our business, which could result in a decrease in market share.

International operations require significant management attention, which could detract from the time and attention management spends on our domestic operations and have a material adverse effect on our results of operations.

Our operations in countries outside of the PRC are subject to various unique risks, including the following, which, if not planned and managed properly, could materially adversely affect our business, financial condition and operating results:

·Ÿ legal uncertainties or unanticipated changes regarding regulatory requirements, political instability, liability, export and import restrictions, tariffs and other trade barriers; Ÿ longer customer payment cycles and greater difficulties in collecting accounts receivable; Ÿ uncertainties of laws and enforcement relating to the protection of intellectual property; and Ÿ potentially uncertain or adverse tax consequences.

· longer customer payment cycles and greater difficulties in collecting accounts receivable;

· uncertainties of laws and enforcement relating to the protection of intellectual property; and

· potentially uncertain or adverse tax consequences.

Additionally, international operations require significant management attention, which could detract from the time and attention management spends on our domestic operations and have a material adverse effect on our results of operations.

We expect to need additional financing, which may not be available on satisfactory terms or at all.

We believe that our existing cash and collection on accounts receivable will be sufficient to support our current operating plan through ~~2012~~2014. Our capital requirements may be accelerated as a result of many factors, including timing of development activities, underestimates of budget items, unanticipated expenses or capital expenditures, limitation of development of new potential products, future product opportunities with collaborators, future licensing opportunities and future business combinations. Consequently, we may need to seek additional debt or equity financing, which may not be available on favorable terms, if at all, and which may be dilutive to you.

We may seek to raise additional capital through public or private equity offerings, debt financings or additional corporate collaboration and licensing arrangements. To the extent we raise additional capital by issuing equity securities, our stockholders may experience dilution. To the extent that we raise additional capital by issuing debt securities, we would likely incur substantial interest obligations, may be required to pledge assets as security for the debt and may be constrained by restrictive financial and/or operational covenants. Debt financing would also be superior to your interest in bankruptcy or liquidation. To the extent we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our technologies or product candidates, or grant licenses on unfavorable terms.

We are exposed to credit risk on our accounts receivable which is heightened during periods when economic conditions worsen.

We operate our business in the PRC, where credit periods vary substantially across industries, segments, types and size of companies. We operate in a niche of the PRC telecommunication industry, specifically in the provision of Mobile Value Added services and Mobile Payment Solutions. Our customers include the Big Three and resellers that further provide services to the Big Three. We may not collect our accounts receivable in accordance with the terms of our contracts with our customers.

Our management determines the collectability of outstanding accounts based on the following considerations:

Reputable customers: our customers or ultimate customers through the resellers are the three mobile operators, which are listed companies and have good reputations and stable cash flows.

Evaluation of resellers: in the arrangements that are through resellers to reach the mobile operators, management investigates all aspects of the resellers, including the arrangement between the mobile operators and the resellers, the particular reseller’s credit reputation and payment history, the financial status and customer lists of our resellers. Only reputable resellers with good quality of assets and cash flows can sign up with us.

Continuous collection of accounts receivable: we have been able to collect our accounts receivable on a continual basis.

In the event accounts receivable are due and the balance remains outstanding, we negotiate repayment plans with our customers. Credit periods will be extended when our customers have a continuous payment history. Constant review of the recoverability of the accounts receivable is performed by management and if there is any indication that a customer may default, allowance for doubtful debts are provided to the accounts receivable.

5. No defaults on historical collection of accounts receivable: we started in 2001 and during the past 1013 years, we never had a bad debt on accounts receivable.

However, if our actual collection experience with our customers or other conditions change, or the other factors that we consider indicate that it is appropriate, provision for doubtful accounts may be required, which could adversely affect our financial results.

We must respond quickly and effectively to new technological developments, and the failure to do so could have a material and adverse effect on our results of operations.

Our business is highly dependent on its computer and telecommunications equipment, including mobile handsets, and software systems. Our failure to maintain our technological capabilities or to respond effectively to technological changes could adversely affect our business, results of operations or financial condition. Our future success also depends on our ability to enhance existing software and systems and to respond to changing technological developments. If we are unable to successfully develop and bring to market new software and systems in a timely manner, our competitors’ technologies or services may render our products or services noncompetitive or obsolete.

If we fail to protect adequately or enforce our intellectual property rights, or to secure rights to patents of others, the value of our intellectual property rights could diminish.

Our success, competitive position and future revenues will depend in part on our ability, and the ability of our licensors, to obtain and maintain patent protection for our products, methods, processes and other technologies, to preserve our trade secrets, to prevent third parties from infringing on our proprietary rights and to operate without infringing upon the proprietary rights of third parties.

To date, our technology is the subject of ~~123.~~217 filed patent ~~applications~~ applications with 7887 patents issued by the National Intellectual Property Administration of the PRC. We anticipate filing additional ~~patent~~ patent applications both in the PRC and in other countries, as appropriate. However, we cannot predict the degree and range of ~~protection~~ protection patents will afford us against competitors, including whether third parties will find ways to invalidate or otherwise ~~circumvent~~ circumvent our patents, if and when patents will be issued, whether or not others will obtain patents claiming aspects similar to our patent applications, or if we will need to initiate litigation or administrative proceedings, which may be costly whether we win or lose.

Our success also depends on the skills, knowledge and experience of our scientific and technical personnel, consultants, advisors, licensors and contractors. To help protect its proprietary know-how and inventions for which patents may be unobtainable or difficult to obtain, we rely on trade secret protection and confidentiality agreements. To this end, we require all of our employees, consultants, advisors and contractors to enter into confidentiality and, where applicable, grant-back agreements. These agreements may not provide adequate protection in the event of unauthorized use or disclosure or the lawful development by others of such information. If any of our intellectual property is disclosed, its value would be significantly impaired, and our business and competitive position would suffer.

If we infringe on the rights of third parties, we could be prevented from selling products, forced to pay damages and compelled to defend against litigation.

If our products, methods, processes and other technologies infringe proprietary rights of other parties, we could incur substantial costs, and may have to obtain licenses (which may not be available on commercially reasonable terms, if at all), redesign our products or processes, stop using the subject matter claimed in the asserted patents, pay damages, or defend litigation or administrative proceedings, which may be costly whether we win or lose. All these efforts could result in a substantial diversion of valuable management resources.

We believe we have taken reasonable steps, including comprehensive internal and external prior patent searches, to ensure we have freedom to operate and that our development and commercialization efforts can be carried out as planned without infringing upon the proprietary rights of others. However, we cannot guarantee that no third party patent has been filed or will be filed that may contain subject matter of relevance to its development, causing a third party patent holder to claim infringement. Resolving such issues has traditionally resulted, and could in our case result, in lengthy and costly legal proceedings, the outcome of which cannot be predicted accurately.

We have never paid cash dividends and are not likely to do so in the foreseeable future.

We have never declared or paid any cash dividends on our common stock. We currently intend to retain any future earnings for use in the operation and expansion of our business. We do not expect to pay any cash dividends in the foreseeable future but will review this policy as circumstances dictate.

Failure to manage our growth or develop appropriate internal organizational structures, internal control environment and risk monitoring and management systems in line with our rapid growth could negatively affect our business and prospects.

Our business and operations have expanded rapidly since our formation. Significant management resources must be expended to develop and implement appropriate structures for internal organization and information flow, an effective internal control environment and risk monitoring and management systems in line with our rapid growth, as well as to hire and integrate qualified employees into our organization. In addition, the disclosure and other ongoing obligations associated with becoming a public company increase the challenges to our finance and accounting team. Our general and administrative expenses for the fiscal year ending December 31, ~~2012~~2013 were $67,~~670~~629,~~760~~412 as compared to $711,~~944~~342,~~055~~159 for the ~~2011~~2012 fiscal year. It is possible that our existing internal control and risk monitoring and management systems could prove to be inadequate. If we fail to appropriately develop and implement structures for internal organization and information flow, an effective internal control environment and a risk monitoring and management system, we may not be able to identify unfavorable business trends, administrative oversights or other risks that could materially adversely affect our business, operating results and financial condition.

Risks Associated with Doing Business in Greater China

There are substantial risks associated with doing business in greater China, as set forth in the following risk factors.

Adverse changes in the political and economic policies of the PRC government could materially and adversely affect the overall economic growth of China, which could adversely affect our business.

Substantially all of our assets are located in the PRC and all of our revenues are derived from our operations there. Accordingly, economic, political and legal developments in the PRC significantly affect our business, financial condition, results of operations and prospects. The PRC economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. While the PRC economy has grown significantly in the past 30 years, the growth has been uneven across different periods, regions and economic sectors of the PRC. We cannot assure you that the PRC economy will continue to grow, or that any such growth will be steady and uniform, or that if there is a slowdown, such a slowdown will not have a negative effect on our business.

The PRC government also exercises significant control over the PRC’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. From late 2003 to mid-2008, the PRC government implemented a number of measures, such as increasing the People’s Bank of China’s statutory deposit reserve ratio and imposing commercial bank lending guidelines that had the effect of slowing the growth of credit, which in turn may have slowed the growth of the PRC economy. In response to the recent global and Chinese economic downturn, the PRC government has promulgated several measures aimed at expanding credit and stimulating economic growth. Since August 2008, the People’s Bank of China has decreased the statutory deposit reserve ratio and lowered benchmark interest rates several times. It is unclear whether the PRC government will continue such policies, or whether PRC economic policies will be effective in creating stable economic growth. Any further slowdown in the economic growth of the PRC could reduce demand for our solutions and services, which could materially and adversely affect our business, our financial condition and results of operations.

Uncertainties with respect to the PRC legal system could adversely affect us.

We conduct our business primarily through our PRC subsidiaries. Our operations in the PRC are governed by PRC laws and regulations. Our PRC subsidiaries are foreign-invested enterprises and are subject to laws and regulations applicable to foreign investment in the PRC and, in particular, laws applicable to foreign-invested enterprises. The PRC legal system is largely a civil law system based on written statutes. Unlike the common law system, prior court decisions may be cited for reference but have limited precedential value.

In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing general economic matters. The overall effect of legislation over the past two decades has significantly enhanced the protections afforded to various foreign investments in the PRC. However, the PRC has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in the PRC. Because these laws and regulations are relatively new, and published court decisions are limited and nonbinding in nature, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all, which may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until after the violation occurs. Any administrative and court proceedings in the PRC may be protracted, resulting in substantial costs and diversion of resources and management attention. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. These uncertainties may also impede our ability to enforce the contracts entered into by our PRC subsidiaries. As a result, these uncertainties could materially and adversely affect our business and results of operations.

The contractual arrangement with Trunkbow Technologies and its shareholders entered into in 2007 may require further approval.

On December 20, 2007, Trunkbow Shandong entered into a series of contracts with Trunkbow Technologies and its shareholders. Through these contractual arrangements, Trunkbow Technologies became a contractually controlled entity of Trunkbow Shandong.

The Regulation on Mergers and Acquisitions of Domestic Companies by Foreign Investors jointly issued by six PRC regulatory agencies, including MOFCOM, the State Assets Supervision and Administration Commission, the State Administration for Taxation, the State Administration for Industry and Commerce, China Securities Regulatory Commission (“CSRC”) and the State Administration of Foreign Exchange (“SAFE”) on August 8, 2006, or the New M&A Rule, has a particular provision which requires that MOFCOM’s approval is required if a PRC resident acquires its/his affiliated Chinese company in the name of an offshore enterprise established or controlled by it or him. The New M&A Rule further provides that the aforesaid requirement cannot be circumvented by a foreign invested enterprise’s domestic investment or “by other means” in China. At the time of entering into the contractual arrangements between Trunkbow Shandong and Trunkbow Technologies in December 2007, Trunkbow Hong Kong was an offshore enterprise indirectly controlled by Hou Wanchun and Li Qiang who are PRC residents. Trunkbow Shandong is a foreign invested enterprise 100% owned by Trunkbow Hong Kong. Hou Wanchun and Li Qiang are two shareholders of Trunkbow Technologies. According to the New M&A Rule, the approval of MOFCOM would be required if we acquired the beneficiary ownership of Trunkbow Technologies by our Company or its Trunkbow Hong Kong directly, and the adoption of the contractual arrangements might be deemed to be circumvent of such approval requirements “by other means”. As the interpretation and implementation of the New M&A Rule are unclear, if the approval of MOFCOM is required, Trunkbow Hong Kong may need to obtain further approval from MOFCOM.

Our contractual arrangements with our VIEs and their shareholders may not be as effective in providing control over our VIEs as direct ownership.

Our contractual arrangements with our VIEs and their respective shareholders provide us with effective control over our VIEs. As a result of these contractual arrangements, we are considered to be the primary beneficiary of our VIEs; we consolidate the results of operations, assets and liabilities of our VIEs in our financial statements. Although we have been advised by Han Kun, our PRC legal counsel, that each contract under these contractual arrangements is valid and binding under current PRC laws and regulations, these contractual arrangements may not be as effective in providing us with control over our VIEs as direct ownership of these companies. If our VIEs or their shareholders fail to perform their respective obligations under these contractual arrangements, we may have to incur substantial costs and resources to enforce such arrangements, and rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective.

Trunkbow Technologies no longer accounts for any of our new business and is being operationally wound down. For the fiscal years ended December 31, ~~2012~~2013 and ~~2011~~2012, Trunkbow Technologies represented 0.20% and 0.62%, respectively, of our consolidated revenue. As at December 31, ~~2012~~2013 and ~~2011~~2012, Trunkbow Technologies represented 2.1.8% and 2.81%, respectively, of our total consolidated assets.

The shareholders of our VIEs may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.

Trunkbow Technologies are jointly owned by nominee shareholders, including Mr. Hou Wanchun, our chairman, Mr. Li Qiang, our CEO, and Mr. Xie Liangyao, and Delixunda by Mr. Xin Wang and Mr. Guodong Xu. Conflict of interests between these nominee shareholders of our contractually controlled entity and their duties to our company may arise. PRC law provides that a director or member of management owes a fiduciary duty to the company he directs or manages. Mr. Hou, Mr. Li, Mr. Wang and Mr. Xu must therefore act in good faith and in the best interests of our VIEs and must not use their respective positions for personal gain. These laws do not require them to consider our best interests when making decisions as a director or member of management of the contractually controlled entity. We cannot assure you that when conflicts of interest arise, these individuals will act in the best interests of our company or that conflicts of interest will be resolved in our favor. In addition, these individuals may breach or cause our contractually controlled entity to breach or refuse to renew the existing contractual arrangements that allow us to effectively control it and receive economic benefits from it. Currently, we do not have arrangements to address potential conflicts of interest between these individuals and our company and a conflict could result in these individuals as officers of our company violating fiduciary duties to us. If we cannot resolve any conflicts of interest or disputes between us and the shareholders of our VIEs, we would have to rely on legal proceedings, which could result in disruption of our business, and there would be substantial uncertainty as to the outcome of any such legal proceedings.

Contractual arrangements we have entered into may be subject to scrutiny by the PRC tax authorities, and a finding that we or our affiliated entities owe additional taxes could reduce our net income and the value of your investment.

As required by applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. We could face adverse tax consequences if the PRC tax authorities determine that the contractual arrangements between Trunkbow Shandong and our VIEs do not represent an arm’s-length price and adjust our VIEs’ income in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction, for PRC tax purposes, of expense deductions recorded by our VIEs, which could in turn increase its respective tax liabilities. In addition, the PRC tax authorities may impose late payment fees and other penalties on our affiliated entities for underpaid taxes.

Our net income may be adversely affected if our VIEs’ tax liabilities increase or if it is found to be subject to late payment fees or other penalties.

We have not yet registered the equity pledges made by our VIE shareholders of their equity in Trunkbow Technologies or Delixunda, which means that these pledges have not been officially validated. Accordingly, the contractual arrangements among the nominee shareholders, Trunkbow Shandong and our VIEs, designed to control our VIEs’ operations and extract their profits, may be undermined.

PRC Property Law provides that all equity pledges under equity pledge agreements must be registered to be validated. Our subsidiary, Trunkbow Shandong, has entered into equity pledge agreements with the nominee shareholders of Trunkbow Technologies and Delixunda, whereby such nominee shareholders are obligated to promptly take necessary steps to register and perfect the equity pledges to secure the service fees under the relevant service agreements and the loans under the loan agreements between Trunkbow Shandong and them. Trunkbow Shandong is now coordinating with the nominee shareholders to prepare various equity pledge registration application documents (including the Chinese versions of the equity pledge agreements and other application forms) in accordance with the requirements of the local competent branch of the State Administration for Industry and Commerce. However, until the equity pledges are registered and perfected, we may not enforce these pledges in PRC courts, and accordingly the contractual arrangements among the nominee shareholders, Trunkbow Shandong and our VIEs, designed to control the VIEs’ operations and extract their profits, will be undermined. Moreover, it is possible that, in the absence of a validated pledge, the nominee shareholders may pledge or otherwise dispose of their equity interests in the relevant VIE to third parties.

We may rely on dividends and other distributions from our subsidiaries in the PRC to fund our cash and financing requirements, and any limitation on the ability of our subsidiaries to make payments to us could materially adversely affect our ability to conduct our business.

As an offshore holding company, we may rely principally on dividends from our subsidiaries in the PRC for our cash requirements, including to pay dividends or make other distributions to our shareholders or to service our debt we may incur and to pay our operating expenses. The payment of dividends by entities organized in the PRC is subject to limitations. In particular, the PRC regulations permit our subsidiaries to pay dividends to us only out of their accumulated profits, if any, as determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries in the PRC is required to set aside a certain amount of its after-tax profits each year, if any, to fund certain statutory reserves. These reserves are not distributable as cash dividends.

If our subsidiaries in the PRC incur debt on their own behalf, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us. Any limitation on the ability of our subsidiaries to distribute dividends or other payments to us could materially adversely limit our ability to grow, make investments or acquisitions, pay dividends and otherwise fund and conduct our business.

We may be subject to penalties, including restriction on our ability to inject capital into our PRC subsidiaries and our PRC subsidiaries’ ability to distribute profits to us, if our PRC resident shareholders or beneficial owners fail to comply with relevant PRC foreign exchange rules.

SAFE issued a public notice in October 2005 requiring PRC residents to register with the local SAFE branch before establishing or controlling any company outside of the PRC for the purpose of capital financing with assets or equities of PRC companies, referred to in the notice as an “offshore special purpose vehicle”. PRC residents that are shareholders and/or beneficial owners of offshore special purpose companies established before November 1, 2005 were required to register with the local SAFE branch before March 31, 2006. In addition, any PRC resident that is a shareholder of an offshore special purpose vehicle is required to amend its SAFE registration with respect to that offshore special purpose company in connection with any increase or decrease of capital, transfer of shares, merger, division, equity investment or creation of any security interest over any assets located in China or other material changes in share capital.

We have requested our current shareholders and/or beneficial owners to disclose whether they or their shareholders or beneficial owners fall within the ambit of the SAFE notice and urge those who are PRC residents to register with the local SAFE branch as required under the SAFE notice. However, we cannot provide any assurance that all of our shareholders and beneficial owners who are PRC residents will comply with our request to make, obtain or update any applicable registrations or comply with other requirements required by the SAFE notice or other related rules. In case of any non-compliance on any of our PRC resident shareholders or beneficial owners, our PRC subsidiaries and such shareholders and beneficial owners may be subject to fines and other legal sanctions.

Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.

The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of the PRC. We receive substantially all of our revenues in Renminbi. Under our current corporate structure, our Nevada holding company primarily relies on dividend payments from our wholly-owned PRC subsidiaries in the PRC to fund any cash and financing requirements we may have.

Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE approval by complying with certain procedural requirements. Therefore, our wholly owned PRC subsidiaries may pay dividends in foreign currency to us without pre-approval from SAFE. However, approval from or registration with competent government authorities is required where the Renminbi is to be converted into foreign currency and remitted out of the PRC to pay capital expenses such as the repayment of loans denominated in foreign currencies. With the prior approval from SAFE, cash generated from the operations of our PRC subsidiary may be used to pay off debt they owe to entities outside the PRC in a currency other than the Renminbi. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders.

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Currency fluctuations and restrictions on currency exchange may adversely affect our business, including limiting our ability to convert Chinese Renminbi into foreign currencies and, if Chinese Renminbi were to decline in value, reducing our revenue in U.S dollar terms.

Our reporting currency is the U.S. dollar and our operations in the PRC use their local currency as their functional currencies. Substantially all of our revenue and expenses are in Chinese Renminbi. We are subject to the effects of exchange rate fluctuations with respect to any of these currencies. For example, the value of the Renminbi depends to a large extent on PRC government policies and the PRC’s domestic and international economic and political developments, as well as supply and demand in the local market. Since 1994, the official exchange rate for the conversion of Renminbi to the U.S. dollar had generally been stable and the Renminbi had appreciated slightly against the U.S. dollar. However, on July 21, 2005, the PRC government changed its policy of pegging the value of Chinese Renminbi to the U.S. dollar. Under the new policy, Chinese Renminbi may fluctuate within a narrow and managed band against a basket of certain foreign currencies. Following the removal of the U.S. dollar peg, the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. From mid-2008 to mid-2010 the Renminbi traded within a narrow range against the U.S. dollar at approximately RMB6.83 per U.S. dollar. In June 2010, the People’s Bank of China announced the removal of the de facto peg. Following this announcement, the Renminbi has appreciated modestly. It is difficult to predict when and how Renminbi exchange rates may change going forward.

The income statements of our operations are translated into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currency denominated transactions results in reduced revenue, operating expenses and net income for our operations. Similarly, to the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign currency denominated transactions results in increased revenue, operating expenses and net income for our operations. We are also exposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries into U.S. dollars in consolidation. If there is a change in foreign currency exchange rates, the conversion of the foreign subsidiaries’ financial statements into U.S. dollars will lead to a translation gain or loss which is recorded as a component of other comprehensive income. In addition, we have certain assets and liabilities that are denominated in currencies other than the relevant entity’s functional currency. Changes in the functional currency value of these assets and liabilities create fluctuations that will lead to a transaction gain or loss. We have not entered into agreements or purchased instruments to hedge its exchange rate risks, although it may do so in the future. The availability and effectiveness of any hedging transaction may be limited and we may not be able to successfully hedge its exchange rate risks.

Although PRC governmental policies were introduced in 1996 to allow the convertibility of Chinese Renminbi into foreign currency for current account items, conversion of Chinese Renminbi into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of SAFE, which is under the authority of the People’s Bank of China. These approvals, however, do not guarantee the availability of foreign currency conversion. We cannot be sure that we will be able to obtain all required conversion approvals for our operations or that PRC regulatory authorities will not impose greater restrictions on the convertibility of Chinese Renminbi in the future. Because a significant amount of our future revenue may be in the form of Chinese Renminbi, our inability to obtain the requisite approvals or any future restrictions on currency exchanges could limit our ability to utilize revenue generated in Chinese Renminbi to fund our business activities outside of the PRC, or to repay foreign currency obligations, including our debt obligations, which would have a material adverse effect on our financial condition and results of operations.

We may have limited legal recourse under PRC law if disputes arise under our contracts with third parties.

The PRC government has enacted some laws and regulations dealing with matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. However, their experience in implementing, interpreting and enforcing these laws and regulations is limited, and our ability to enforce commercial claims or to resolve commercial disputes is unpredictable. If business ventures are unsuccessful, we face the risk that the parties to these ventures may seek ways to terminate the transactions, or, may hinder or prevent us from accessing important information regarding the financial and business operations of these acquired companies. The resolution of these matters may be subject to the exercise of considerable discretion by agencies of the PRC government, and forces unrelated to the legal merits of a particular matter or dispute may influence their determination. Any rights we may have to specific performance, or to seek an injunction under PRC law, in either of these cases, are severely limited, and without a means of recourse by virtue of the Chinese legal system, we may be unable to prevent these situations from occurring. The occurrence of any such events could have a material adverse effect on our business, financial condition and results of operations.

You may have difficulty enforcing judgments against us.

We are a Nevada holding company and most of our assets are located outside of the United States. Most of our current operations are conducted in the PRC. In addition, most of our directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons is located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. It may also be difficult for you to enforce in U.S. courts judgments on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, most of whom are not residents in the United States and the substantial majority of whose assets are located outside of the United States. In addition, there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts (imposing monetary fines, penalties, damages or otherwise) or entertain original actions brought in the courts of the PRC against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States. Courts in China may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based on treaties between China and the country where the judgment is made or on reciprocity between jurisdictions. China does not have any treaties or other arrangements that provide for the reciprocal recognition and enforcement of foreign judgments with the United States. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not recognize or enforce a foreign judgment against us or our directors and officers (imposing monetary fines, penalties, damages or otherwise) or entertain original actions brought in the courts of the PRC against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States if they decide that the judgment violates basic principles of PRC law or national sovereignty, security or the public interest. So it is uncertain whether a PRC court would recognize or enforce a judgment rendered by a court in the United States.

We must comply with the Foreign Corrupt Practices Act and PRC anti-bribery law, which may put us at a competitive disadvantage.

Following the registration of our common stock under the Securities Exchange Act of 1934, as amended, we, a former shell company, will be required to comply with the United States Foreign Corrupt Practices Act, which prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some of our competitors, are not subject to these prohibitions. We are also subject to PRC anti-bribery law, which strictly prohibits bribery of government officials. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in mainland China. If our competitors engage in these practices, they may receive preferential treatment from personnel of some companies, giving our competitors an advantage in securing business or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage. Although we inform our personnel that such practices are illegal, we cannot assure you that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties.

Under the PRC EIT Law, we, Trunkbow BVI and/or Trunkbow Hong Kong may be classified as a “resident enterprise” of the PRC. Such classification could result in PRC tax consequences to us, our non-PRC resident investors, Trunkbow BVI and/or Trunkbow Hong Kong.

On March 16, 2007, the National People’s Congress approved and promulgated a new tax law (the “EIT Law”), which took effect on January 1, 2008. Under the EIT Law, enterprises are classified as “resident enterprises” and “non-resident enterprises.” An enterprise established outside of the PRC with a “de facto management body” within the PRC is considered a “resident enterprise,” meaning that it can be treated in a manner similar to an enterprise organized under the laws of the PRC for PRC enterprise income tax purposes. The implementing rules of the EIT Law define “de facto management body” as a managing body that in practice exercises “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise; however, it remains unclear whether the PRC tax authorities would deem our managing body or the managing body of Trunkbow BVI or Trunkbow Hong Kong as being located within the PRC. Due to the short history of the EIT Law and the lack of applicable legal precedents, the PRC tax authorities determine the PRC tax resident treatment of a foreign (non-PRC) company on a case-by-case basis.

If the PRC tax authorities determine that we, Trunkbow BVI and/or Trunkbow Hong Kong is a “resident enterprise” for PRC enterprise income tax purposes, a number of PRC tax consequences could follow. First, we, Trunkbow BVI and/or Trunkbow Hong Kong could be subject to PRC enterprise income tax at a rate of 25% on our, Trunkbow BVI’s and /or Trunkbow Hong Kong’s worldwide taxable income, as well as PRC enterprise income tax reporting obligations. Second, under the EIT Law and its implementing rules dividends paid between “qualified resident enterprises” are exempt from enterprise income tax. As a result, if we, Trunkbow BVI and Trunkbow Hong Kong are treated as “qualified resident enterprises,” all dividends from Trunkbow Shenzhen and Trunkbow Shandong to us (through Trunkbow Hong Kong and Trunkbow BVI) should be exempt from the PRC enterprise income tax.

If Trunkbow Hong Kong were treated as a PRC “non-resident enterprise” under the EIT Law, then dividends that Trunkbow Hong Kong receives from Trunkbow Shenzhen and Trunkbow Shandong (assuming such dividends were considered sourced within the PRC) (i) may be subject to a 5% PRC withholding tax, provided that Trunkbow Hong Kong owns more than 25% of the registered capital of Trunkbow Shenzhen or Trunkbow Shandong, as applicable, continuously within 12 months immediately prior to obtaining such dividends, and the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the “PRC-Hong Kong Tax Treaty”) were otherwise applicable, or (ii) if such treaty does not apply (i.e., because the PRC tax authorities may deem Trunkbow Hong Kong to be a conduit not entitled to treaty benefits), may be subject to a 10% PRC withholding tax. Similarly, if Trunkbow BVI were treated as a “non-resident enterprise” under the EIT Law and Trunkbow Hong Kong were treated as a “resident enterprise” under the EIT Law, then the dividends that Trunkbow BVI receives from Trunkbow Hong Kong (assuming such dividends were considered sourced within the PRC) may be subject to a 10% PRC withholding tax. A similar situation may arise if we were treated as a “non-resident enterprise” under the EIT Law and Trunkbow BVI were treated as a “resident enterprise” under the EIT Law. Any such taxes on dividends could materially reduce the amount of dividends, if any, we could pay to our shareholders.

Finally, if we are determined to be a “resident enterprise” under the EIT Law, or dividends payable to (or gains realized by) our investors that are not tax residents of the PRC (“non-resident investors”) are otherwise treated as income derived from sources within the PRC, this could result in (i) a 10% PRC tax being imposed on dividends we pay to our non-resident investors and that are enterprises (but not individuals) and gains derived by them from transferring our common stock and (ii) a potential 20% PRC tax being imposed on dividends we pay to our non-resident investors who are individuals and gains derived by them from transferring our common stock. In such event, we may be required to withhold the applicable PRC tax on any dividends paid to our non-resident investors. Our non-resident investors also may be responsible for paying the applicable PRC tax on any gain realized from the sale or transfer of our common stock in these circumstances. We would not, however, have an obligation to withhold PRC tax with respect to such gain under the PRC tax laws.

On December 10, 2009, the State Administration of Taxation (“SAT”) released Circular Guoshuihan No. 698 (“Circular 698”), which reinforces the taxation of certain equity transfers by non-resident investors through overseas holding vehicles. Circular 698 is retroactively effective from January 1, 2008. Circular 698 addresses indirect equity transfers as well as other issues. According to Circular 698, where a non-resident investor that indirectly holds an equity interest in a PRC resident enterprise through a non-PRC offshore holding company indirectly transfers an equity interest in the PRC resident enterprise by selling an equity interest in the offshore holding company, and the latter is located in a country or jurisdiction where the actual tax burden is less than 12.5% or where the offshore income of its residents is not taxable, the non-resident investor is required to provide the PRC tax authorities in charge of that PRC resident enterprise with certain relevant information within 30 days of the execution of the equity transfer agreement. The tax authorities in charge will evaluate the offshore transaction for tax purposes. In the event that the PRC tax authorities determine that such transfer is abusing forms of business organization and a reasonable commercial purpose for the offshore holding company other than the avoidance of PRC income tax liability is lacking, the tax authorities will have the power to re-assess the nature of the equity transfer under the doctrine of substance over form. If the SAT’s challenge of a transfer is successful, it may deny the existence of the offshore holding company that is used for tax planning purposes and subject the non-resident investor to PRC tax on the capital gain from such transfer. Because Circular 698 has a short history, there is uncertainty as to its application. We (or a non-resident investor) may become at risk of being taxed under Circular 698 and may be required to expend valuable resources to comply with Circular 698 or to establish that we (or such non-resident investor) should not be taxed under Circular 698, which could have a material adverse effect on our financial condition and results of operations (or such non-resident investor’s investment in us).

If any PRC tax applies to a non-resident investor, the non-resident investor may be entitled to a reduced rate of PRC tax under an applicable income tax treaty and/or a deduction for such PRC tax against such investor’s domestic taxable income or a foreign tax credit in respect of such PRC tax against such investor’s domestic income tax liability (subject to applicable conditions and limitations). Investors should consult their own tax advisors regarding the applicability of any such taxes, the effects of any applicable income tax treaties, and any available deductions or foreign tax credits.

Restrictions under PRC law on our PRC subsidiaries’ ability to make dividends and other distributions could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, pay dividends to you, and otherwise fund and conduct our businesses.

Substantially the majority of our revenues are earned by our PRC subsidiaries, Trunkbow Shenzhen and Trunkbow Shangdong. However, PRC regulations restrict the ability of our PRC subsidiaries to make dividends and other payments to their offshore parent company. PRC legal restrictions permit payments of dividend by our PRC subsidiaries only out of their accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. Our PRC subsidiaries are also required under PRC laws and regulations to allocate at least 10% of our annual after-tax profits determined in accordance with PRC GAAP to a statutory general reserve fund until the amounts in said fund reaches 50% of our registered capital. Allocations to these statutory reserve funds can only be used for specific purposes and are not transferable to us in the form of loans, advances or cash dividends. Any limitations on the ability of our PRC subsidiaries to transfer funds to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends and otherwise fund and conduct our business.

SAFE regulations may limit our ability to finance our PRC subsidiaries effectively and affect the value of your investment and may make it more difficult for us to pursue growth through acquisition.

If we finance our PRC subsidiaries through additional capital contributions, MOCFOM in China or its local counterpart must approve the amount of these capital contributions. On August 29, 2008, SAFE promulgated Circular 142, a notice regulating the conversion by a foreign-invested company of foreign currency into Renminbi by restricting how the converted Renminbi may be used. The notice requires that Renminbi converted from the foreign currency-denominated capital of a foreign-invested company may only be used for purposes within the business scope approved by the applicable governmental authority and may not be used for equity investments in the PRC unless otherwise provided by laws and regulations. In addition, SAFE strengthened its oversight of the flow and use of Renminbi funds converted from the foreign currency denominated capital of a foreign-invested company. The use of such Renminbi may not be changed without approval from SAFE, and may not be used to repay Renminbi loans if the proceeds of such loans have not yet been used for purposes within the company’s approved business scope. Violations of Circular 142 may result in severe penalties, including substantial fines as set forth in the Foreign Exchange Administration Regulations. We cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to the use and conversion of the foreign currencies provided by us to our PRC subsidiaries by mean of loans or capital contributions in the future. If we fail to complete such registrations or obtain such approvals, our PRC subsidiaries’ ability to use and convert such foreign currencies into Renminbi may be negatively affected, in particular in our future equity investments in the PRC, which could adversely and materially affect our ability to fund and expand our business.

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Failure to comply with PRC regulations regarding the registration requirements for employee stock ownership plans or share option plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.

In the future, we may choose to adopt an employee incentive option plan. Under applicable PRC regulations, all foreign exchange matters relating to employee stock ownership plans, share option plans or similar plans in which PRC citizens participate require approval from SAFE or its authorized local branch. In addition, PRC citizens who are granted share options, shares or other equity interests by an offshore listed company are required, through a PRC agent or PRC subsidiary of the offshore listed company, to register with SAFE and complete certain other procedures. Since we are an offshore listed company and may in the future adopt an employee incentive option plan, we and our PRC employees who are granted share options or shares will be subject to, and intend to comply with, these regulations. If we or our PRC employees fail to comply with these regulations, we or our Chinese employees may face sanctions imposed by SAFE or other PRC government authorities, including restrictions on foreign currency conversions and additional capital contributions to our PRC subsidiaries.

We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.

Pursuant to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or SAT Circular 698, issued by the State Administration of Taxation on December 10, 2009 with retroactive effect from January 1, 2008, where a non-resident enterprise transfers the equity interests of a PRC resident enterprise indirectly via disposing of the equity interests of an overseas holding company, or an Indirect Transfer, and such overseas holding company is located in a tax jurisdiction that: (i) has an effective tax rate less than 12.5% or (ii) does not tax foreign income of its residents, the foreign investor shall report to the competent tax authority of the PRC resident enterprise this Indirect Transfer. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of avoiding PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC withholding tax at a rate of up to 10%. SAT Circular 698 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its related parties at a price lower than the fair market value, the relevant tax authority has the power to make a reasonable adjustment to the taxable income of the transaction.

There is uncertainty as to the application of SAT Circular 698. For example, while the term “Indirect Transfer” is not clearly defined, it is understood that the relevant PRC tax authorities have jurisdiction regarding requests for information over a wide range of foreign entities having no direct contact with China. Moreover, the relevant authority has not yet promulgated any formal provisions or formally declared or stated how to calculate the effective tax rates in foreign tax jurisdictions, and the process and format of the reporting of an Indirect Transfer to the competent tax authority of the relevant PRC resident enterprise. In addition, there are not any formal declarations with regard to how to determine whether a foreign investor has adopted an abusive arrangement in order to avoid PRC tax. As a result, we may become at risk of being taxed under SAT Circular 698 and we may be required to expend valuable resources to comply with SAT Circular 698 or to establish that we should not be taxed under SAT Circular 698, which may have a material adverse effect on our financial condition and results of operations.

The approval of the China Securities Regulatory Commission may be required in connection with the recent listing of our common stock on NASDAQ under a regulation adopted in August 2006, and, if required, we cannot predict whether we will be able to obtain such approval.

In 2006, six PRC regulatory agencies jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the New M&A Rule. This rule requires that, if an overseas company established or controlled by PRC domestic companies or citizens intends to acquire equity interests or assets of any other PRC domestic company affiliated with the PRC domestic companies or citizens, such acquisition must be submitted to MOFCOM for approval. In addition, this regulation requires that an overseas company controlled directly or indirectly by PRC companies or citizens and holding equity interests of PRC domestic companies needs to obtain the approval of the CSRC prior to listing its securities on an overseas stock exchange. On September 21, 2006, the CSRC, published a notice on its official website specifying the documents and materials required to be submitted by overseas special purpose companies seeking CSRC’s approval of their overseas listings.

While the application of the New M&A Rule remains unclear, based on their understanding of current PRC laws, regulations, and the notice published on September 21, 2006, our PRC counsel, Han Kun Law Offices, has advised us that, since our subsidiaries were established by means of direct investment rather than by merger or acquisition of the equity interest or assets of any “domestic company” as defined under the New M&A Rules, and no provision in the New M&A Rules classifies our contractual arrangements with Trunkbow Technologies as a type of acquisition transaction falling under the New M&A Rules, we are not required to submit an application to MOFCOM or the CSRC for its approval for our contractual control on Trunkbow Technologies and the listing and trading of our common stock on a US national securities exchange. However, MOFCOM and the CSRC may hold a different view from our PRC counsel.

If the CSRC or another PRC regulatory agency subsequently determines that the approvals from the MOFCOM and/or CSRC were required our contractual control over Trunkbow Technologies and for the listing and trading of our shares on NASDAQ, we may need to apply for a remedial approval from the CSRC and may be subject to certain administrative punishments or other sanctions from PRC regulatory agencies. The regulatory agencies may impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, delay or restrict the repatriation of our foreign currency in our offshore bank accounts into the PRC, or take other actions that could materially and adversely affect our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our common stock.

Also, if MOFCOM or CSRC later requires that we obtain its approval, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding these approval requirements could materially and adversely affect the trading price of our common stock.

The New M&A Rule sets forth complex procedures for acquisitions conducted by foreign investors that could make it more difficult to pursue acquisitions.

The New M&A Rule sets forth complex procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex, including requirements in some instances that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. Complying with the requirements of the New M&A Rule to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from MOFCOM, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

Risks Related to our Common Stock

There can be no assurance that any agreement will be executed with respect to the Going-Private Proposal made by the Consortium Members, or that this or any other transaction will be approved or consummated. The absence of a proposal to acquire our common stock would likely have an effect on the market price of our common stock.

On November 2, 2012, we received and announced a going private proposal from the Consortium Members. According to the proposal letter, the transaction will involve the acquisition of all of the outstanding shares of our common stock not beneficially owned by the Consortium Members at a price of US$1.46 per share in cash, which is intended to be financed with a combination of debt and equity capital (the “Proposed Transaction”).

Our Board of Directors has formed a special committee of independent directors to evaluate and consider certain the going private transaction. Since being formed, the Special Committee has engaged legal and financial advisors. The Special Committee’s process is ongoing and the Special Committee intends to continue with its work, including evaluating the going private transaction as well as other proposals which we may receive, for as long as the Special Committee, in consultation with its advisors, deems necessary. No decisions have been made by the Special Committee with respect to our response to the going private proposal. 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 public announcement of the proposal affected our stock price. There can be no assurance that any definitive agreement will be executed with respect to the going private transaction or that this or any other transaction will be approved or consummated. The absence of a proposal to acquire our common stock, or changes in the proposal, as well as the commencement of the litigation would likely have an effect on the market price of our common stock.

On November 8, 2012, a putative class action lawsuit was filed by a purported Trunkbow shareholder in District Court, Clark County, Nevada, captioned Hansen v. Trunkbow, et al., Case No. A-12-671652-C. The complaint named as defendants several directors and officers of Trunkbow, namely, Wanchun Hou, Qiang Li, Jihong Bao, Xin Wang, Albert Liu, Regis Kwong, Kokhui Tan, Iris Geng, Tingjie Lv, Zhaoxing Huang and Dong Li (the “Individual Defendants”). Although Trunkbow was included among the defendants listed in the caption, the complaint did not assert a cause of action against the Company. The plaintiff in Hansen seeks recovery on behalf of all Trunkbow shareholders for alleged breaches of fiduciary duties by the Individual Defendants in connection with the Proposed Transaction in which the Chairman of Trunkbow’s Board of Directors, Wanchun Hou, and Trunkbow’s CEO, Qiang Li, have offered to acquire all of the outstanding shares of the Company’s common stock not currently owned by them. On November 14, 2012, another putative class action lawsuit was filed by a purported Trunkbow shareholder in District Court, Clark County, Nevada, captioned Robert Davis v. Hou, et al., Case No. A-12-671946-C. Trunkbow is named as a defendant in this action, along with each of the Individual Defendants named in the Hanson complaint. The plaintiff in Davis seeks recovery on behalf of all Trunkbow shareholders for alleged breaches of fiduciary duties by the Individual Defendants in connection with the Proposed Transaction, and for aiding and abetting such alleged breaches by Trunkbow. The plaintiffs in both cases allege that the share price proposed by Hou and Li is inadequate in light of the Company’s intrinsic value and anticipated future growth. Among other things, the plaintiffs in both actions seek to enjoin the Proposed Transaction until such time as the Individual Defendants have acted in accordance with their fiduciary duties. Only the Company has been served in the actions, but it need not respond to the complaints until after a transaction agreement has been signed, if that occurs, and an amended complaint has been filed.

We may face lawsuits related to statements made by us that Bernstein and Pinchuk LLP was independent with respect to our 2009 fiscal year.

In reviewing the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, the SEC informed us that because its Chief Financial Officer was previously employed by Bernstein and Pinchuk LLP (“B&P”), our outside auditors, and had performed more than 10 hours on the Trunkbow audit for the year ended December 31, 2009, it did not consider B&P “independent,” with respect to our 2009 fiscal year, as defined in the SEC’s rules regarding auditor independence. We disagreed, arguing that the hiring of Ms. Alice Ye was in accordance with a statutory exemption for such situations involving emergency or unusual circumstances approved by the Company’s board of directors or audit committee, and noting the limited work performed by Ms. Ye and her status as a non-partner in B&P at the time. The SEC disagreed with our position, indicating that they believe such exemption is to be relied upon only in very rare circumstances and that our situation was not consistent with their views of the scope of the exemption. Accordingly, we have amended our Annual Report on Form 10-K for the 2010 fiscal year to include the audit report of another independent registered public accounting firm, Holtz Rubenstein Reminick LLP (“HRR”), regarding our consolidated financial statements for the year ended December 31, 2009.

Because our initial public offering registration statement contained the 2009 audit report of B&P, there is a risk that certain of our stockholders may choose to initiate legal proceedings against us. With respect to unasserted claims regarding statements contained in our IPO registration statement, we cannot identify a population of potential claimants that have suffered damages resulting from such statements with sufficient certainty to determine the probability of a loss and to make a reasonable estimate of liability, if any. While we expect to pursue recovery for recognized and unrecognized contingent losses through insurance, indemnification arrangements or other sources, we are unable to quantify the amount, if any, that we may expect to recover because of the uncertainties associated with such unasserted claim.

Until February 2010 we were a “shell” company and as such, we may have material liabilities of which we are not aware.

We were incorporated as a “shell” company with nominal assets under the name Bay Peak 5 Acquisition Corp. (“BP5”). Immediately prior to the closing of the Share Exchange in February 2010, we conducted a due diligence review of BP5’s financial condition and legal status. Notwithstanding such review, BP5 may have material liabilities that we have not yet discovered. Further, although the Share Exchange Agreement contains customary representations and warranties from BP5 concerning its assets, liabilities, financial condition and affairs, we may have limited or no recourse against former owners or principals of BP5 in the event these prove to be untrue. We cannot insure against any loss we might incur as a result of undisclosed liabilities. See “Item 1 – Business” of this Report captioned “Company Background – Our History and Corporate Structure” for more information about the Share Exchange and our former status as a “shell” company.

Because we became public by means of a reverse takeover transaction, we may not be able to attract the attention of major brokerage firms.

Additional risks may exist since we became public through a “reverse takeover” with a shell company. Security analysts of major brokerage firms and securities institutions may not cover us since there are no broker-dealers who sold our stock in a public offering who would have an incentive to follow or recommend the purchase of our common stock. No assurance can be given that established brokerage firms will want to conduct any financings for us in the future.

If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for shares of our common stock.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We maintain a system of internal control over financial reporting, which is defined as a process designed by, or under the supervision of, our principal executive officer and principal financial officer, or persons performing similar functions, and effected by our Board of Directors, management and other personnel, 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.

As a newly public company, we have significant additional requirements for enhanced financial reporting and internal controls. We will be required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm addressing these assessments. The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company.

We cannot assure you that we will not, in the future, identify areas requiring improvement in our internal control over financial reporting. We cannot assure you that the measures we will take to remediate any areas in need of improvement will be successful or that we will implement and maintain adequate controls over our financial processes and reporting in the future as we continue our growth. If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for shares of our common stock.

Lack of experience as officers of publicly-traded companies of our management team may hinder our ability to comply with the Sarbanes-Oxley Act.

It may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal controls and other finance staff or consultants in order to develop and implement appropriate internal controls and reporting procedures. If we are unable to comply with the Sarbanes-Oxley Act’s internal controls requirements, we may not be able to obtain the independent auditor certifications that the Sarbanes-Oxley Act requires publicly-traded companies to obtain.

We will incur increased costs as a result of being a public company.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act, as well as new rules subsequently implemented by the SEC, has required changes in the corporate governance practices of public companies. We expect these new rules and regulations to increase our legal, accounting and financial compliance costs and to make certain corporate activities more time-consuming and costly. In addition, we will incur additional costs associated with our public company reporting requirements. We are currently evaluating and monitoring developments with respect to these new rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

As all property in China is state owned, neither we, nor any company, owns any real property. Our principal executive office is located at Unit 1217-1218, 12F of Tower B, Gemdale Plaza, No. 91 Jianguo Road, Chaoyang District, Beijing, People’s Republic of China 100022. The rentable space in this office consists of approximately 340.79 square meters (approximately 3,668.23 square feet). The term of the lease expires on March 2015. The monthly rental payment was approximately $822,~~546~~832 (RMB 57141,~~934~~428) during the period from ~~2010~~April ~~to March~~ 2013, ~~while it increases~~ to ~~approximately~~March 2015.

Item 3. Legal Proceedings.

In the normal course of business, we are subject to claims and litigation. Neither we nor our subsidiaries are currently a party to any material legal proceedings nor are we aware of any material proceeding to which any of our directors, officers, affiliates, or any holder of more than five percent of our common stock, or any associate of any such director, officer, affiliate, or shareholder, is a party adverse to us or any of our subsidiaries or has a material interest adverse to us or any of our subsidiaries, other than as described below.

On November 8, 2012, a putative class action lawsuit was filed by a purported Trunkbow shareholder in District Court, Clark County, Nevada, captioned Hansen v. Trunkbow, et al., Case No. A-12-671652-C (the “Hansen Action”). The complaint named as defendants several directors and officers of Trunkbow, namely, Wanchun Hou, Qiang Li, Jihong Bao, Xin Wang, Albert Liu, Regis Kwong, Kokhui Tan, Iris Geng, Tingjie Lv, Zhaoxing Huang and Dong Li (the “Individual Defendants”). Although Trunkbow was included among the defendants listed in the caption, the complaint did not assert a cause of action against the Company. The plaintiff in the Hansen Action sought recovery on behalf of all Trunkbow shareholders for alleged breaches of fiduciary duties by the Individual Defendants in connection with the proposed “going-private” transaction involving the acquisition of all of the outstanding shares of our common stock not beneficially owned by the Consortium Members at a price of US$1.46 per share in cash (the “Proposed Transaction”). On November 14, 2012, another putative class action lawsuit was filed by a purported Trunkbow shareholder in District Court, Clark County, Nevada, captioned Robert Davis v. Hou, et al., Case No. A-12-671946-C (the “Davis Action”). Trunkbow was named as a defendant in this action, along with each of the Individual Defendants named in the Hansen complaint. The plaintiff in the Davis Action sought recovery on behalf of all Trunkbow shareholders for alleged breaches of fiduciary duties by the Individual Defendants in connection with the Proposed Transaction, and for aiding and abetting such alleged breaches by Trunkbow. The plaintiffs in both actions alleged that the share price proposed by Hou and Li was inadequate in light of the Company’s intrinsic value and anticipated future growth. Among other things, the plaintiffs in both actions sought to enjoin the Proposed Transaction until such time as the Individual Defendants have acted in accordance with their fiduciary duties. Only the Company was served in the actions, but it had no obligation to respond to the complaints until after a transaction agreement had been signed and an amended complaint had been filed.

After the Company announced that it had entered into a Merger Agreement with Parent on December 10, 2013 and filed a Preliminary Proxy Statement and Notice of Special Meeting of Stockholders on Schedule 14A with respect to the Merger on December 20, 2013 (the “Preliminary Proxy Statement”) with the SEC, five additional putative class action lawsuits were filed between December 20, 2013 and January 7, 2014 in District Court, Clark County, Nevada, purportedly on behalf of all stockholders of the Company, other than the named defendants and their respective affiliates, asserting claims against Trunkbow, Parent, Merger Sub, Hou, Li and other members of the Board. The five actions are captioned as follows: Jason Lines v. Trunkbow Int’l Holdings Ltd., et al., Case No. A-13-693474-C, filed on December 20, 2013 (the “Lines Action”); William Morgan v. Hou, et al., Case No. A-13-693613-C, filed on December 26, 2013 (the “Morgan Action”); Troy Hertel v. Trunkbow Int’l Holdings Ltd., et al., Case No. A-13-693654-C, filed on December 27, 2013 (the “Hertel Action”); Lu Sun v. Trunkbow Int’l Holdings Ltd., et al., Case No. A-14-694023-C, filed on January 6, 2014 (the “Sun Action”); and Jean Fontaine v. Trunkbow Int’l Holdings Ltd. et al., Case No. A-14-694147-C, filed on January 7, 2014 (the “Fontaine Action”). The complaints generally alleged that the Merger Agreement was entered into as a result of an unfair process and for an unfair price and that the defendants breached, or aided and abetted the breach of, fiduciary duties to the Company’s stockholders. In addition, the Morgan, Hertel, Sun and Fontaine Actions alleged that the Preliminary Proxy Statement omitted information necessary for it not to be materially misleading and asserted claims for violation of the duty of candor. On January 9, 2014, counsel for all the named plaintiffs in the Hansen, Lines, Morgan, Hertel, Sun and Fontaine Actions filed a motion seeking consolidation of all the filed actions (as well as any similar actions that may be filed) into a single proceeding, and for the appointment of lead plaintiffs, co-lead counsel, co-liaison counsel, and a plaintiffs’ counsels’ executive committee to oversee the litigation of a consolidated action. On January 10, 2014, the plaintiff in the Davis Action voluntarily dismissed the action without prejudice. On March 13, 2014, the Court entered an Order of Consolidation and Appointment of Lead Counsel, consolidating the remaining six actions under the caption In re Trunkbow International Holdings Limited Shareholders Litigation, No. A-12-671652-B (the “Consolidated State Action”), and appointing co-lead counsel, co-liaison counsel, and a plaintiffs’ counsels’ executive committee (collectively, the “Plaintiffs’ Counsel”).

In addition, on January 22, 2014, a putative class action lawsuit was filed by a purported stockholder of the Company in the United States District Court for the District of Nevada, captioned Bornet Olivier v. Wanchun Hou et al., Case No. 2:14-cv-00106 (the “Federal Action”). Trunkbow and each of the Individual Defendants named in the Hansen complaint were named as defendants in the Federal Action. The plaintiff in the Federal Action sought recovery on behalf of all Trunkbow shareholders for alleged violations of Section 14(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder by the Company and the Individual Defendants, alleged violations of Section 20(a) of the Securities Exchange Act of 1934 by the Individual Defendants, and alleged breaches of fiduciary duties by the Individual Defendants in connection with the Proposed Transaction. The plaintiff in the Federal Action alleged that the share price proposed by Hou and Li was inadequate in light of the Company’s intrinsic value and anticipated future growth and that the Preliminary Proxy Statement omitted information necessary for it not to be materially misleading. Among other things, the plaintiff sought to enjoin the Proposed Transaction until such time as the Company has implemented a process to obtain the highest possible value and provide all material disclosures in connection with the Proposed Transaction. Only the Company was served in the action.

The parties in the Consolidated State Action have reached a proposed settlement of those claims (the “Proposed Settlement”). On April 7, 2014, the Company filed a supplement to the Preliminary Proxy Statement with the SEC containing supplemental disclosures (the “Supplemental Disclosures”) which form the basis for the Proposed Settlement. On April 11, 2014, the parties executed a Memorandum of Understanding (the “MOU”) with respect to the Proposed Settlement. On August 6, 2014, the parties entered into a Stipulation of Settlement and Release (the “Settlement Stipulation”) based on the terms in the MOU. In entering into the Proposed Settlement, the defendants expressly denied and continue to deny each and all of the claims and contentions alleged by the named plaintiffs in the Consolidated State Action, including but not limited to any allegation of wrongdoing, fault, liability, or damage to any of the named plaintiffs or the purported class, or that the disclosures and materials provided to Trunkbow shareholders regarding the Merger were incomplete or in any way misleading, that any additional disclosure was required under the SEC rules or any applicable legal principle, and that the Supplemental Disclosures were material. The defendants are entering into the Proposed Settlement solely to eliminate the distraction, burden, and expense of further litigation, and to fully and finally resolve all claims relating to the Merger. The defendants believe that they acted properly and fully complied with their fiduciary and other legal obligations at all times, believe the Consolidated State Action has no merit, and maintain that they have committed no disclosure violations or any other breach of duty whatsoever in connection with the Merger or any public disclosures. The Proposed Settlement is subject to the final approval of the court. Plaintiffs’ Motion for Preliminary Approval of Proposed Settlement, Class Certification and Notice to Class Members (the “Proposed Settlement Motion”) was filed on August 20, 2014. A hearing on the Proposed Settlement Motion was held on September 22, 2014, at which time, the Proposed Settlement was preliminarily approved. The Court has not yet set a date for a hearing on the final approval of the Proposed Settlement.

On May 30, 2014, the plaintiff in the Federal Action entered into a stipulation with the Company to stay the Federal Action pending final approval of the Proposed Settlement in the Consolidated State Action.

Item 4. Mine Safety Disclosures.

Not applicable.

3127

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Commencing on February 3, 2011 until the effective time of the Merger on April 14, 2014 and NASDAQ filed on such date a notification on Form 25 with the SEC to report that we were no longer listed on NASDAQ, our common stock was listed on the NASDAQ Global Market under the symbol “TBOW.” Prior to such listing, there was no public market for our common stock. The following table sets forth the high and low sale prices for our common stock for the periods indicated, as reported by NASDAQ.

	Common Stock
	Low		High
2014
Second Quarter (through April 14, 2014)	$	1.41	$	1.46
First Quarter	$	1.31	$	1.42
2013
Fourth Quarter	$	0.96	$	1.37
Third Quarter	$	0.7	$	1.17
Second Quarter	$	0.58	$	1.40
First Quarter	$	1.11	$	1.58
Second Quarter*	$	1.19	$	1.40
2012
Fourth Quarter	$	0.85	$	1.33
Third Quarter	$	0.77	$	1.62
Second Quarter	$	1.00	$	2.39
First Quarter	$	1.70	$	2.35
2011
Fourth Quarter	$	1.61	$	3.00
Third Quarter	$	2.15	$	4.25
Second Quarter	$	1.96	$	5.25
First Quarter (commencing February 3, 2011)	$	3.90	$	5.25

*Through April 9, 2013.

Holders

As a result of the Merger as approved and completed on April 14, 92014, ~~2013~~Merger Sub merged with and into the Company, wewith ~~had~~the ~~approximately~~Company ~~451~~continuing ~~record~~as ~~owners~~the surviving company after the Merger as a wholly owned subsidiary of Parent. The Parent owns all the outstanding shares of our common stock.

Dividend Policy

We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends on our common stock for the foreseeable future.

Future cash dividends, if any, will be at the discretion of our Board of Directors and will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors as our Board of Directors may deem relevant. We can pay dividends only out of our profits or other distributable reserves and dividends or distributions will only be paid or made if we are able to pay our debts as they fall due in the ordinary course of business.

Securities Authorized for Issuance Under Equity Compensation Plans

We presently do not have any equity based or other long-term incentive programs. In the future, we may adopt and establish an equity-based or other long-term incentive plan if our management believes that it is in our and our stockholders’ best interest to do so.

Recent Sales of Unregistered Securities

Not applicable.

Item 6. Selected Financial Data

Not applicable to smaller reporting companies.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with our financial statements and the notes to those statements. This discussion contains forward-looking statements reflecting our management’s current expectations that involve risks and uncertainties. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed on page 19 entitled “Risk Factors” and elsewhere in this Form 10-K.

We provide technology platform solutions for mobile telecom operators in the People’s Republic of China. Our patented platforms provide a comprehensive solution for Chinese telecom operators to deliver and manage the distribution of various mobile value added service (“MVAS”) applications to their subscribers. We believe that the Trunkbow brand is regarded by the telecom operators as a well-managed, trusted provider of technology solutions. Our research and development focused business model provides us with a defensible market position as a technology provider to the telecom operators.

As of December 31, ~~2012~~2013, our technology is the subject of ~~123~~217 filed patent applications, of which 7887 have been granted by the National Intellectual Property Administration of the People’s Republic of China. We have recently begun the process of filing for international and U.S. patents in order to protect our intellectual properties globally.

The primary geographic focus of our operations is in the PRC, where we derive substantially all of our revenues. We conduct our business operations primarily through our wholly-owned subsidiaries Trunkbow Asia Pacific (Shenzhen) Limited and Trunkbow Asia Pacific (Shandong) Limited. Both companies are registered in PRC as Wholly-Owned Foreign Enterprises.

Overview

Our History and Corporate Structure

We were incorporated as a “shell” company with nominal assets under the name Bay Peak 5 Acquisition Corp. We were incorporated in the State of Nevada on September 3, 2004 as a wholly owned subsidiary of Visitalk Capital Corporation (“VCC”). We were formed as part of the implementation of the Chapter 11 reorganization plan (the “Visitalk Plan”) of visitalk.com, Inc. (“Visitalk.com”), a former provider of VOIP services. The Visitalk Plan was deemed effective by the Bankruptcy Court on September 17, 2004 (the “Effective Date”). On September 22, 2004, Visitalk.com was merged into VCC, which was authorized as the reorganized debtor under the Visitalk Plan.

On July 28, 2008, pursuant to Stock Purchase Agreements (“SPAs”), we sold 5,971,898 shares of common stock to two parties unaffiliated with us (the “Purchasing Shareholders”) for a total payment of $51,000, or approximately $.008 per share (the “Change of Control Transactions”). On August 29, 2008, the SPAs were approved by our shareholders at a special shareholders’ meeting and all the closing conditions of the SPAs were met. After the Change of Control Transactions, including the impact of a related master settlement agreement, these newly issued shares represented 85.5% ownership of us. One of the parties, Bay Peak, LLC (“Bay Peak”), had contacts with various companies and individuals in Asia, in particular the PRC. Cory Roberts, the managing member of Bay Peak, was appointed to our Board of Directors and elected President in conjunction with the Change of Control Transactions. Mr. Roberts resigned as a member of our Board of Directors on March 30, 2011. On August 28, 2008, shareholders authorized adopting the name of Bay Peak 5 Acquisition Corp. Also on August 28, 2008, shareholders ratified a one-for-seven reverse stock split (the “First Reverse Split”), which was implemented on January 6, 2010 and in January 2010, authorized a further reverse split of 4.14 for 1, which was implemented on January 27, 2010 (the “Second Reverse Split”).

In February 2010 we entered into the Share Exchange Agreement with Trunkbow BVI and the shareholders of Trunkbow BVI (the “Shareholders”), who together owned shares constituting 100% of the issued and outstanding ordinary shares of Trunkbow BVI (the “Trunkbow BVI Shares”), and Bay Peak, our former principal shareholder. Pursuant to the terms of the Share Exchange Agreement, the Shareholders transferred to us all of the Trunkbow BVI Shares in exchange for the issuance of 19,562,888 (the “Shares”) shares of our common stock (the “Share Exchange”). As a result of the Share Exchange, Trunkbow BVI became our wholly owned subsidiary. After giving effect to the Share Exchange, the sale of common stock in the February 2010 Offering and the BP5 Warrant Financing (as defined below) (i) existing shareholders of Trunkbow BVI owned approximately 60.25% of our outstanding common stock, (ii) purchasers of common stock in the February 2010 Offering owned approximately 26.01% of our outstanding common stock (including 7.7% owned by VeriFone, Inc.), (iii) the holders of BP5 warrants owned approximately 8.54% of our outstanding common stock and (iv) the pre-existing shareholders of BP5 owned approximately 5.2% of our outstanding common stock.

3329

We were founded in 2001 by former Silicon Valley engineers with extensive experience in the telecom industry. We have been able to develop first to market application platforms that enable telecom operators to generate significant new revenue streams by leveraging our extensive knowledge of the mobile network technology. Since our inception, we have invested significant time and resources to develop cutting edge technology solutions for our customers. We were the first to create and develop a Color Ring Back Tone (“CRBT”) application platform for Shandong Unicom in 2003. Since then, this innovative service solution has become the third largest revenue contributor for China Mobile after voice and Short Message Service (“SMS”).

We believe that we have a competitive advantage over our primary competitors by our proven track record of innovation. We believe Chinese telecom operators continue to utilize our technology platforms because of our superior technological solutions and unique product offerings.

Our organizational structure is as follows:

(1)

(2)

(3)

(4)

(5)

(6)

We entered into a series of contractual arrangements with Beijing Delixunda Technology Co., Ltd. (“Delixunda”) and its shareholders on March 10, 2011. Delixunda is a telecom value-added service licensed company and was established as a limited liability company on December 1, 2009 in Beijing, the PRC. Delixunda has no operations prior to February 10th, 2011. As a result of the contractual arrangements with Delixunda, we indirectly own the telecom value-added service license, which would enable us to offer telecom wireless value-added content service to individual clients.

Results of Operations

Fiscal Years Ended December 31, ~~2012~~2013 versus ~~2011~~2012

	Years Ended December 31,				% of
	2012		2011		change
	2013		2012		change
System integration	$	53,~~896~~272,~~575~~377	$	125,~~567~~896,~~498~~575		(5344.15	)%
Software sales		2513,~~043~~898,~~872~~334		1325,~~451~~043,~~015~~872		86(44.25	)%
Maintenance service		~~505~~372,~~944~~187		1505,~~617,431~~944		(6826.74	)%
Shared revenue		42,~~013~~678,~~906~~567		24,~~079~~013,~~463~~906		93(33.03	)%
Total revenues		3520,~~460~~221,~~297~~465		2935,~~715~~460,~~407~~297		19(43.30	)%
Less:
Business tax and surcharges		~~691~~366,~~297~~097		~~638~~691,~~377~~297		8(47.30	)%
Net revenues	$	3419,~~769~~855,~~000~~368	$	2934,~~077~~769,~~030~~000		19(42.69	)%

Net revenues were $3419.7786 million for the year ended December 31, ~~2012~~2013, compared to $2934.0877 million for the year ended December 31, ~~2011~~2012. The ~~increase~~decrease in net revenue was $514.7091 million or 1942.69%, mainly ~~attributable~~caused toby the ~~growth~~reduction of software sales. ~~System~~and system integration. ~~revenues~~Software sales decreased $611.67 15 million, or 44.5%, from $1225.5704 million for the year ended December 31, ~~2011~~2012 to $513.90 million for the year ended December 31, ~~2012~~2013, due to ~~reduced~~the ~~demand~~decrease on in MVAS ~~platforms.~~related ~~Software~~to phone call and SMS management and mobile business card and decrease in MPS software sales. System ~~increased~~integration revenues decreased $112.5962 million, ~~or 86.2%,~~ from $135.4590 million for the year ended December 31, ~~2011~~2012 to $253.0427 ~~million~~ for the year ended December 31, ~~2012~~2013, ~~mainly~~due ~~attributed~~to ~~from~~decrease ~~mobile~~in ~~payment software and~~ MVAS systems related to ~~phone~~ ~~call and SMS management,~~ mobile ~~business card~~newspaper, ~~color~~phone ~~numbering~~call and ~~number~~SMS ~~change notification~~management. ~~Maintenance~~Shared ~~service~~ revenue decreased $1.1134 million, or 6833.73%, from $14.6201 million for the year ended December 31, ~~2011~~2012 to $02.5168 million for the year ended December 31, ~~2012~~2013, ~~mainly~~caused ~~due~~by toless arevenue ~~lower~~shared ~~demand~~from onmobile ~~services provided to the carrier on network testing~~payment. ~~Shared~~Maintenance service revenue ~~increased~~ decreased $10.9313 million, or 9326.4%, from $20.0851 million for the year ended December 31, ~~2011~~2012 to $40.0137 million for the year ended December 31, ~~2012~~ 2013, ~~driven~~mainly bydue ~~shared~~to ~~revenue~~less services ~~from~~provided ~~mobile~~to ~~payment~~the carrier on network maintaining.

	Years Ended December 31,				% of
	2013		2012		change

MVAS Technology Platforms
Gross Revenues	$	12,391,637	$	21,643,519		(42.7	)%
Business tax and surcharges		223,282		431,377		(48.2	)%
Cost of Revenues		1,585,646		3,469,481		(54.3	)%
	$	10,582,709	$	17,742,661		(40.4	)%
Mobile Payment Solutions
Gross Revenues	$	7,829,828	$	13,816,778		(43.3	)%
Business tax and surcharges		142,815		259,920		(45.1	)%
Cost of Revenues		3,800,341		1,638,155		132.0	%
	$	3,886,672	$	11,918,703		(67.4	)%

	Years Ended December 31,				% of
	2012		2011		change
MVAS Technology Platforms
Gross Revenues	$	21,643,519	$	17,429,377		24.2	%
Business tax and surcharges		431,377		413,491		4.3	%
Cost of Revenues		3,469,481		4,184,549		(17.1	)%
	$	17,742,661	$	12,831,337		38.3	%
Mobile Payment Solutions
Gross Revenues	$	13,816,778	$	12,286,030		12.5	%
Business tax and surcharges		259,920		224,886		15.6	%
Cost of Revenues		1,638,155		1,945,522		(15.8	)%
	$	11,918,703	$	10,115,622		17.8	%

Revenue from MVAS ~~increased~~decreased $49.2125 million or 2442.27% to $2112.6439 million for the year ended December 31, ~~2012~~2013, compared with $1721.4364 million from the year ended December 31, ~~2011~~2012. The ~~increase~~decrease in MVAS revenue was primarily caused by the ~~growth~~reduction on MVAS software sales related to phone call and SMS management, and mobile business card~~, color numbering and number change notification~~. Revenue from our MPS offerings ~~increased~~decreased 1243.53% to $137.82 83 million for the year ended December 31, ~~2012~~2013, compared with $1213.2982 million for the year ended December 31, ~~2011~~2012. The ~~increase~~decrease in MPS revenue was ~~driven~~caused by the MPS software sales. For the year ended December 31, ~~2012~~2013, MVAS and MPS accounted for 61.03% and 3938.07% of gross revenues, respectively, compared to 5861.70% and 4139.30% for the year ended December 31, ~~2011~~2012.

Cost of revenues:

	Years Ended December 31,				% of
	2012		2011		change
	2013		2012		change
Equipment costs	$	4,~~454~~792,~~293~~930	$	54,~~339~~454,~~688~~293		~~(16~~7.6	)%
Labor Costs		~~653~~593,~~343~~057		~~790~~653,~~383~~343		(179.32	)%
	$	5,~~107~~385,~~636~~987	$	65,~~130~~107,~~071~~636		~~(16~~5.74	)%

Cost of revenues includes equipment hardware costs and labor costs. The equipment hardware includes servers, network equipment, safety equipment and storage equipment. The ~~decrease~~slight increase in cost of ~~revenue~~revenues was primarily related to ~~the~~higher ~~significant~~hardware ~~reduction~~costs in ~~the~~our system ~~integration, which consumed significant hardware costs~~sales.

Gross Profit:

	Years Ended December 31,
	2012						2011
	2013						2012
	MVAS			MPS			MVAS			MPS
Gross Revenues	$	2112,~~643~~391,~~519~~637		$	137,~~816~~829,~~778~~828		$	1721,~~429~~643,~~377~~519		$	1213,~~286~~816,~~030~~778
Business tax and surcharges		~~431~~223,~~377~~282			~~259~~142,~~920~~815			~~413~~431,~~491~~377			~~224~~259,~~886~~920
Cost of Revenues		31,~~469~~585,~~481~~646			13,~~638~~800,~~155~~341			43,~~184~~469,~~549~~481			1,~~945~~638,~~522~~155
Gross profit	$	1710,~~742~~582,~~661~~709		$	113,~~918~~886,~~703~~672		$	1217,~~831~~742,~~337~~661		$	1011,~~115~~918,~~622~~703
Gross margin		8387.60	%		8750.96	%		7583.46	%		8387.9	%

Gross profit ~~increased~~decreased $615.7119 million, or 29or 51.32%, from $2229.9566 million for the year ended December 31, ~~2011~~2012 to $2914.6647 million for the year ended December 31, ~~2012~~2013. The ~~gross~~ gross margin ~~increased~~decreased by 812.14%, from 7885.93% for the year ended December 31, ~~2011~~2012 to 8572.39% for the year ended December 31, ~~2012~~2013. The ~~increase~~ decrease in gross margin was due to the ~~increase of software sales and~~ decrease of ~~revenues~~MPS ~~from~~software ~~system integration~~sales, which ~~involves~~carries ~~significantly~~ a higher ~~hardware~~gross ~~costs~~margin.

36The gross profit and the gross margin for the MVAS and MPS were $10.58 million or 87.0% and $3.88 million or 50.6%, respectively, for the year ended December 31, 2013 and $17.74 million or 83.6% and $11.92 million or 87.9%, respectively, for the year ended December 31, 2012. The decrease of MPS gross margin for 2013 when compared to 2012 was related to the decrease of software sales which carries a higher gross margin than the average level.

The gross profit and the gross margin for the MVAS and MPS were $17.74 million or 83.6% and $11.92 million or 87.9%, respectively, for the year ended December 31, 2012 and $12.83 million or 75.4% and $10.12 million or 83.9%, respectively, for the year ended December 31, 2011. The increase of MVAS gross margin for 2012 when compared to 2011 was related to the software sales which carries a higher gross margin than the average level.32

Operating expenses:

	Years Ended December 31,										% of
	2012					2011					change
	2013					2012					change
			% of net revenues					% of net revenues
	Amount		% of net revenues			Amount		% of net revenues
Selling and distribution expenses	$	31,~~197~~642,~~089~~285		98.23	%	$	23,~~344~~197,~~993~~089		89.12	%		36(48.36	)%
General and administrative expenses		118,~~342~~001,~~159~~035		3240.63	%		711,~~944~~342,~~055~~159		2732.36	%		42(29.85	)%
Research and development expenses		21,~~014~~912,~~797~~502		59.86	%		12,~~434~~014,~~525~~797		45.98	%		~~40.~~(5.1	)%
	$	1611,~~554~~555,~~045~~822		4758.62	%	$	1116,~~723~~554,~~573~~045		4047.36	%		41(30.2	)%

Operating expenses including selling and distribution, general and administrative expenses and R&D, ~~increased~~decreased $45.830 million, or 4130.2%, from $1116.7255 million for the ~~year~~ year ended December 31, ~~2011~~2012 to $1611.5556 million for year ended December 31, 2012.

Selling and distribution expenses: Selling and distribution expenses ~~increased~~decreased $01.8555 million or by 3648.36%, to $31.2064 million for the year ended December 31, ~~2012~~2013 from $23.3420 million for the year ended December 31, ~~2011~~2012. The ~~increase~~decrease in selling and distribution expenses was mainly due to ~~the~~reduction ~~recruitment~~in ofstaff ~~more sales people on mobile payment service line for our merchant acquisition~~benefit, ~~which~~business ~~raised our salaries and welfare expenses by $0.6 million when compared to the year ended December 31~~entertainment, ~~2011. Recruitment of more sales people~~ and ~~establishment of branch offices in more regions also resulted in higher selling and distribution expenses. Meanwhile, our~~ advertisement and promotion expenses ~~also~~ ~~increased~~due into ~~line~~cost ~~with our merchant acquisition efforts~~control.

General and administrative expenses: General and administrative expenses ~~increased~~decreased $3.4034 million or by 4229.85%, to $118.34 00 million for the year ended December 31, 2013 ~~2012~~ as compared to $711.9434 million for the same period in ~~2011~~2012. The ~~increase~~decrease in general and administrative expenses was mainly due to the ~~following~~decrease ~~reasons: (1) the increase~~ of 6$4.5821 million in allowance for doubtful debts, provided for customer’s receivables and advances to suppliers that are over one year. (2) the decrease of $1.44 million in professional services charges related to being a US public company, including but not limited to legal, business development and consulting services, insurance and agency fees. The decrease of professional expenses was due to the reason that more professional expenses were spent related to being a new public company in 2011. (3) decrease of $0.87 million in salaries and welfare, traveling and meeting expenses, due to effective cost control implemented by management.

Research and development expenses: Research and development expenses ~~increased~~decreased $0.5810 million or by ~~40.~~5.1%, to $21.0191 million for the year ended December 31, 2012 from $12.~~43 million~~01 million for the same period of ~~2011~~2012. The ~~increase~~slight decrease of the research and development expenses was mainly due to ~~the~~cost ~~expansion of our R&D function which resulted in an increase of the salary expenses and related expense~~control.

Other income (expenses): Other income (expenses) mainly includes interest income, interest expense, government grants and VAT refund and exchange loss.

Other income (expense) decreased $60.2824 million from $71.6839 million during the year ended December 31, ~~2011~~2012 to $1.3915 million for the year ended December 31, ~~2012~~2013, due to increase ~~reduction~~of $0.34 million in ~~government~~interest ~~grants~~expense, decrease of $0.23 ~~The~~million ~~government~~in ~~grants~~interest ~~for~~income, ~~the~~decrease ~~year~~of ~~ended~~$0.25 ~~December~~million 31government grants, ~~2011~~and ~~was~~increase of $50.6566 million in VAT refund.

Interest expense increased $0.8734 million from $0.0996 million during the year ended December 31, ~~2011~~2012 to $01.9630 million during year ended December 31, ~~2012~~2013 due to increase in bank loans.

Income before income tax expense: Income before income tax expense decreased $410.4044 million, or ~~23.3~~72%, from $1814.9050 million for the year ended December 31, ~~2011~~2012 to $144.5007 million for the year ended December 31, ~~2012~~2013. The ~~increase~~decrease was mainly due to ~~increase~~decrease of $615.5819 million in gross profit, net-off by decrease of $4.21 million in allowance for doubtful debts, provided for customer’s receivables and advances to suppliers that are over one year.

Critical Accounting Policies and Estimates. We prepare our financial statements in conformity with U.S. GAAP, which requires us to make estimates and assumptions that affect our reporting of, among other things, assets and liabilities, contingent assets and liabilities and revenues and expenses. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experiences and other factors that we believe to be relevant under the circumstances. Since our financial reporting process inherently relies on the use of estimates and assumptions, our actual results could differ from what we expect. This is especially true with some accounting policies that require higher degrees of judgment than others in their application. We consider the policies discussed below to be critical to an understanding of our audited consolidated financial statements because they involve the greatest reliance on our management’s judgment.

Revenue Recognition. We derive revenues from our MVAS Technology Platforms and Mobile Payment Solutions in the form of providing system integration, sales of software, patent licensing and maintenance services. With respect to the system integration, we sign contracts with telecommunication and mobile operators and system integrators to install and integrate the Group’s software with the hardware and software purchased from third-party suppliers. Deliverables of system integration include: software, hardware, integration, installation and training. Some of our contracts include post-contract customer support for a period of twelve months or less. We recognize post-contract customer support revenue together with the initial licensing fee on delivery of the software. Revenue is recognized when the last deliverable in the arrangement is delivered and when all of the following criteria have been met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the vendor’s fee is fixed or determinable; and (4) collectability is probable.

With respect to the sales of software, revenue is recognized when the last deliverable in the arrangement is delivered and when all of the following criteria have been met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the vendor’s fee is fixed or determinable; and (4) collectability is probable. Some of our contracts include post-contract customer support for a period of twelve months or less. We recognize post-contract customer support revenue together with the initial licensing fee on delivery of the software

With respect to patent licensing, we enter into contracts with local system integrators who further contract with telecommunication and mobile operators, and provide these system integrators with our patents which permit the system integrators to use our patents. The system integrators pay the Group a one-time license fee for obtaining the programs and technologies. Patent licensing revenues are recognized when all revenue recognition criteria according to ASC 985-605 have been met.

Revenue derived from technical support contracts primarily includes telephone consulting, on-site support, product updates, and releases of new versions of products previously purchased by the customers, as well as error reporting and correction services. Maintenance contracts are typically sold for a separate fee with initial contractual period of one year with renewal for additional periods thereafter. Technical support service revenue is recognized ratably over the term of the service agreement.

Accounts Receivable. We sell our products and services to telecommunication and mobile operators directly or through resellers. We do not require collateral from our customers.

We perform ongoing credit evaluations of our customers and review the composition of accounts receivable, analyze historical bad debts, customer concentration, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate if allowance for doubtful accounts is needed.

Recently issued accounting pronouncements

In July 2012, the FASB issued ASU 2012-02, “Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment." This ASU simplifies how entities test indefinite-lived intangible assets for impairment which improve consistency in impairment testing requirements among long-lived asset categories. These amended standards permit an assessment of qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. For assets in which this assessment concludes it is more likely than not that the fair value is more than its carrying value, these amended standards eliminate the requirement to perform quantitative impairment testing as outlined in the previously issued standards. The guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income”. The ASU does not change the current requirements for reporting net income or other comprehensive income in financial statements. However, this ASU requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. The guidance is effective prospectively for reporting periods beginning after December 15, 2012 for public entities. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial position and results of operations upon adoption.

Foreign Currency Translation

Our functional currency is the Renminbi (“RMB”) which is not freely convertible into foreign currencies. We maintain our financial statements in the functional currency. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet date. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the date of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.

For financial reporting purposes, our financial statements, which are prepared using the functional currency, have been translated into U.S. dollars. Assets and liabilities are translated at the exchange rates at the balance sheet date and revenue and expenses are translated at the average exchange rates and stockholders’ equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign currency translation adjustment of other comprehensive income, a component of stockholders’ equity.

The exchange rates applied are as follows:

	December 31,
	2012		2011
	2013		2012
Year end RMB exchange rate		6.~~3086~~1122		6.~~3585~~3086
Average RMB exchange rate		6.~~3585~~1943		6.~~4640~~3585

There is no significant fluctuation in exchange rate for the conversion of RMB to U.S. dollars after the balance sheet date.

Liquidity and Capital Resources

Dividends

We are a holding company and conduct our operations primarily through our subsidiaries and VIEs in the PRC. As a result, our ability to pay dividends depends upon dividends paid by our subsidiaries and VIEs. The VIEs’ earnings are transferred to our subsidiaries in the form of payments under the technology support and related consulting agreements. If our subsidiaries incur debt on their own behalf, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our subsidiaries are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with accounting standards and regulations applicable to such subsidiaries. As of December 31, ~~2012~~2013, our PRC subsidiaries and VIEs had aggregate unappropriated earnings of approximately $6056.7196 million (translated by ~~2012~~2013 year end exchange rate of 6.~~3086~~1122) that were available for distribution. These unappropriated earnings are considered to be indefinitely reinvested, and will be subject to PRC dividend withholding taxes upon distribution.

Under PRC law, each of our PRC subsidiaries must set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of our PRC subsidiaries with foreign investments must also set aside a portion of its after-tax profits to fund an employee welfare fund at the discretion of the board. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, companies may not distribute the reserve funds as cash dividends except upon a liquidation of these subsidiaries. In addition, dividend payments from our PRC subsidiaries could be delayed as we may only distribute such dividends upon completion of annual audits of the subsidiaries.

Government Control of Currency Conversion

Cash Flows

In summary, our cash flows were as follows:

	Years Ended December 31,
	2012			2011
	2013			2012
Net cash flows provided by (used in) operating activities	$	9(939,~~063,944~~231	)	$	~~(671~~1,~~817~~ 636,225	)
Net cash flows used in investing activities		(2110,~~400~~161,~~957~~236	)		(2613,~~641~~973,~~509~~239	)
Net cash flows provided by financing activities		710,~~061~~565,~~953~~207			227,~~812~~061,~~597~~953
Effect of foreign currency fluctuation on cash and cash equivalents		(8121,~~454~~255	)		~~380~~(81,~~568~~454	)
Net increase in cash and cash equivalents		(5,356,515	)		(4,120,161	)
Net decrease in cash and cash equivalents		(556,515	)		(5,356,515	)
Cash and cash equivalents – beginning of year		6783,~~139,589~~074			106,~~259~~139,~~750~~589
Cash and cash equivalents – end of the period	$	783,074		$	6,139,589
Cash and cash equivalents – end of the year	$	226,559		$	783,074

Operating Activities

Net cash flows ~~provided~~ used by in operating activities for the year ended December 31, ~~2012~~2013 was $90.0694 million as compared with ~~$0.67~~cash ~~million~~provided ~~used in~~by operating activities of $1.64 million for the year ended December 31, ~~2011~~2012, for a net ~~increase~~decrease of $92.7458 million. This ~~increase~~decrease was mainly due to ~~improved~~increase ~~collection~~ on ~~accounts~~cash ~~receivable~~used ~~and~~in advance to suppliers, amount due from directors, ~~reduction on cash used in inventory and long-term~~ ~~prepayment~~accounts payable, ~~and increase in~~ taxes payable and decrease in deferred revenue, adversely affected by improved collection on accounts ~~the~~receivable ~~increase~~and decreased use of cash in ~~advance to suppliers, other current assets, and~~ accrued expenses and other current liabilities.

~~With~~We ~~the increase of our revenue, we~~ continue to improve our collection on accounts receivable. Long-term prepayment decreased because no new royalty fee was paid during 2012. Taxes payable increased due to VAT increase from more sales. As of December 31, 2012, we received $1.51 million of payment from one of our customers. The revenue will be recognized within over one year. Cash used in advance to suppliers increased, due to more on-going projects and projects to be started within the next ~~two quarters~~year. ~~Cash~~Due from director increased due to more cash used in ~~other~~projects ~~current~~. ~~assets~~Accounts ~~was~~payable ~~mainly~~and ~~on payment~~taxes topayable adecreased ~~cloud~~due to ~~APP~~more ~~project~~payment. ~~Less~~Accounts ~~cash~~receivable ~~was~~decreased ~~used~~due into collection. Cash provided from accrued expenses and other current liabilities was ~~since~~mainly ~~the~~advance ~~royalty~~from ~~fee~~customers ~~was exempted~~from insales ~~2012~~of long term assets.

Investing Activities

Our main investing activities during the year ended December 31, ~~2012~~2013 was on projects in progress of $1210.7749 million ~~and $6.13 million~~ on ~~telecommunication~~our ~~equipment~~data centers. The other use of cash in investing activities was on loans to third parties.

Financing Activities

Net cash flows provided by financing activities for the year ended December 31, ~~2012~~2013 was $710.0657 million as compared with $227.8106 million provided by financing activities for the year ended December 31, ~~2011~~2012. The increase on cash provided by financing activities was from proceeds from bank loans. We received $31.7 million from the banks and repaid $19.7 million to the banks.

The cash provided by financing activities for the year ended December 31, ~~2012~~2013 included the net proceeds from bank loan of $412.6603 million and ~~proceeds~~payback ~~from~~of loans from third parties of $21.4046 million.

Restricted Net Assets

As a result of these PRC laws and regulations that require annual appropriations of 10% of after-tax income to be set aside prior to payment of dividends as general reserve fund, our PRC operating entities are restricted in their ability to transfer a portion of their net assets to us. Amounts restricted include paid-in capital and statutory reserve funds of our PRC operating subsidiaries as determined pursuant to PRC generally accepted accounting principles, totaling approximately US$3540.~~53million~~41 million (translated by ~~2012~~2013 year end exchange rate of 6.~~3086~~1122) as of December 31, ~~2012~~ 2013.

Operating lease commitment

We lease office space and vehicles under a lease agreement with a term expiring in December 2015. The leases may be cancelled by either party with 30-days prior written notice.

Future minimum rental payments under this operating lease are as follows:

	Office Rental
Year ending December 31, 2013	$	553,317
Year ending December 31, 2014		446,538
Year ending December 31, 2014		502,177
Year ending December 31, 2015		185,624
Year ending December 31, 2015		179,759
Total	$	632,162
Total	$	1,235,253

We do not have other commitments besides the commitment in office and vehicle rental.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements.

Inflation

Inflation has not historically been a significant factor impacting our financial results.

Item 8. Financial Statements and Supplementary Financial Data

Consolidated Financial Statements

The financial statements required by this item begin on page F-1 hereof.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

41Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness, as of December 31, 2013, of the design and operation of our disclosure controls and procedures, as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Included in this evaluation was a discussion of the contingency set forth in Note 24 of our financial statements. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of such date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness, as of December 31, 2012, of the design and operation of our disclosure controls and procedures, as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Included in this evaluation was a discussion of the contingency set forth in Note 24 of our financial statements. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of such date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Internal Controls Over Financial Reporting

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting refers to the process designed by, or under the supervision of, our principal executive officer and principal financial officer, and effected by our Board of Directors, management and other personnel, 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, and includes those policies and procedures that:

(1)

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

(2)

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and

(3)

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of our assets that could have a material effect on the financial statements.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Management is responsible for establishing and maintaining adequate internal control over financial reporting for the company.

Management has used the framework set forth in the report entitled Internal Control—Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission, known as COSO, to evaluate the effectiveness of our internal control over financial reporting. Included in this evaluation was a discussion of the contingency set forth in Note 24 of our financial statements. Based on this assessment, our Chief Executive Officer and Chief Financial Officer have concluded that our internal control over financial reporting was effective as of December 31, 2012.37

Management has used the framework set forth in the report entitled Internal Control-Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission, known as COSO, to evaluate the effectiveness of our internal control over financial reporting. Included in this evaluation was a discussion of the contingency set forth in Note 24 of our financial statements. Based on this assessment, our Chief Executive Officer and Chief Financial Officer have concluded that our internal control over financial reporting was effective as of December 31, 2013.

As a smaller reporting company, we are not required to obtain an attestation report of our registered public accounting firm regarding internal controls over financial reporting.

Changes in Internal Controls over Financial Reporting

There has been no change in our internal control over financial reporting during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

4238

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The following table sets forth the name, age and position of each of our officers and directors asimmediately prior to the effective time of ~~May~~the 2Merger on April 14, ~~2013~~2014.Our directors, other than Dr. Wanchun Hou and Mr. Qiang Li, resigned from directorship at the effective time of the Merger.

Name	Age	Title	Date Appointed
Dr. Wan ChunHou	47	Chairman of the Board of Directors	February 10, 2010
Dr. Wanchun Hou	48	Chairman of the Board of Directors	February 10, 2010
Qiang Li	4546	Chief Executive Officer and Director	March 1, 2010
Jihong Bao	4849	Chief Marketing Officer and Director	February 10, 2010
Xin Wang	3435	Chief Technology Officer and Director	March 1, 2010
Regis Kwong (1)(2)	5051	Independent Director	March 1, 2010
Dr. Kokhui Tan (3)	5152	Independent Director	March 1, 2010
Iris Geng (1)(2)(3)	4950	Independent Director	March 1, 2010
Dr. TingjieLv (1)	5758	Independent Director	March 1, 2010
Zhaoxing Huang (2)	6768	Independent Director	February 10, 2010
Dong Li (3)	4546	Independent Director	February 10, 2010

(1)

Indicates member of the Nominating and Corporate Governance Committee.

(2)

Indicates member of the Compensation Committee

(3)

Indicates member of Audit Committee

Below are brief descriptions of the backgrounds and experiences of the officers and directors:

WanChun Hou, Chairman and Co-Founder. Dr. Hou has been our Chairman of the Board since February 10, 2010. Dr. Hou founded Trunkbow in 2001 and holds numerous patents for telecom applications. From September 1991 to July 1994 he was a visiting scholar at Beijing Telecommunications University. Dr. Hou was also a research fellow at Shandong University from October 2000 to November 2001. He obtained his BS, MS and PhD in mathematics from Shandong University. Dr. Hou is one of our co-founders and has a vast telecommunications, engineering and research experience. We believe that he provides the board of directors with unique insight into the technical aspects of our business and that is intimately familiar with our day-to-day operations.

Qiang Li, Chief Executive Officer, Director and Co-Founder. Mr. Li has been our Chief Executive Officer since March 1, 2010 and has been a director since his appointment. Mr. Li founded Trunkbow in 2001 and is an entrepreneur with extensive business knowledge of the telecom market. Prior founding Trunkbow with Dr. Hou, Mr. Li was a director at the National Tax Bureau from July 1991 to November 2001, overseeing technology companies in Jinan, Shandong. He currently holds three patents for telecom applications. Mr. Li graduated from Shandong Tax University and obtained his MBA from Nanyang University in Singapore. Mr. Li is one of our co-founders and we believe that he possesses a thorough understanding of our business from top to bottom. We believe that Mr. Li provides the board of directors with valuable insight into our entire business operations. Mr. Li became the acting chief financial officer on September 12, 2014 when Ye Yuan Jun resigned from the company on the same day.

Jihong Bao, Chief Marketing Officer and Director. Mr. Bao ~~has~~was ~~been~~ a member of the board of directors since March 1, 2010. He has over 20 years of telecom marketing experience. ~~From~~ From October 1998 to April 2005 he worked at China Electronic Corporation, a provider of software and hardware systems to China’s telecom operators, where he left as the head of telecom application marketing. Mr. Bao obtained his BS and MS from Peking University in Information Management. Mr. Bao joined us in May 2005 and has a rich experience with Chinese telecom market. We believe that Mr. Bao ~~provides~~provided the board of directors with unique insight into the marketing of our business.

43Xin Wang, Chief Technology Officer and Director. Mr. Wang was a member of the board of directors since March 1, 2010. He joined us in July 2001, helping us to develop mobile applications with intelligent networks. He was part of the development team for the original Color Ring Back Tone application and led the successful development of mobile applications in logistic industry for Rapid ID in the US. Mr. Wang obtained his BS in applied mathematics from Shandong University. As leader of our R&D team, we believe that Mr. Wang provided the board of directors with unique insight into the research and development of new technology in the telecom field.

Xin Wang, Chief Technology Officer and Director. Mr. Wang has been a member of the board of directors since March 1, 2010. He joined us in July 2001, helping us to develop mobile applications with intelligent networks. He was part of the development team for the original Color Ring Back Tone application and led the successful development of mobile applications in logistic industry for Rapid ID in the US. Mr. Wang obtained his BS in applied mathematics from Shandong University. As leader of our R&D team, we believe that Mr. Wang provides the board of directors with unique insight into the research and development of new technology in the telecom field.39

Regis Kwong, Director and Compensation, Nominating and Corporate Governance Committee Chair. Mr. Kwong ~~has~~was ~~been~~ a member of the board of directors since March 1, 2010. He has over 25 years’ experience with leading global telecom services providers. In June 1985 he started his career with GTE (now Verizon) where he became the Head of Operations in China. From May 1997 to May 2000 Mr. Kwong served as Vice President and General Manager for GTS China, managing China operations for GTS. After GTS, in June 2000, Mr. Kwong founded Terremark Asia, a subsidiary of Terremark Worldwide (NASDAQ: TMRK). Mr. Kwong became Chief Executive Officer of Jingwei International, a US public company in February 2005 where he oversaw all of its business operations until June 2009. Mr. Kwong received his B.S. and Master’s Degree in Computer Engineering from California Polytechnic University in 1985 and 1987, respectively, and an M.B.A. from Rutgers University in 1999. We believe that Mr. Kwong’s vast experience in the telecom industry and his experience with public companies will enable him to provide the Board of Director with valuable advice on industry matters and with our SEC compliance. From April 2007 through July 2009 Mr. Kwong served on the board of directors of Jingwei International Limited. From March 2006 through April 2007 served on the board of directors of CGI Group Inc. Since July 2009, Mr. Kwong has served as managing director of Centric Capital Limited, where he is responsible for the company’s investments in China.

Dr. Kokhui Tan, Director and Audit Committee Chair. Dr. Kokhui Tan ~~has~~was ~~been~~ a member of the board of directors since March 1, 2010. Dr. Tan has worked at Nanyang Business School, ~~Nanyang~~ Nanyang Technological University, Singapore, since 1991, and he is currently an Associate Professor of Banking and Finance and ~~Associate~~ Associate Dean. Dr. Tan graduated from Arizona State University with a PhD in International Finance. His research areas include risk management, derivatives, market microstructure, merger and acquisition, international finance, and fixed income. From 2001 to 2005 he was a sole consultant to Singapore’s DBS Bank DBS Family of Bond Indices. From January 2004 to December 2006, he was appointed as a member of the Singapore Commercial Affairs Department Panel of Experts on Securities Offences. Since 2000, he has been a senior advisor to a consulting firm in China dealing in the capital market. Dr. Tan qualifies as an “audit committee financial expert,” defined in the rules and regulations of the Securities Exchange Act of 1934, as amended. We believe that Dr. Tan’s expertise in international finance ~~makes~~made him uniquely qualified to serve as a member of the board of directors and as Chair of the Audit Committee.

Iris Geng, Director and Member of Audit Committee, Nominating and Corporate Governance Committee and Compensation Committee. Ms. Geng ~~has~~was ~~been~~ a member of the board of directors since March 1, 2010. Ms. Geng is currently an international independent investor in Hong Kong since November 2006. She was the Managing Director of CRE Beverage Company Ltd in Hong Kong from August 1995 to November 2006 and served as a member of local industry (mainly Tea and Canned Food) chamber of commerce from January 1991 to October 1994. She has over 25 years’ experience in supply chain management and procurement operation. Ms. Geng has an MBA degree from the University of San Francisco, USA. We believe that Ms. Geng’s experience working in and managing large international companies ~~provides~~provided her a unique perspective from which she can offer her advice to the Board.

44Dr. Tingjie Lv, Director and Member of Nominating and Corporate Governance Committee. Dr. Lv was a member of the board of directors since March 1, 2010. Dr. Lv has been with Beijing University of Posts and Telecommunication since May 1985, where currently he is a Professor of Business, and he is a Visiting Professor at Tsinghua University. Dr. Lv was also the Chairman and CEO of NuoTai Consulting Company, from March 2001 to December 2002. We consider Dr. Lv to be an expert on China’s telecom business and we believe that his scholarly research on business and economics was valuable to the board of directors.

~~Dr.~~Zhaoxing ~~Tingjie Lv~~Huang, Director and Member of ~~Nominating~~Compensation ~~and Corporate Governance~~ Committee. Dr Mr. LvHuang ~~has~~was ~~been~~ a member of the board of directors since ~~March~~February 110, 2010. DrMr. Huang has extensive experience in the telecom equipment Lvindustry. Since 2005 he has been ~~with~~a ~~Beijing~~general ~~University~~engineer ofat ~~Posts~~Hangzhou ~~and~~Telisheng ~~Telecommunication~~Technology ~~since~~Co., ~~May 1985~~Ltd., where ~~currently~~ he is aresponsible ~~Professor~~for strategic oversight of ~~Business~~their R&D team. He was the General Manager of Zhejiang Telecom Equipments Factory from April 1989 to June 2005, ~~and~~the heChairman isof aZhejiang ~~Visiting~~Telecom ~~Professor~~Equipments atFactory ~~Tsinghua~~from ~~University~~February 1991 to July 1997 and UTStarcom Hangzhou Telecom Co., DrLtd. Lvfrom February ~~was~~1991 ~~also~~to ~~the~~July ~~Chairman~~1997 and ~~CEO~~the Deputy Chairman of ~~NuoTai~~UTStarcom ~~Consulting~~Hangzhou ~~Company~~Telecom Co., Ltd. from ~~March~~ ~~2001~~August 1997 to December 2002. WeHe also ~~consider~~served ~~Dr.~~as Lvthe toworkshop bemanager anand ~~expert~~technology onofficer ~~China’s~~from ~~telecom~~1972 ~~business~~to 1988 and wethe ~~believe~~Vice ~~that~~General Manager of Zhejiang Telecom Equipments Factory from 1988 to 1989. Mr. Huang obtained his ~~scholarly~~BS in radio engineering from Zhejiang University in July of 1970. We believe ~~research~~that onMr. ~~business~~Huang’s ~~and~~telecom ~~economics~~hardware ~~will~~engineering bebackground provided him with valuable expertise from which he drew to help advise the board of directors.

~~Zhaoxing~~Dong ~~Huang~~Li, Director and Member of ~~Compensation~~Audit Committee. Mr. ~~Huang~~Li ~~has~~was ~~been~~ a member of the board of directors since February 10, 2010. ~~Mr.~~He ~~Huang~~ has ~~extensive~~over ~~experience~~ten inyears ~~the telecom equipment industry. Since 2005 he has been a general engineer at Hangzhou Telisheng Technology Co., Ltd., where he is responsible for strategic oversight~~ of ~~their~~finance ~~R&D team. He was the General Manager of Zhejiang Telecom Equipments Factory from April 1989 to June 2005, the Chairman of Zhejiang Telecom Equipments Factory from February 1991 to July 1997~~ and ~~UTStarcom~~security ~~Hangzhou Telecom~~investment Coexperience., ~~Ltd~~Mr. ~~from~~Li ~~February~~has ~~1991~~been towith ~~July~~Beijing ~~1997~~Qinchuangxin ~~and~~Tech-trading ~~the Deputy Chairman of UTStarcom Hangzhou Telecom~~ Co., Ltd. ~~from~~since ~~August 1997 to~~ December ~~2002~~ 2003. He ~~also~~currently ~~served~~acts as ~~the~~Vice ~~workshop~~General Manager, ~~manager~~where ~~and~~he ~~technology~~is ~~officer~~responsible ~~from~~for ~~1972~~overseeing tocorporate ~~1988~~finance and ~~the~~investing ~~Vice General Manager of Zhejiang Telecom Equipments Factory from 1988 to 1989~~activities. Mr. ~~Huang~~Li obtained his BS in ~~radio~~Industrial and ~~engineering~~Civil Architecture from ~~Zhejiang~~Beijing University inof ~~July~~Technology ~~of 1970~~in 1993. We believe that Mr. ~~Huang~~Li’s ~~telecom~~experience ~~hardware~~with ~~engineering~~finance ~~background~~and capital ~~provides~~markets provided him with valuable expertise from which he can draw to help advise the board of directors.

~~Dong~~All ~~Li, Director and Member of Audit Committee. Mr. Li has been a member of the board of~~ directors ~~since~~other ~~February~~than ~~10, 2010~~Dr. HeWanchun ~~has~~Hou ~~over ten years of finance~~ and ~~security investment experience.~~ Mr. LiQiang has been with Beijing Qinchuangxin Tech-trading Co., Ltd. since December 2003. He currently acts as Vice General Manager, where he is responsible for overseeing corporate finance and investing activities. Mr. Li ~~obtained his BS in Industrial~~held ~~and~~office ~~Civil~~until ~~Architecture~~their ~~from~~resignation ~~Beijing~~on ~~University~~April of14, ~~Technology in 1993~~2014. ~~We believe that Mr. Li’s experience with finance and capital markets provides him with valuable expertise from which he can draw to help advise the board of directors.~~

All directors hold office until the Company’s annual stockholders’ meeting or until their death, resignation, retirement, removal, disqualification, or until their successors have been elected and are qualified.

Family Relationships

There are no family relationships among our executive officers, directors and significant employees.

Involvement in Certain Legal Proceedings

To the best of our knowledge, there have been no events under any bankruptcy act, no criminal proceedings and no judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any director, executive officer, promoter or control person of us during the past ten years.

Board Leadership Structure

The positions of chief executive officer and chairman of our board of directors are held by different persons. The chairman of our board of directors, Dr. WanChun Hou, chairs director and stockholder meetings and participates in preparing their agendas. Dr. Hou serves as a focal point for communication between management and the board of directors between board meetings, although there iswas no restriction on communication between directors and management. Qiang Li serves as our chief executive officer as well as a member of our board of directors. WePrior ~~believe~~to ~~that~~the resignation of the directors other than Dr. Hou and Mr. Li on April 14, 2014, the effective day of the Merger, these arrangements ~~afford~~afforded the six independent members of our board of directors sufficient resources to supervise management effectively, without being overly engaged in day-to-day operations.

The board ~~has~~did not ~~designated~~designate a lead director. ~~Given~~Prior to April 14, 2014, given the limited number of directors comprising the board, the independent directors ~~call~~called and ~~plan~~ planned their executive sessions collaboratively and, between board meetings, communicate with management and one another directly. Under the circumstances, the directors ~~believe~~believed that formalizing a lead director function might detract from, rather than enhance, performance of their responsibilities as directors.

Risk Oversight

The ~~board~~arrangement ofin ~~directors~~respect ~~is responsible for the oversight~~ of risk ~~management~~ ~~related to the company and its business and accomplishes this~~ oversight ~~through~~for ~~regular~~Trunkbow ~~reporting by the audit committee.~~prior ~~The~~to ~~audit~~April ~~committee assists the board of directors by periodically reviewing the accounting~~14, ~~reporting and financial practices of the company~~2014, ~~including~~ the ~~integrity~~effective ofday ~~our financial statements, the surveillance~~ of ~~administrative and financial controls and our compliance with legal and regulatory requirements. Through its regular meetings with management, including~~ the ~~finance and~~Merger ~~internal~~was ~~audit~~as functions, the audit committee reviews and discusses all significant areas of our business, including credit policies, inventory management practices, internal controls, accounting policies and procedures and summarizes for the board of directors areas of risk and the appropriate mitigating factors.follows:

The board of directors was responsible for the oversight of risk management related to the company and its business and accomplishes this oversight through regular reporting by the audit committee. The audit committee assisted the board of directors by periodically reviewing the accounting, reporting and financial practices of the company, including the integrity of our financial statements, the surveillance of administrative and financial controls and our compliance with legal and regulatory requirements. Through its regular meetings with management, including the finance and internal audit functions, the audit committee reviewed and discussed all significant areas of our business, including credit policies, inventory management practices, internal controls, accounting policies and procedures and summarized for the board of directors areas of risk and the appropriate mitigating factors.

Practices of our board of directors

Our business and affairs are managed under the direction of our board of directors. The primary responsibilities of our board of directors are to provide oversight, strategic guidance, counseling and direction to our management. ~~The~~Prior to April 14, 2014, the effective day of the Merger, the board of directors iswas currently composed of eleven members. All actions of the board of directors require the approval of a majority of the directors in attendance at a meeting at which a quorum is was present. A quorum was is a majority of the board of directors.

Committees of the board of directors and Director Independence

~~Our~~Prior to April 14, 2014, the effective day of the Merger, our board of directors has an audit committee, nominating and corporate governance committee and a compensation committee, each of which was formed on March 2, 2010. ~~Our~~Six ~~board~~ of ~~directors has determined that six of~~ our directors, Regis Kwong, Dr. Kokhui Tan, Iris Geng, Dr. Tingjie Lv, Zhaoxing Huang, and Dong Li~~, the~~ were appointed members of these committees, ~~are~~were “independent” under the ~~current~~ independence standards of Rule 5605(a)(2) of the Marketplace Rules of The NASDAQ Stock Market, LLC and ~~meet~~met the criteria for independence set forth in Rule 10A(m)(3) under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). ~~Our board of directors has also determined that~~ ~~these~~These persons ~~have~~had no material relationships with us—-either directly or as a partner, stockholder or officer of any entity—-which could be inconsistent with a finding of their independence as members of our board of directors.

4641

Audit Committee

~~Our~~ Prior to April 14, 2014, the effective day of the Merger, our audit committee was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. The audit committee members ~~consist~~consisted of Dr. Kokhui Tan, Iris Geng and Dong Li. Each of these members were ~~would be~~ considered “independent” as defined by Rule 5605 of NASDAQ’s Marketplace Rules, as determined by our board of directors. During the fiscal year ended December 31, ~~2012~~2013, the audit committee met 4 times and acted by unanimous written consent 2 times.

The audit committee ~~oversees~~oversaw our financial reporting process on behalf of the board of directors. The committee’s responsibilities ~~include~~included the following functions:

	·	approve and retain the independent auditors to conduct the annual audit of our books and records;

	·	review the proposed scope and results of the audit;

	·	review and pre-approve the independent auditors’ audit and non-audited services rendered;

	·	approve the audit fees to be paid;

	·	review accounting and financial controls with the independent auditors and our internal auditors and financial and accounting staff;

	·	review and approve transactions between us and our directors, officers and affiliates;

	·	recognize and prevent prohibited non-audit services; and

	·	meet separately and periodically with management and our internal auditor and independent auditors.

The audit committee ~~operates~~operated under a written charter, a copy of which is available on our corporate website at http://www.trunkbow.com/?en-c-m-62.html. Dr. Tan ~~serves~~served as the chairman of our audit committee. Our board of directors ~~has~~ determined that we ~~have~~had at least one audit committee financial expert, as defined by ~~the~~ the rules and regulations of Securities and Exchange Commission (the “SEC”) and NASDAQ, serving on our audit committee, and that Dr. Tan iswas the “audit committee financial expert.”

Audit Committee Report

The role of the audit committee iswas to assist the board of ~~directors~~ directors in its oversight of our financial reporting process. As set forth in the charter, our management was is responsible for the preparation, presentation and integrity of our financial statements, accounting and financial reporting principles and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent auditors ~~are~~ were responsible for auditing our financial statements and expressing an opinion as to their conformity with generally accepted accounting principles.

47Due to the completion of the Merger and the resignation of the members of our audit committee on April 14, 2014, the audit committee has not reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2013 with management or the independent auditors the matters required to be discussed by Statement of Auditing Standards No. 61, Communication with audit committee, as currently in effect.

InTHE ~~the~~AUDIT ~~performance~~COMMITTEE of(prior this oversight function, the audit committee has reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2012 with management, and has discussed with the independent auditors the matters required to betheir ~~discussed by Statement of Auditing Standards No. 61, Communication~~resignations with audit committee, as currently in effect. The audit committee has received the written disclosures and the letter from the independent auditors required by Independence Standards Board Standard No. 1, Independence Discussions with audit committees, as currently in effect, and has discussed with the independent auditors the independent auditors’ independence; and based on ~~the~~ ~~review~~April ~~and discussions referred above~~14, the audit committee recommended to the board of directors that the audited financial statements be included in this Annual Report on Form 10-K for the fiscal year ended December 31, 2012 for filing with the SEC.2014)

The members of the audit committee are not professionally engaged in the practice of auditing or accounting, are not experts in the fields of accounting or auditing, including in respect of auditor independence. Members of the audit committee rely without independent verification on the information provided to them and on the representations made by management and the independent accountants. Accordingly, the audit committee’s oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal control and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the audit committee’s consideration and discussions referred to above do not assure that the audit of our financial statements has been carried out in accordance with generally accepted accounting principles or that our auditors are in fact “independent.”

Based upon the reports, review and discussions described in this report, and subject to the limitations on the role and responsibilities of the audit committee referred to above and in the audit committee charter, the audit committee recommended to our board of directors that the audited financial statements be included in this Annual Report on Form 10-K for the year ended December 31, 2012, filed with the SEC.

THE AUDIT COMMITTEE

Dr. Kokhui Tan

Iris Geng

Dong Li

4842

Nominating and Corporate Governance Committee

~~The~~Prior ~~nominating~~to ~~and~~April ~~corporate~~14, ~~governance~~2014, ~~committee~~the iseffective ~~responsible for~~day ~~identifying~~of ~~potential~~the ~~candidates~~Merger toand ~~serve~~the day on ~~our~~which they resigned from the board of ~~and~~directors, ~~its~~Regis ~~committees~~Kwong, Iris Geng and Dr. ~~The~~Tingjie Lv constituted the nominating and corporate governance committee ~~met~~. 1Mr. ~~time~~Kwong was ~~during~~the ~~2012.~~chairman ~~The~~of the nominating and corporate governance committee~~’s responsibilities include the following functions:~~.

The nominating and corporate governance committee was responsible for identifying potential candidates to serve on our board and its committees. The nominating and corporate governance committee met 1 time during 2013. The nominating and corporate governance committee’s responsibilities include the following functions:

	·	making recommendations to the board regarding the size and composition of the board;

	·	identifying and recommending to the board nominees for election or re-election to the board, or for appointment to fill any vacancy;

	·	establishing procedures for the nomination process;

	·	advising the board periodically with respect to corporate governance matters and practices, including periodically reviewing corporate governance guidelines to be adapted by the board; and

	·	establishing and administering a periodic assessment procedure relating to the performance of the board as a whole and its individual members.

~~Each~~Prior to April 14, 2014, the effective day of the Merger and the day on which they resigned from the board of directors, Regis Kwong, Iris Geng and Dr. Tingjie Lv ~~are the members~~constituted of the nominating and corporate governance committee. The nominating and corporate governance committee ~~operate~~operated under a written charter, which is available on our website at http://www.trunkbow.com/?en-c-m-62.html. Mr. Kwong is the chairman of the ~~nominating~~ nominating and corporate governance committee.

The nominating and corporate governance committee ~~will consider~~considered director candidates recommended by security holders. Potential nominees to the board of directors ~~are~~were required to have such experience in business or financial matters as would make such nominee an asset to the board of directors and may, under certain circumstances, be required to be “independent”, as such term is defined under Rule 5605 of the listing standards of NASDAQ and applicable SEC regulations. The nominating and corporate governance committee need not engage in an evaluation process unless (i) there is a vacancy on the board of directors, (ii) a director is not standing for re-election, or (iii) the nominating and corporate governance committee does not intend to recommend the nomination of a sitting director for re-election. A potential director nominee recommended by a security holder will not be evaluated differently from any other potential nominee. Although it has not done so in the past, the nominating and corporate governance committee may retain search firms to assist in identifying suitable director candidates.

The board of directors ~~does~~did not have a formal policy on director candidate qualifications. The board of directors may consider those factors it deems appropriate in evaluating director nominees made either by the board of directors or stockholders, including judgment, skill, strength of character, experience with businesses and organizations comparable in size or scope to us, experience and skill relative to other members of the board of directors, and specialized knowledge or experience. Depending upon the current needs of the board of directors, certain factors may be weighed more or less heavily. In considering candidates for the board of directors, the directors ~~evaluate~~evaluated the entirety of each candidate’s credentials and dodid not have any specific minimum qualifications that must be met. “Diversity,” as such, is not a criterion that the nominating and corporate governance committee considers. The directors ~~will~~considered ~~consider~~ candidates from any reasonable source, including current board members, stockholders, professional search firms or other persons. The directors ~~will~~did not evaluate candidates differently based on who ~~has~~had made the recommendation.

Compensation Committee

The Compensation Committee iswas responsible for making recommendations to the board of directors concerning salaries and incentive compensation for our officers and key employees and administers our stock option plans. During the fiscal year ended December 31, ~~2012~~2013, the compensation committee met 1one time. Its responsibilities ~~include~~included the following functions:

·Ÿ reviewing and recommending policy relating to the compensation and benefits of our officers and employees, including reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer and other senior officers; evaluating the performance of these officers in light of those goals and objectives; and setting compensation of these officers based on such evaluations; ·Ÿ administering our benefit plans and the issuance of stock options and other awards under our stock plans; and reviewing and establishing appropriate insurance coverage for our directors and executive officers; ·Ÿ recommending the type and amount of compensation to be paid or awarded to members of our board of directors, including consulting, retainer, meeting, committee and committee chair fees and stock option grants or awards; and ·Ÿ reviewing and approving the terms of any employment agreements, severance arrangements, change-of-control protections and any other compensatory arrangements for our executive officers.

Each of Regis Kwong, Zhaoxing Huang, and Iris Geng are members of the compensation committee. The Compensation Committee operates under a written charter, which is available on our website at http://www.trunkbow.com/?en-c-m-62.html. Mr. Kwong is Chairman of Compensation Committee. Our executive officers have no formal role in suggesting their salaries.43

Prior to April 14, 2014, the effective day of the Merger and the day on which they resigned from the board of directors, Regis Kwong, Zhaoxing Huang, and Iris Geng constituted the compensation committee. The Compensation Committee operated under a written charter, which is available on our website at http://www.trunkbow.com/?en-c-m-62.html. Mr. Kwong was Chairman of Compensation Committee. Our executive officers had no formal role in suggesting their salaries.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, requires our executive officers, directors and persons who beneficially own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. These executive officers, directors, and greater than 10% beneficial owners are required by SEC regulation to furnish us with copies of all Section 16(a) forms filed by such reporting persons.

Based solely on our review of such forms furnished to us, we believe that all filing requirements applicable to our executive officers, directors and greater than 10% beneficial owners were complied with during ~~2012~~2013.

Code of Ethics

We adopted a Corporate Code of Ethics and Conduct on January 31, 2011. The Code of Ethics, in accordance with Section 406 of the Sarbanes-Oxley Act of 2002 and Item 406 of Regulation S-K, constitutes our Code of Ethics for our principal executive officer, our principal financial and accounting officer and our other senior financial officers. The Code of Ethics is intended to promote honest and ethical conduct, full and accurate reporting, and compliance with laws as well as other matters. A printed copy of the Code of Ethics may be obtained free of charge by writing to Trunkbow International Holdings Limited, Unit 1217-1218, 12F of Tower B, Gemdale Plaza, No. 91 Jianguo Road, Chaoyang District, Beijing, People’s Republic of China 100022. It may also be viewed on our corporate website at http://www.trunkbow.com/?en-c-m-62.html.

Meetings of the board of directors and Committees

During the fiscal year ended December 31, ~~2012~~2013, the board of directors met 2one ~~times~~time and took action by written consent on 2one ~~occasions~~occasion. All of the directors participated in the board meetings. Each director is expected to participate, either in person or via teleconference, in meetings of our board of directors and meetings of committees of our board of directors in which each director is a member, and to spend the time necessary to properly discharge such director’s respective duties and responsibilities. We do not have a written policy with regard to directors’ attendance at annual meetings of stockholders; however, all directors are encouraged to attend the annual meeting.

Communications with the board of directors

Stockholders can mail communications to the board of directors, ~~c/o Jenny Cai, Secretary,~~ Trunkbow International Holdings Limited, Unit 1217-1218, 12F of Tower B, Gemdale Plaza, No. 91 Jianguo Road, Chaoyang District, Beijing, People’s Republic of China 100022, who will forward the correspondence to each addressee.

Pursuant to General Instruction G(3) of Form 10-K, the information required by this item relating to our executive officers is included under the caption “Executive Officers of the Company” in Part I of this report.

We have adopted a code of ethics that applies to our principal executive officer and all members of our finance department, including the principal financial officer and principal accounting officer. This code of ethics is posted on our website. The Internet address for our website is www.trunkbowintl.com, and the code of ethics may be found from our main web page by clicking first on “Investor Relations” and then on “Corporate Governance” under “Investor Relations,” next on “The Code of Business Ethics and Conduct” under “Corporate Governance.”

We intend to satisfy any disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of this code of ethics by posting such information on our website, on the web page found by clicking through to “Code of Business Ethics and Conduct” as specified above.

Item 11. Executive Compensation

Summary Compensation Table

Summary Compensation of Named Executive Officers

Name and Principal Position	Fiscal Year		Salary ($)		~~Salary ($)~~		Bonus ($)		~~Bonus ($)~~		Option Awards ($)		~~Option Awards ($)~~		All Other Compensation ($)		~~All Other Compensation ($)~~		Total ($)		~~Total ($)~~
Li Qiang Chief Executive Officer	2012	~~2012~~		88,860		~~88,860~~		0		0		0		0		0		0		88,860		~~88,860~~
		2011				72,900				0				0				0				72,900
	2013			96,863				0				0				0				96,863

During each of the last two fiscal years, none of our other officers had salary and bonus greater than $100,000. In addition, our executive officers and/or their respective affiliates will be reimbursed by us for any out-of-pocket expenses incurred in connection with activities conducted on our behalf. There is no limit on the amount of these out-of-pocket expenses and there will be no review of the reasonableness of such expenses by anyone other than our board of directors, which includes persons who may seek reimbursement, or a court of competent jurisdiction if such reimbursement is challenged.

We have an employment agreement with Qiang Li, our chief executive officer. We formed a compensation committee consisting of the independent directors on March 1, 2010. Compensation for our executive officers is determined based on the compensation policies, programs and procedures established by our compensation committee.

Securities Authorized for Issuance under Equity Compensation Plans

Our board of directors adopted the Trunkbow International Holdings Limited 2012 Omnibus Securities and Incentive Plan (the “2012 Plan”) on March 27, 2012. No securities have been awarded pursuant to the 2012 Plan.

Equity Compensation Plan Information

The following table summarizes compensation plans (including individual compensation arrangements), under which our equity securities are authorized for issuance, as of December 31, ~~2012~~2013.

	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted- average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Plan Category	(a)		(b)		(c)
Equity compensation plans approved by security holders		-0-	$	-0-		-0-
Equity compensation plans not approved by security holders:		-0-	$	-0-		-0-
Options to purchase Common Stock		-0-	$	-0-		-0-
Warrants to purchase Common Stock		-0-	$	-0-		-0-
Total		-0-	$	-0-		-0-

5245

Employee Benefits Plans

Pension Benefits

We do not sponsor any qualified or non-qualified pension benefit plans.

Nonqualified Deferred Compensation

We do not maintain any non-qualified defined contribution or deferred compensation plans.

Outstanding Equity Awards at Fiscal Year End

We did not issue any equity awards to our named executive officers during the ~~2012~~2013 fiscal year and no such awards were outstanding as of December 31, ~~2012~~2013.

Employment Agreements and Change In Control

Qiang Li, our chief executive officer, and Trunkbow Asia Pacific (Shandong) Company Limited (“Trunkbow Shandong”), our indirect wholly owned subsidiary, entered into a three-year employment agreement effective January 1, 2010. Pursuant to the agreement, Mr. Li agreed to serve as the Chief Executive Officer of Trunkbow Shangdong on a full-time basis for annual base compensation of RMB360,000. Mr. Li is subject to confidentiality provisions as well as non-compete and non-solicitation provisions for the period covering the agreement and for 24 months after termination of the agreement, regardless of the reason for termination. The agreement is governed by the laws of the People’s Republic of China. In December 2012, Trunkbow Shangdong renewed the employment agreement with Mr. Li for another five years.

We are not obligated to make any payments to any named executive officer upon their termination or upon a change in control of us.

Director Compensation

Our directors are ~~reimbursed~~ reimbursed for expenses incurred by them in connection with attending meetings of the board of directors, but they did not receive any other compensation for serving on the board of directors in ~~2012~~2013. OnDuring ~~November~~the 9,year ~~2011~~2013, ~~our~~independent ~~board~~directors of ~~directors~~the ~~approved~~Special Committee andesignated ~~annual~~to ~~fee of~~represent ~~$50,000~~the ~~for~~Company’s ~~each~~stockholders ~~independent~~during ~~director~~the ~~serving~~go-private ontransaction ~~our~~received ~~board~~$133,620 infor ~~2012~~serving on the Special Committee.

Changes in Control

~~There~~On ~~are~~April no14, ~~arrangements~~2014, ~~known~~the toCompany ~~us,~~announced ~~including~~the ~~any~~completion ~~pledge~~of the Merger contemplated by ~~any~~the ~~person~~previously ofannounced ~~our~~Merger ~~securities~~Agreement, dated December 10, 2013, by and among the ~~operation~~Company, ofParent and ~~which~~Merger ~~may~~Sub. atAs a ~~subsequent~~result ~~date~~of ~~result~~the inMerger, aMerger ~~change~~Sub inmerged ~~control~~with ofand into the Company, with the Company continuing as the surviving company after the Merger as a wholly owned subsidiary of Parent.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth, asimmediately prior to the effective time of the Merger on April 2614, ~~2013~~2014, the number of shares of our common stock beneficially owned by (i) each person who is known by us to be the beneficial owner of more than five percent of our common stock; (ii) each director; (iii) each of the named executive officers in the Summary Compensation Table; and (iv) all directors and executive officers as a group. AsImmediately prior to the effective time of the Merger on April 2614, ~~2013~~2014, we had 36,807,075 shares of common stock issued and outstanding. Each share of the registrant’s common stock was cancelled at the effective time of the Merger.

Beneficial ownership is determined in accordance with the rules of the securities and Exchange Commission (the “SEC”) and generally includes voting or investment power with respect to securities. Unless otherwise indicated, the stockholders listed in the table have sole voting and investment power with respect to the shares indicated. Unless otherwise noted, the principal address of each of the stockholders, directors and officers listed below is c/o Trunkbow International Holdings Limited, Unit 1217-1218, 12F of Tower B, Gemdale Plaza, No. 91 Jianguo Road Chaoyang District, Beijing, People’s Republic of China, 100022.

All share ownership figures include shares of our common stock issuable upon securities convertible or exchangeable into shares of our common stock within sixty (60) days of April 26, 2013 which are deemed outstanding and beneficially owned by such person for purposes of computing his or her percentage ownership, but not for purposes of computing the percentage ownership of any other person.46

Name and Address of Beneficial Owner	Number of Shares			Percentage of Outstanding Shares of Common Stock
Chief Honour Investments Limited		8,558,764	(1)		23.3	%
Capital Melody Limited		7,580,619	(2)		20.6	%
VeriFone, Inc. 2099 Gateway Place Suite 600 San Jose, CA 95110		2,990,000	(3)		8.0	%
VeriFone, Inc.
2099 Gateway Place
Suite 600 San Jose, CA 95110		2,281,511			6.2	%
Dr. Wanchun Hou		8,558,764	(1)		23.3	%
Qiang Li		7,598,219	(2)		20.6	%
Regis Kwong		833,379			2.3	%
Yuanjun Ye		4537,~~000~~500	~~(4)~~		*
Jihong Bao		0			*
Xin Wang		3932,~~000~~500	~~(5)~~		*
Dr. Kokhui Tan		0			*
Iris Geng		0			*
Dr. Tingjie Lv		0			*
Zhaoxing Huang		0			*
Dong Li		6047,~~414~~914	~~(6)~~		*
Albert Liu (7)		*			*
Albert Liu (3)		*			*
All Directors, Executive Officers and Director Nominees, as a group (12 persons)		17,~~134~~108,~~776~~276			46.65	%

Less than one percent

(1) Mr. Lao Chi Weng owns 100% of the outstanding ordinary shares of Chief Honour Investment Limited (“Chief Honour”), but he ~~does~~did not have the power to vote or ~~dispose~~disposed of any of our Common Stock owned by Chief Honour. Pursuant to a share transfer agreement dated September 21, 2009 by and between Lao Chi Weng, as transferor, and Dr. Wanchun Hou, as transferee (the “Hou STA”), Lao Chi Weng ~~has~~ irrevocably and unconditionally granted to Dr. Wanchun Hou the right to acquire any or all of the 1,000 outstanding shares of Chief Honor at a nominal price of US$1.00 at any time after February 14, 2012. In addition, pursuant to an entrustment agreement dated May 30, 2011 (which replaced an entrustment agreement dated October 1, 2009), by and between Chief Honour, Capital Melody Limited, a British Virgin Islands company (“Capital Melody”, and collectively with Chief Honor, “Party A”), Dr. Wanchun Hou and Mr. Qiang Li (the “Entrustment Agreement”), Party A has authorized Dr. Wanchun Hou and Mr. Qiang Li to act on behalf of Party A as the exclusive agents with respect to the exercise of all of the shareholder’s rights and shareholder’s voting rights enjoyed by Party A in our shares of Common Stock owned by Party A, which consist of the 8,558,764 shares of our Common Stock owned by Chief Honour and 7,580,619 shares of our Common Stock owned by Capital Melody. This information was derived from a Schedule 13D filed on November 6, 2012.

(2)

Mr. Lao Chi Weng owns 100% of the outstanding ordinary shares of Capital Melody, but he does not have the power to vote or dispose of any of our Common Stock owned by Capital Melody. Pursuant to a share transfer agreement dated September 21, 2009 by and between Lao Chi Weng, as transferor, and Mr. Qiang Li, as transferee (the “Li STA”), Lao Chi Weng has irrevocably and unconditionally granted to Mr. Qiang Li the right to acquire any or all of the 1,000 outstanding shares of Capital Melody at a nominal price of US$1.00 at any time after February 14, 2012. In addition, pursuant to the Entrustment Agreement, Party A has authorized Dr. Wanchun Hou and Mr. Qiang Li to act on behalf of Party A as the exclusive agents with respect to all matters concerning Party A’s exercise of all of the shareholder’s rights and shareholder’s voting rights enjoyed by Party A in the shares of our Common Stock owned by Party A, which consist of the 8,558,764 shares of our Common Stock owned by Chief Honour and 7,580,619 shares of Common Stock of the Company owned by Capital Melody. This information was derived from a Schedule 13D filed on November 6, 2012.

(3) ~~Includes~~Mr. ~~warrants~~Albert toLiu ~~purchase~~resigned ~~500,000~~from ~~shares~~his position as a member of ~~our~~the ~~common~~Board ~~stock~~of Directors of the Company, effective April 19, 2013.

~~(4) Includes warrants to purchase up to 7,500 shares of our common stock.~~47

(5) Includes warrants to purchase up to 6,500 shares of our common stock.

(6) Includes warrants to purchase up to 12,500 shares of our common stock.

(7) Mr. Albert Liu resigned from his position as a member of the Board of Directors of the Company, effective April 19, 2013.

Equity Compensation Plan Information

We currently do not have any equity compensation plans.

Item 13. Certain Relationships and Related Transactions, Director Independence

Related Transactions

~~(1) Purchase from related parties~~48

On(1) ~~March~~Guarantee ~~10, 2011, we entered into a series of contractual arrangements with Delixunda~~ and ~~its~~pledge ~~shareholders, Mr. Xin Wang, our Chief Technology Officer and Director and another employee~~ of ~~the~~assets ~~Company. Through~~by ~~these~~related ~~arrangements, we contractually control Delixunda.~~parties

~~(2)~~The ~~Guarantee~~loans from China Everbright Bank and China Construction Bank were guaranteed by ~~related~~Mr. ~~parties~~Wanchun Hou and Mr. Qiang Li.

~~As of December 31, 2012, we borrowed $7,695,819 of short-term bank loan from China Everbright Bank, $~~(2~~,686,808~~) ~~from~~Vehicle ~~Agriculture~~rental ~~Bank of China, and $792,569~~ from ~~China~~related ~~Merchants Bank. The loans were guaranteed by Mr. Wanchun Hou and Mr. Qiang Li. Please see note 15 to the financial statements for details of the loans.~~parties

Trunkbow (3Asia Pacific) ~~Vehicle~~Investment Holdings Limited, our wholly owned Hong Kong subsidiary, entered into a vehicle rental agreement with Mr. Qiang Li for consecutive twelve months starting from January ~~related~~1, ~~parties~~2013. Monthly rental fee is $12,000 on four cars owned by Mr. Li and $36,000 was paid to Mr. Li as deposit. Rental expense for the year ended December 31, 2013 was $144,000.

~~Trunkbow~~At ~~(Asia~~December ~~Pacific) Investment Holdings Limited~~31, ~~our~~2013 ~~wholly owned~~and ~~Hong Kong subsidiary, entered into a vehicle rental agreement with Mr. Qiang Li for consecutive twelve months starting from January 1,~~ 2012~~. Monthly rental fee is $12~~,~~000~~ onamounts ~~four~~due ~~cars owned by Mr. Li and $36,000 was paid~~ to ~~Mr.~~directors ~~Li as deposit. Rental expense~~consisted ~~for the year ended December 31, 2012 was $144,000.~~of:

	December 31, 2013		December 31, 2012
Amount due to Mr. Xin Wang	$	78,573	$	9,743
Amount due to Mr. Wan Chun Hou		50,997		0
Amount due to Mr. Qiang Li		0		96,399
	$	129,570	$	106,142

At December 31, ~~2012~~2013 and ~~2011~~2012, ~~amounts~~amount due from directors consisted of:

	December 31, 2012		December 31, 2011
	December 31, 2013		December 31, 2012
Amount due from Mr. Qiang Li	$	02,346,488	$	~~573,103~~0
Amount due from Mr. Wan Chun Hou		~~9,350~~0		~~184~~9,~~930~~350
	$	92,~~350~~346,488	$	~~758~~9,~~033~~350

The balance as of December 31, ~~2012~~2013 represented advances to the directors for expenses to be paid on behalf of the Company.

At December 31, 2012 and 2011, amount due to directors consisted of:

	December 31, 2012		December 31, 2011
Amount due to Mr. Qiang Li	$	96,399	$	0
Amount due to Mr. Xin Wang		9,743		11,959
	$	106,141	$	11,959

Director Independence

~~Six~~Immediately prior to the effective time of the Merger on April 14, 2014, six of our directors, Regis Kwong, Dr. Tan Kok Hui, Iris Geng, Dr. Lv Ting Jie, Huang Zhaoxing, and Li Dong, ~~have~~were ~~been~~ determined to be independent as defined by Rule 5605(a)(2) of the Marketplace Rules of The NASDAQ Stock Market, LLC and Section 10A(m)(3) of the Exchange Act. No transactions, relationships or arrangements were considered by the board of directors in determining that these directors were independent.

Item 14. Principal Accountant Fees and Services

The following chart sets forth public accounting fees paid to Marcum Bernstein & Pinchuk LLP during the years ended December 31, ~~2012~~2013 and ~~2011~~2012:

Marcum Bernstein & Pinchuk LLP

	2012		2011
	2013		2012
Audit Fees	$	~~166~~225,000	$	~~150~~166,000
Audit-Related Fees		21,~~470~~709		152,~~247~~470
Tax Fees		7,500		7,500
All Other Fees		0		0
Total	$	~~175~~234,~~970~~209	$	~~172~~175,~~747~~970

Audit fees were for professional services for the audit of our annual financial statements and the review of the financial statements included in our quarterly reports on Forms 10-Q, and services that are normally provided by Marcum Bernstein & Pinchuk LLP in connection with statutory and regulatory filings or engagements for that fiscal year.

Audit-related fees consist of services by Marcum Bernstein & Pinchuk LLP that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under Audit Fees. We incurred these fees in connection with the preparation of registration statements. Audit-related fees also included out of pocket expenses incurred during the course of performing audit or review of our financial statements for the respective fiscal year.

Tax fees are the aggregate fees in each of the last two years for the professional services rendered by Marcum Bernstein & Pinchuk LLP for the preparation and filing of our U.S. tax returns.

Marcum Bernstein & Pinchuk LLP did not bill any other fees for services rendered to us during the fiscal years ended December 31, 2012 and 2011 for assurance and related services in connection with the audit or review of our financial statements.49

56Marcum Bernstein & Pinchuk LLP did not bill any other fees for services rendered to us during the fiscal years ended December 31, 2013 and 2012 for assurance and related services in connection with the audit or review of our financial statements.

Pre-Approval of Services

The audit committee appoints the independent accountant each year and pre-approves the audit services. The audit committee chair is authorized to pre-approve specified non-audit services for fees not exceeding specified amounts, if he promptly advises the other audit committee members of such approval. All of the services described under the caption “Audit Fees” were pre-approved.

PART IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Exhibit Number		Description
2.1		Share Exchange Agreement, dated as of January 27, 2010 ⁽¹⁾
3.1		Amended Articles of Incorporation ⁽¹⁾
3.2		Bylaws ⁽¹⁾
4.1		Form of Investor Warrant ⁽¹⁾
4.2		Registration Rights Agreement, dated as of February 10, 2010 ⁽¹⁾
4.3		Specimen Common Stock Certificate ⁽⁵⁾
4.4		Form of Underwriter Warrant ⁽⁵⁾
10.1		Subscription Agreement, dated as of February 10, 2010 ⁽¹⁾
10.2		Make Good Escrow Agreement ⁽¹⁾
10.3		Form of Director Repayment Agreement ⁽¹⁾
10.4		Exclusive Business Cooperation Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd. and Trunkbow Technologies (Shenzhen) Co., Ltd. ⁽²⁾
10.5		Exclusive Option Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd., Wanchun Hou and Trunkbow Technologies (Shenzhen) Co., Ltd. ⁽²⁾
10.6		Exclusive Option Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd., Qiang Li and Trunkbow Technologies (Shenzhen) Co., Ltd. ⁽²⁾

10.7		Exclusive Option Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd., Liangyao Xie and Trunkbow Technologies (Shenzhen) Co., Ltd. ⁽²⁾
10.8		Loan Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd. and Wanchun Hou ⁽²⁾
10.9		Loan Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd. and Qiang Li ⁽²⁾
10.10		Loan Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd. and Liangyao Xie ⁽²⁾
10.11		Power of Attorney of Wanchun Hou in favor of Trunkbow Asia Pacific (Shandong) Co., Ltd. ⁽²⁾
10.12		Power of Attorney of Qiang Li in favor of Trunkbow Asia Pacific (Shandong) Co., Ltd. ⁽²⁾
10.13		Power of Attorney of Liangyao Xie in favor of Trunkbow Asia Pacific (Shandong) Co., Ltd. ⁽²⁾
10.14		Share Pledge Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd., Wanchun Hou and Trunkbow Technologies (Shenzhen) Co., Ltd. ⁽²⁾
10.15		Share Pledge Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd., Qiang Li and Trunkbow Technologies (Shenzhen) Co., Ltd. ⁽²⁾
10.16		Share Pledge Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd., Liangyao Xie and Trunkbow Technologies (Shenzhen) Co., Ltd. ⁽²⁾
10.17		Nominee Letter to Wanchun Hou ⁽²⁾
10.18		Nominee Letter to Qiang Li ⁽²⁾
10.19		Nominee Letter to Liangyao Xie ⁽²⁾
10.20		Medium-to-Small Sized Enterprise Financing Service Contract dated November 9, 2011 between Trunkbow Asia Pacific (Shandong) Company Limited and China Minsheng Banking Corp., Ltd., Dalian Division. (4)
10.21		Accounts Receivable Maximum Amount Pledge Contract between Trunkbow Asia Pacific (Shandong) Company Limited and China Minsheng Banking Corp., Ltd., Dalian Division. (4)
10.22		Maximum Amount Guarantee Contract among Wanchun Hou, Zhonghong Yu, Qiang Li, Xuesong Dai and China Minsheng Banking Corp., Ltd., Dalian Division. (4)
10.23		Maximum Amount Pledge Contract between Qiang Li and China Minsheng Banking Corp., Ltd., Dalian Division. (4)

10.7		Exclusive Option Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd., Liangyao Xie and Trunkbow Technologies (Shenzhen) Co., Ltd. (2)
10.8		Loan Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd. and Wanchun Hou (2)
10.9		Loan Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd. and Qiang Li (2)
10.10		Loan Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd. and Liangyao Xie (2)
10.11		Power of Attorney of Wanchun Hou in favor of Trunkbow Asia Pacific (Shandong) Co., Ltd. (2)
10.12		Power of Attorney of Qiang Li in favor of Trunkbow Asia Pacific (Shandong) Co., Ltd. (2)
10.13		Power of Attorney of Liangyao Xie in favor of Trunkbow Asia Pacific (Shandong) Co., Ltd. (2)
10.14		Share Pledge Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd., Wanchun Hou and Trunkbow Technologies (Shenzhen) Co., Ltd. (2)
10.15		Share Pledge Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd., Qiang Li and Trunkbow Technologies (Shenzhen) Co., Ltd. (2)
10.16		Share Pledge Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd., Liangyao Xie and Trunkbow Technologies (Shenzhen) Co., Ltd. (2)
10.17		Nominee Letter to Wanchun Hou (2)
10.18		Nominee Letter to Qiang Li (2)
10.19		Nominee Letter to Liangyao Xie (2)
10.20		Medium-to-Small Sized Enterprise Financing Service Contract dated November 9, 2011 between Trunkbow Asia Pacific (Shandong) Company Limited and China Minsheng Banking Corp., Ltd., Dalian Division. (4)
10.21		Accounts Receivable Maximum Amount Pledge Contract between Trunkbow Asia Pacific (Shandong) Company Limited and China Minsheng Banking Corp., Ltd., Dalian Division. (4)
10.22		Maximum Amount Guarantee Contract among Wanchun Hou, Zhonghong Yu, Qiang Li, Xuesong Dai and China Minsheng Banking Corp., Ltd., Dalian Division. (4)
10.23		Maximum Amount Pledge Contract between Qiang Li and China Minsheng Banking Corp., Ltd., Dalian Division. (4)
10.24		Maximum Amount Pledge Contract between Qiang Li and China Minsheng Banking Corp., Ltd., Dalian Division. (4)
10.25		Domestic Factoring Contract (with Recourse) between Agricultural Bank of China, Jinan Branch and Trunkbow Asia Pacific (Shandong) Co. Limited dated March 2, 2012. (5)
10.26		Domestic Factoring Contract (with Recourse) between Agricultural Bank of China, Jinan Branch and Trunkbow Asia Pacific (Shandong) Co. Limited dated April 26, 2012. (5)
10.27		Pledge Contract between Agricultural Bank of China, Jinan Branch and Trunkbow Asia Pacific (Shandong) Co. Limited dated April 26, 2012. (5)
10.28		Guarantee Contract between Agricultural Bank of China, Jinan Branch and Li Qiang, dated April 26, 2012. (5)
10.29		Guarantee Contract between Agricultural Bank of China, Jinan Branch and Hou Wanchun, dated April 26, 2012. (5)
10.30		Automobiles Lease Contract between Li Qiang and Trunkbow (Asia Pacific) Investment Holdings Limited. (5)
10.31		RMB 2.75 million Factoring Agreement by and between Trunkbow Asia Pacific (Shangdong) Co. Limited and Agricultural Bank of China, Jian Hi-Tech Development Zone Branch. (6)
10.32		Guaranty of Dr. Wanchun Hou with respect to Exhibit 10.31. (6)
10.33		Guaranty of Qiang Li with respect to Exhibit 10.31. (6)
10.34		Pledge Agreement by and between Trunkbow Asia Pacific (Shandong) Co. Limited and Agricultural Bank of China, Jinan Hi-Tech Development Zone Branch with respect to Exhibit 10.31. (6)
10.35		RMB 5.25 million Factoring Agreement by and between Trunkbow Asia Pacific (Shangdong) Co. Limited and Agricultural Bank of China, Jian Hi-Tech Development Zone Branch. (6)
10.36		Guaranty of Dr. Wanchun Hou with respect to Exhibit 10.35. (6)
10.37		Guaranty of Qiang Li with respect to Exhibit 10.35. (6)
10.38		Pledge Agreement by and between Trunkbow Asia Pacific (Shandong) Co. Limited and Agricultural Bank of China, Jinan Hi-Tech Development Zone Branch with respect to Exhibit 10.35 (6)
14.1		Code of Ethics (3)
21.1		Subsidiaries of Trunkbow Holdings International Limited (1)
31.1*		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

10.24		Maximum Amount Pledge Contract between Qiang Li and China Minsheng Banking Corp., Ltd., Dalian Division. (4)
10.25		Domestic Factoring Contract (with Recourse) between Agricultural Bank of China, Jinan Branch and Trunkbow Asia Pacific (Shandong) Co. Limited dated March 2, 2012. (5)
10.26		Domestic Factoring Contract (with Recourse) between Agricultural Bank of China, Jinan Branch and Trunkbow Asia Pacific (Shandong) Co. Limited dated April 26, 2012. (5)
10.27		Pledge Contract between Agricultural Bank of China, Jinan Branch and Trunkbow Asia Pacific (Shandong) Co. Limited dated April 26, 2012. (5)
10.28		Guarantee Contract between Agricultural Bank of China, Jinan Branch and Li Qiang, dated April 26, 2012. (5)
10.29		Guarantee Contract between Agricultural Bank of China, Jinan Branch and Hou Wanchun, dated April 26, 2012. (5)
10.30		Automobiles Lease Contract between Li Qiang and Trunkbow (Asia Pacific) Investment Holdings Limited. (5)
10.31		RMB 2.75 million Factoring Agreement by and between Trunkbow Asia Pacific (Shangdong) Co. Limited and Agricultural Bank of China, Jian Hi-Tech Development Zone Branch. (6)
10.32		Guaranty of Dr. Wanchun Hou with respect to Exhibit 10.31. (6)
10.33		Guaranty of Qiang Li with respect to Exhibit 10.31. (6)
10.34		Pledge Agreement by and between Trunkbow Asia Pacific (Shandong) Co. Limited and Agricultural Bank of China, Jinan Hi-Tech Development Zone Branch with respect to Exhibit 10.31. (6)
10.35		RMB 5.25 million Factoring Agreement by and between Trunkbow Asia Pacific (Shangdong) Co. Limited and Agricultural Bank of China, Jian Hi-Tech Development Zone Branch. (6)
10.36		Guaranty of Dr. Wanchun Hou with respect to Exhibit 10.35. (6)
10.37		Guaranty of Qiang Li with respect to Exhibit 10.35. (6)
10.38		Pledge Agreement by and between Trunkbow Asia Pacific (Shandong) Co. Limited and Agricultural Bank of China, Jinan Hi-Tech Development Zone Branch with respect to Exhibit 10.35 (6)
14.1		Code of Ethics ⁽³⁾
21.1		Subsidiaries of Trunkbow Holdings International Limited ⁽¹⁾
31.1*		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*		Interactive Data Files

* Filed herewith.

* Filed herewith.
(1)	Incorporated herein by reference to the Registration Statement on Form 10 filed by Trunkbow on June 4, 2010.
(2)	Incorporated herein by reference to Amendment No. 2 to the Registration Statement on Form S-1/A filed by Trunkbow on December 15, 2010.
(3)	Incorporated herein by reference to Amendment No. 4 to the Registration Statement on Form S-1/A filed by Trunkbow on January 18, 2011.
(4)	Incorporated by reference from Trunkbow’s Annual Report on Form 10-K filed with the SEC on March 30, 2012
(5)	Incorporated by reference from the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 21, 2012.
(6)	Incorporated by reference from Trunkbow’s Annual Report on Form 10-K/A filed with the SEC on July 3, 2012.

~~(1) Incorporated herein by reference to the Registration Statement on Form 10 filed by Trunkbow on June 4, 2010.~~51

(2) Incorporated herein by reference to Amendment No. 2 to the Registration Statement on Form S-1/A filed by Trunkbow on December 15, 2010.

(3) Incorporated herein by reference to Amendment No. 4 to the Registration Statement on Form S-1/A filed by Trunkbow on January 18, 2011.

(4) Incorporated by reference from Trunkbow’s Annual Report on Form 10-K filed with the SEC on March 30, 2012

(5) Incorporated by reference from the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 21, 2012.

(6) Incorporated by reference from Trunkbow’s Annual Report on Form 10-K/A filed with the SEC on July 3, 2012.

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.

	TRUNKBOW INTERNATIONAL HOLDINGS LIMITED
May 2, 2013	By:	/s/ Li Qiang
September 26, 2014	By:	/s/ Li Qiang
(Date Signed)		Li Qiang, Chief Executive Officer

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 date indicated.

Signature	Capacity	Date
/s/ Dr. Hou WanChun	Chairman of the Board of Directors	~~May~~September 226, ~~2013~~2014
Dr. Hou WanChun
/s/ Li Qiang	Chief Executive Officer and Director	~~May~~September 226, ~~2013~~2014
Li Qiang	(Principal Executive Officer)
/s/ Ye Yuan Jun	Chief Financial Officer	May 2, 2013
/s/ Li Qiang	Acting Chief Financial Officer	September 26, 2014
Ye Yuan Jun	(Principal Accounting Officer)
Li Qiang	(Acting Principal Accounting Officer)
/s/ Bao Jihong	Director	May 2, 2013
Bao Jihong
/s/ Wang Xin	Director	May 2, 2013
Wang Xin
/s/Regis Kwong	Director	May 2, 2013
Regis Kwong
/s/ Dr. Tan Kok Hui	Director	May 2, 2013
Dr. Tan Kok Hui
/s/ Iris Geng	Director	May 2, 2013
Iris Geng
/s/ Dr. Lv Ting Jie	Director	May 2, 2013
Dr. Lv Ting Jie
/s/ Huang Zhaoxing	Director	May 2, 2013
Huang Zhaoxing
/s/ Li Dong	Director	May 2, 2013
Li Dong

6052

Exhibit Index

Exhibit Number		Description
2.1		Share Exchange Agreement, dated as of January 27, 2010 ⁽¹⁾
3.1		Amended Articles of Incorporation ⁽¹⁾
3.2		Bylaws ⁽¹⁾
4.1		Form of Investor Warrant ⁽¹⁾
4.2		Registration Rights Agreement, dated as of February 10, 2010 ⁽¹⁾
4.3		Specimen Common Stock Certificate ⁽⁵⁾
4.4		Form of Underwriter Warrant ⁽⁵⁾
10.1		Subscription Agreement, dated as of February 10, 2010 ⁽¹⁾
10.2		Make Good Escrow Agreement ⁽¹⁾
10.3		Form of Director Repayment Agreement ⁽¹⁾
10.4		Exclusive Business Cooperation Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd. and Trunkbow Technologies (Shenzhen) Co., Ltd. ⁽²⁾
10.5		Exclusive Option Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd., Wanchun Hou and Trunkbow Technologies (Shenzhen) Co., Ltd. ⁽²⁾
10.6		Exclusive Option Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd., Qiang Li and Trunkbow Technologies (Shenzhen) Co., Ltd. ⁽²⁾
10.7		Exclusive Option Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd., Liangyao Xie and Trunkbow Technologies (Shenzhen) Co., Ltd. ⁽²⁾
10.8		Loan Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd. and Wanchun Hou ⁽²⁾
10.9		Loan Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd. and Qiang Li ⁽²⁾
10.10		Loan Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd. and Liangyao Xie ⁽²⁾
10.11		Power of Attorney of Wanchun Hou in favor of Trunkbow Asia Pacific (Shandong) Co., Ltd. ⁽²⁾
10.12		Power of Attorney of Qiang Li in favor of Trunkbow Asia Pacific (Shandong) Co., Ltd. ⁽²⁾
10.13		Power of Attorney of Liangyao Xie in favor of Trunkbow Asia Pacific (Shandong) Co., Ltd. ⁽²⁾
10.14		Share Pledge Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd., Wanchun Hou and Trunkbow Technologies (Shenzhen) Co., Ltd. ⁽²⁾
10.15		Share Pledge Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd., Qiang Li and Trunkbow Technologies (Shenzhen) Co., Ltd. ⁽²⁾
10.16		Share Pledge Agreement among Trunkbow Asia Pacific (Shandong) Co., Ltd., Liangyao Xie and Trunkbow Technologies (Shenzhen) Co., Ltd. ⁽²⁾
10.17		Nominee Letter to Wanchun Hou ⁽²⁾
10.18		Nominee Letter to Qiang Li ⁽²⁾
10.19		Nominee Letter to Liangyao Xie ⁽²⁾
10.20		Medium-to-Small Sized Enterprise Financing Service Contract dated November 9, 2011 between Trunkbow Asia Pacific (Shandong) Company Limited and China Minsheng Banking Corp., Ltd., Dalian Division. (4)
10.21		Accounts Receivable Maximum Amount Pledge Contract between Trunkbow Asia Pacific (Shandong) Company Limited and China Minsheng Banking Corp., Ltd., Dalian Division. (4)
10.22		Maximum Amount Guarantee Contract among Wanchun Hou, Zhonghong Yu, Qiang Li, Xuesong Dai and China Minsheng Banking Corp., Ltd., Dalian Division. (4)
10.23		Maximum Amount Pledge Contract between Qiang Li and China Minsheng Banking Corp., Ltd., Dalian Division. (4)
10.24		Maximum Amount Pledge Contract between Qiang Li and China Minsheng Banking Corp., Ltd., Dalian Division. (4)
10.25		Domestic Factoring Contract (with Recourse) between Agricultural Bank of China, Jinan Branch and Trunkbow Asia Pacific (Shandong) Co. Limited dated March 2, 2012. (5)
10.26		Domestic Factoring Contract (with Recourse) between Agricultural Bank of China, Jinan Branch and Trunkbow Asia Pacific (Shandong) Co. Limited dated April 26, 2012. (5)
10.27		Pledge Contract between Agricultural Bank of China, Jinan Branch and Trunkbow Asia Pacific (Shandong) Co. Limited dated April 26, 2012. (5)
10.28		Guarantee Contract between Agricultural Bank of China, Jinan Branch and Li Qiang, dated April 26, 2012. (5)
10.29		Guarantee Contract between Agricultural Bank of China, Jinan Branch and Hou Wanchun, dated April 26, 2012. (5)
10.30		Automobiles Lease Contract between Li Qiang and Trunkbow (Asia Pacific) Investment Holdings Limited. (5)

6153

10.31		RMB 2.75 million Factoring Agreement by and between Trunkbow Asia Pacific (Shangdong) Co. Limited and Agricultural Bank of China, Jian Hi-Tech Development Zone Branch. (6)
10.32		Guaranty of Dr. Wanchun Hou with respect to Exhibit 10.31. (6)
10.33		Guaranty of Qiang Li with respect to Exhibit 10.31. (6)
10.34		Pledge Agreement by and between Trunkbow Asia Pacific (Shandong) Co. Limited and Agricultural Bank of China, Jinan Hi-Tech Development Zone Branch with respect to Exhibit 10.31. (6)
10.35		RMB 5.25 million Factoring Agreement by and between Trunkbow Asia Pacific (Shangdong) Co. Limited and Agricultural Bank of China, Jian Hi-Tech Development Zone Branch. (6)
10.36		Guaranty of Dr. Wanchun Hou with respect to Exhibit 10.35. (6)
10.37		Guaranty of Qiang Li with respect to Exhibit 10.35. (6)
10.38		Pledge Agreement by and between Trunkbow Asia Pacific (Shandong) Co. Limited and Agricultural Bank of China, Jinan Hi-Tech Development Zone Branch with respect to Exhibit 10.35 (6)
14.1		Code of Ethics (3)
21.1		Subsidiaries of Trunkbow Holdings International Limited (1)
31.1*		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*		Interactive Data Files

* Filed herewith.
(1)	Incorporated herein by reference to the Registration Statement on Form 10 filed by Trunkbow on June 4, 2010.
(2)	Incorporated herein by reference to Amendment No. 2 to the Registration Statement on Form S-1/A filed by Trunkbow on December 15, 2010.
(3)	Incorporated herein by reference to Amendment No. 4 to the Registration Statement on Form S-1/A filed by Trunkbow on January 18, 2011.
(4)	Incorporated by reference from Trunkbow’s Annual Report on Form 10-K filed with the SEC on March 30, 2012
(5)	Incorporated by reference from the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 21, 2012.
(6)	Incorporated by reference from Trunkbow’s Annual Report on Form 10-K/A filed with the SEC on July 3, 2012.

32.2*		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*		Interactive Data Files

* Filed herewith.

(1) Incorporated herein by reference to the Registration Statement on Form 10 filed by Trunkbow on June 4, 2010.

(2) Incorporated herein by reference to Amendment No. 2 to the Registration Statement on Form S-1/A filed by Trunkbow on December 15, 2010.

(3) Incorporated herein by reference to Amendment No. 4 to the Registration Statement on Form S-1/A filed by Trunkbow on January 18, 2011.

(4) Incorporated by reference from Trunkbow’s Annual Report on Form 10-K filed with the SEC on March 30, 2012

(5) Incorporated by reference from the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 21, 2012.

(6) Incorporated by reference from Trunkbow’s Annual Report on Form 10-K/A filed with the SEC on July 3, 2012.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the ~~Audit~~Board ~~Committee~~ of ~~the~~Directors and Stockholders

Board of Directors and Stockholders

of Trunkbow International Holdings Limited

We have audited the accompanying consolidated balance sheets of Trunkbow International Holdings Limited (the “Company”) as of December 31, ~~2012~~2013 and ~~2011~~2012, and the related consolidated statements of income and comprehensive income, changes in stockholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company, as of December 31, ~~2012~~2013 and ~~2011~~ 2012, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Marcum Bernstein & Pinchuk llp

Marcum Bernstein & Pinchuk llp

New York, New York

~~May~~September 226, ~~2013~~2014

64 NEW YORK OFFICE • 7 Penn Plaza • Suite 830 • New York, New York 10001 • Phone 646.442.4845 • Fax 646.349.5200 • marcumbp.com

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31,		December 31,
	2012		2011
	2013		2012
ASSETS
Current assets
Cash and cash equivalents*	$	~~783~~226,~~074~~559	$	6783,~~139,589~~074
Accounts receivable, net*		4638,~~896~~590,~~214~~636		4146,~~147~~240,~~767~~651
Advances to suppliers, net		1224,~~478~~568,~~788~~872		912,~~783~~478,~~454~~788
Prepayments		~~496~~450,~~372~~411		~~316~~496,~~258~~372
Other current assets*		71,~~996~~502,~~644~~375		49,~~040~~717,~~152~~929
Due from directors*		9,350		758,033
Loans to third party		10,148,621		4,787,116
Inventories*		5,673,179		4,924,415
Due from directors*		2,346,489		9,350
Deferred tax assets		942,028		117,952
Inventories*		7,209,194		5,424,773
Total current assets		75,275,649		67,227,620
Assets held for sale		8,323,573		8,064,442
Property and equipment, net*		39,929,472		21,420,803
Deferred tax assets		1,223,861		942,028
Land use right, net		5,831,641		5,905,583
Total current assets		94,590,591		88,944,523
Intangible assets, net		271,894		33,958
Property and equipment, net*		43,415,896		26,260,598
Long-term prepayment*		368,985		2,733,363
Land use right, net		5,894,495		5,831,641
TOTAL ASSETS	$	121,677,641	$	97,321,327
Intangible assets, net		1,069,312		271,894
Long-term prepayment*		224,497		368,985
TOTAL ASSETS	$	145,194,791	$	121,677,641
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable*	$	2,~~655~~059,~~395~~046	$	2,~~238~~655,~~179~~395
Accrued expenses and other current liabilities*		39,~~983~~069,~~227~~248		23,~~216~~983,~~128~~227
Short-term loans		1123,~~175~~723,~~196~~046		611,~~460~~175,~~945~~196
Due to directors*		~~106~~129,~~141~~570		11106,~~959~~141
Taxes payable*		6,~~857~~786,~~978~~668		46,~~209~~857,~~907~~978
Total current liabilities		2441,~~777~~767,~~937~~578		1524,~~137~~777,~~118~~937
Deferred revenue		1,~~505~~554,~~881~~269		01,505,881
Total liabilities		2643,~~283~~321,~~818~~847		1526,~~137~~283,~~118~~818
COMMITMENTS AND CONTINGENCIES
Stockholders’ equity
Preferred Stock: par value $0.001, authorized 10,000,000 shares, none issued and outstanding at December 31, 2012 and December 31, 2011, respectively		0		0
Preferred Stock: par value $0.001, authorized 10,000,000 shares, none issued and outstanding at December 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 December 31, 2012 and December 31, 2011, respectively		36,807		36,807
Common Stock: par value $0.001, authorized 190,000,000 shares, 36,807,075 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively		36,807		36,807
Additional paid-in capital		39,671,966		39,671,966
Appropriated retained earnings		67,~~461~~105,~~938~~153		46,~~504~~461,~~667~~938
Unappropriated retained earnings		4548,~~713~~457,~~187~~233		3445,~~989~~713,~~429~~187
Accumulated other comprehensive income		36,~~509~~601,~~925~~785		23,~~981~~509,~~340~~925
Total stockholders’ equity		95101,~~393~~872,~~823~~944		8295,~~184~~393,~~209~~823
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	~~121~~145,~~677~~194,~~641~~791	$	97121,~~321~~677,~~327~~641

*The assets of the VIEs can be used only to settle the obligations of the VIEs. Conversely, liabilities recognized as of consolidating VIEs do not represent additional claims on the Company’s assets. (Note 2627).

See notes to the consolidated financial statements.

6556

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

	Years Ended December 31,
	2012			2011
	2013			2012
Revenues	$	3520,~~460~~221,~~297~~465		$	2935,~~715~~460,~~407~~297
Less: Business tax and surcharges		~~691~~366,~~297~~097			~~638~~691,~~377~~297
Net revenues		3419,~~769~~855,~~000~~368			2934,~~077~~769,~~030~~000
Cost of revenues		5,~~107~~385,~~636~~987			65,~~130~~107,~~071~~636
Gross profit		2914,~~661~~469,~~364~~381			2229,~~946~~661,~~959~~364
Operating expenses
Operating expenses (income)
Selling and distribution expenses		31,~~197~~642,~~089~~285			23,~~344~~197,~~993~~089
General and administrative expenses		118,~~342~~001,~~159~~035			711,~~944~~342,~~055~~159
Research and development expenses		21,~~014~~912,~~797~~502			12,~~434~~014,~~525~~797
		16,554,045			11,723,573
		11,555,822			16,554,045
Income from operations		132,~~107~~913,~~319~~559			1113,~~223~~107,~~386~~319
Other income (expenses)
Interest income		~~232~~3,~~693~~863			~~107~~232,~~467~~693
Interest expense		(~~956~~1,~~492~~297,761	)		(87956,~~005~~492	)
Refund of value-added tax		12,~~667~~325,~~606~~020			21,~~112~~667,~~463~~606
Government grants		~~379~~134,~~159~~075			5379,~~651,686~~159
Other income		~~83,562~~410			783,~~890~~562
Other expenses		(1213,~~723~~257	)		(~~117~~12,~~024~~723	)
		1,393,805			7,675,477
		1,152,350			1,393,805
Income before income tax expense		144,~~501~~065,~~124~~909			1814,~~898~~501,~~863~~124
Income tax expense		1678,~~820,095~~648			1,~~958~~820,~~615~~095
Net income		123,~~681~~387,~~029~~261			1612,~~940~~681,~~248~~029
Foreign currency translation fluctuation		~~528~~3,~~585~~091,860			2528,~~405,664~~585
Comprehensive income	$	136,~~209~~479,~~614~~121		$	1913,~~345~~209,~~912~~614
Weighted average number of common shares outstanding
Basic		36,807,075			36,~~263~~807,~~911~~075
Diluted		36,~~812~~807,~~203~~075			3736,~~163~~812,~~690~~203
Earnings per share
Basic	$	0.3409		$	0.4734
Diluted	$	0.3409		$	0.4634

See notes to the consolidated financial statements.

6657

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2012			2011
	2013			2012
Cash flows from operating activities
Net income	$	123,~~681~~387,~~029~~261		$	1612,~~940~~681,~~248~~029
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		1,~~667~~090,~~726~~335			~~323~~1,~~671~~667,726
Provision for doubtful accounts		6,582,008			928,218
Provision for doubtful debts		2,367,232			6,582,008
Share-based compensation expenses		0			350,000
Impairment of intangible assets		253,658			0
Deferred tax assets		(822,001	)		(116,027	)
Deferred taxes		(248,229	)		(822,001	)
Changes in operating assets and liabilities:
Accounts receivable		(96,~~467~~667,~~390~~603	)		(158,~~159~~810,~~545~~160	)
Advances to suppliers		(512,~~151~~761,~~720~~116	)		(25,~~585~~151,~~065~~720	)
Prepayments		~~121~~61,~~529~~090			~~399~~121,~~563~~529
Other current assets		(1825,~~830,839~~852	)		(~~795~~1,~~636~~830,839	)
Due from directors		~~754~~(2,~~321~~305,866	)		~~(664~~754,~~592~~321	)
Inventories		(~~709~~1,~~476~~335,779	)		(1709,~~078,415~~476	)
Long-term prepayment		354,422			(2,322,161	)
Long-term prepayments		154,271			354,422
Accounts payable		399,323			1,328,366
Assets held for sale		0			(8,084,948	)
Accrued expenses and other current liabilities		272,275			1,572,534
Accounts payable		(672,639	)		399,323
Other non-current liabilities		0			(141,940	)
Accrued expenses and other current liabilities		3,496,854			272,275
Amounts due to directors		9419,~~043~~753			1194,~~764~~043
Taxes payable		2(287,~~613,528~~807	)		~~337~~2,~~200~~613,528
Deferred revenue		~~1,505,165~~0			01,505,165
Net cash flows used in operating activities		9,063,943			(671,817	)
Net cash flows provided by (used in) operating activities		(939,231	)		1,636,225
Cash flows from investing activities
Acquisition of property and equipment and intangible assets		(1910,~~468~~492,~~008~~186	)		(2012,~~823~~040,~~526~~290	)
Acquisition of land use right		0			(5,877,870	)
Collection of loans to third parties		2,179,423			158,438
Collection on loans to third parties		158,438			2,884,763
Payment on Loans to third parties		(4,705,939	)		(2,091,387	)
Payment on loans to third parties		(2,091,387	)		(2,784,653	)
Cash advance received from sale of property		2,857,466			0
Acquisition of Delixunda Company (net of cash acquired)		0			(40,223	)
Net cash flows used in investing activities		(10,161,236	)		(13,973,239	)
Net cash flows used in investing activities		(21,400,957	)		(26,641,509	)
Cash flows from financing activities
Proceeds from issuance of common stock (net of finance costs)		0			17,332,251
Proceeds from bank loans		31,714,667			18,888,700
Proceeds from bank loans		18,888,700			6,355,495
Repayment of bank loans		(19,687,455	)		(14,227,771	)
Repayment of bank loans		(14,227,771	)		(1,856,436	)
Proceeds from loans from third parties		645,755			2,401,024
Proceeds from loans from third parties		2,401,024			0
Repayment of loans from third parties		(2,107,760	)		0
Restricted deposit collected from bank		0			371,287
Net cash flows provided by financing activities		10,565,207			7,061,953
Proceeds from exercise of warrants		0			610,000
Effect of exchange rate fluctuation on cash and cash equivalents		(21,255	)		(81,454	)
Net cash flows provided by financing activities		7,061,953			22,812,597
Net decrease in cash and cash equivalents		(556,515	)		(5,356,515	)
Effect of exchange rate fluctuation on cash and cash equivalents		(81,454	)		380,568
Cash and cash equivalents – beginning of the year		783,074			6,139,589
Net increase in cash and cash equivalents		(5,356,515	)		(4,120,161	)
Cash and cash equivalents – end of the year	$	226,559		$	783,074
Cash and cash equivalents – beginning of the year		6,139,589			10,259,750
Cash and cash equivalents – end of the period	$	783,074		$	6,139,589
Supplemental disclosure of cash flow information
Cash paid for interest	$	~~956~~1,~~492~~309,640		$	74956,~~332~~492
Cash paid for income taxes	$	1603,~~649,212~~281		$	~~390~~1,~~586~~649,212
Supplemental disclosure of noncash financing activities
Issuance of 30,000 common shares at $5.00 each for the legal fee	$	0		$	150,000

See notes to the consolidated financial statements

6758

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

												Accumulated
					Additional		Appropriated		Unappropriated			other
	Common stock				paid-in		retained		retained			comprehensive
	Shares		Amount		Capital		earnings		earnings			income/(loss)		Total
Balance at January 1, 2011		32,472,075	$	32,472	$	21,384,050	$	2,428,847	$	20,125,001		$	575,676	$	44,546,046
Balance at January 1, 2012		36,807,075		36,807		39,671,966		4,504,667		34,989,429			2,981,340		82,184,209
Net income		0		0		0		0		16,940,248			0		16,940,248
Issue of shares		4,030,000		4,030		17,328,221		0		0			0		17,332,251
Exercise of warrants		305,000		305		609,695		0		0			0		610,000
Share-based compensation		0		0		350,000		0		0			0		350,000
Appropriation of statutory surplus reserve		0		0		0		2,075,820		(2,075,820	)		0		0
Foreign currency Translation adjustment		0		0		0		0		0			2,405,664		2,405,664
Balance at December 31, 2011		36,807,075		36,807		39,671,966		4,504,667		34,989,429			2,981,340		82,184,209
Net income		0		0		0		0		12,681,029			0		12,681,029
Appropriation of statutory surplus reserve		0		0		0		1,957,271		(1,957,271	)		0		0
Foreign currency Translation adjustment		0		0		0		0		0			528,585		528,585
Balance at December 31, 2012		36,807,075	$	36,807	$	39,671,966	$	6,461,938	$	45,713,187		$	3,509,925	$	95,393,823
Net income		0		0		0		0		3,387,261			0		3,387,261
Appropriation of statutory surplus reserve		0		0		0		643,215		(643,215	)		0		0
Foreign currency Translation adjustment		0		0		0		0		0			3,091,860		3,091,860
Balance at December 31, 2013		36,807,075	$	36,807	$	39,671,966	$	7,105,153	$	48,457,233		$	6,601,785	$	101,872,944

See notes to the consolidated financial statements.

6859

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 - ORGANIZATION AND PRINCIPAL ACTIVITIES

Trunkbow International Holdings Limited (formerly named as Bay Peak 5 Acquisition Corp. (“BP5”) (the “Company”), was incorporated in the State of Nevada on September 3, 2004. The Company was formed as part of the implementation of the Chapter 11 reorganization plan (the “Visitalk Plan”) of visitalk.com, Inc. (“Visitalk.com”), a former provider of VOIP services. The Visitalk Plan was deemed effective by the Bankruptcy Court on September 17, 2004 (the “Effective Date”). On September 22, 2004, Visitalk.com was merged into VCC, which was authorized as the reorganized debtor under the Visitalk Plan.

In February 2010, the Company entered into a Share Exchange Agreement (the “Exchange Agreement”) with Trunkbow International Holdings Limited, a company organized under the laws of the British Virgin Islands (“Trunkbow”), the shareholders of Trunkbow (the “Shareholders”), who together own shares constituting 100% of the issued and outstanding ordinary shares of Trunkbow (the “Trunkbow Shares”), and the principal shareholder of the Company (“Principal Shareholder”). Pursuant to the terms of the Exchange Agreement, the Shareholders transferred to the Company all of the Trunkbow Shares in exchange for the issuance of 19,562,888 (the “Shares”) shares of our common stock (the “Share Exchange”). As a result of the Share Exchange, Trunkbow became our wholly owned subsidiary. After giving effect to the Share Exchange, the sale of common stock in the February 2010 Offering (defined below) and the BP5 Warrant Financing referred to below (i) existing shareholders of Trunkbow owned approximately 60.25% of the Company’s outstanding Common Stock, (ii) purchasers of Common Stock in the Offering owned approximately 26.01% of the Company’s outstanding Common Stock (including 7.7% owned by VeriFone, Inc.), (iii) the holders of BP5 Warrants owned approximately 8.54% of the Company’s outstanding Common Stock and (iv) the pre-existing shareholders of BP5 owned approximately 5.2% of the Company’s outstanding Common Stock.

Concurrent with the Share Exchange, (i) we entered into a securities purchase agreement (the “Purchase Agreement”) with certain investors (the “Investors”) for the sale of an aggregate of 8,447,575 shares (the “Investor Shares”) and 1,689,515 warrants (the “Investor Warrants”), for aggregate gross proceeds equal to $16,895,150 (the “February 2010 Offering”) and (ii) certain holders of outstanding warrants of the Company issued to creditors and claimants of visitalk.com., in accordance with the Visitalk Plan, referred to herein as the BP5 Warrant Investors” exercised the 2,774,500 warrants owned by them for an aggregate exercise price of $5.5 million and received warrants to purchase an aggregate of 554,900 shares of Common Stock (“BP5 Warrant Financing”).

The Company’s wholly owned subsidiary, Trunkbow, was established in the British Virgin Islands (“BVI”) on July 17, 2009, with no significant business operations and assets other than holding of equity interests in its subsidiaries and variable interest entities (“VIEs”). Trunkbow’s wholly owned subsidiary, Trunkbow (Asia Pacific) Investment Holdings Limited (“Trunkbow Hong Kong”) was established as an Investment Holding Company in Hong Kong Special Administrative Region of the People’s Republic of China (the “PRC”) on July 9, 2004.

Trunkbow Hong Kong established two wholly foreign owned subsidiaries in the PRC, Trunkbow Asia Pacific (Shandong) Company, Limited (“Trunkbow Shandong”) which was established on December 10, 2007 in Jinan, Shandong Province and Trunkbow Asia Pacific (Shenzhen) Company, Limited (“Trunkbow Shenzhen”) which was established on June 7, 2007 in Shenzhen, Guangdong Province. Both subsidiaries are principally engaged in research and development of application platforms for mobile operators in China.

Trunkbow Technologies (Shenzhen) Company, Limited (“Trunkbow Technologies”) was established as a limited liability company on December 4, 2001 in Shenzhen, Guangdong Province, the PRC. Trunkbow Technologies was formerly engaged in research and development of application platforms for mobile operators in China as well as wireless application systems for the international market. Beijing Delixunda Technology Co., Ltd (“Delixunda”) was established as a limited liability company on December 1, 2009 in Beijing, the PRC. Delixunda is a telecom value-added service licensed company and is engaged in research and development and sales of value-added application platforms for mobile operators. In December 2007, a series of agreements were entered into amongst Trunkbow Shandong, Trunkbow Technologies and its controlling shareholders, providing Trunkbow Shandong the ability to control Trunkbow Technologies, including its financial interest. In March 2011, a series of agreements were entered into amongst Trunkbow Shandong, Delixunda and its controlling shareholders, providing Trunkbow Shandong the ability to control Delixunda, including its financial interest. As a result of these contractual arrangements, which assigned all of Trunkbow Technologies and Delixunda’s equity owners’ rights and obligations to Trunkbow Shandong resulting in the equity owners lacking the ability to make decisions that have a significant effect on Trunkbow Technologies and Delixunda’s operations and Trunkbow Shandong’s ability to extract the profits from the operation of Trunkbow Technologies and Delixunda, and assume the Trunkbow Technologies and Delixunda’s residual benefits. Because Trunkbow Shandong and its indirect parent are the sole interest holders of Trunkbow Technologies, the Company consolidates Trunkbow Technologies from its inception, and Delixunda from March 10, 2011, consistent with the provisions of FASB Accounting Standards Codification (“ASC”) 810-10.

The Company, its subsidiaries and VIEs are collectively referred to as the “Group”.

~~2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~60

2. — LIQUIDITY AND FINANCIAL CONDITION

The Company’s cash flows provided by operations amounted to $0.68 million for the year ended December 31, 2013. The Company had working capital of approximately $54.14 million as of December 31, 2013. The Company has historically financed its operations principally from cash flows generated from operating activities and external financing.

As of December 31, 2013, Trunkbow had signed four agreements in relation to capital expenditures on Guangzhou, Shanghai and Huzhou data centers, and our R&D center. The total capital expenditure of these four centers is approximately $83.9-90.9 million of which $40-60 million will be paid within the next year. As of December 31, 2013, Trunkbow has invested $50.4 million. The Company expects to finance these projects principally from cash collection from our accounts receivables, loans from third parties and also from bank loans.

Management believes, based on the Company’s historical ability to fund operations using internally generated cash flow and external financings that the Company’s currently available cash and funds it expects to generate from operations and through potential short term loans financing from banks will enable it to operate the business and satisfy short term obligations through at least the next twelve months. Notwithstanding, the Company still has substantial obligations as described herein and there is no assurance that unforeseen circumstances would not have a material adverse effect on the Company’s financial condition.

If the Company is unable to generate sufficient operating cash flows obtain financing or raise additional capital, or encounters unforeseen circumstances that place constraints on its capital resources, management will be required to take various measures to conserve liquidity. Such measures could include, but not necessarily be limited to, curtailing the Company’s business development activities and controlling overhead expenses. There is a material risk, and management cannot provide any assurances, that the Company will be able to raise additional capital if needed. The Company has not received any commitments for new financing, and cannot provide any assurance that new financing will be available to the Company on acceptable terms, if at all. The failure of the Company to fund its obligations when needed would have a material adverse effect on its business and results of operations.

3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Basis of presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of the Company, and its subsidiaries and VIEs, Trunkbow, Trunkbow Hong Kong, Trunkbow Shandong, Trunkbow Shenzhen and Trunkbow Technologies and Delixunda.

b) Principles of Consolidation

The consolidated financial statements include the financial statements of the Company, the Company’s subsidiaries and the Company’s VIEs. All transactions and balances between the Company and its subsidiaries and VIEs have been eliminated upon consolidation.

c) Reclassification

The prior year figures have been reclassified to conform to current year presentation.

d) Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ from those estimates.

e) Foreign currency translation

The functional currency of the ~~Company~~ Company is the United States ~~dollars~~dollar (“US$”), and the functional currency of Trunkbow Hong Kong is the Hong Kong dollar ~~dollars~~ (“HK$”). The functional currency of the Company’s PRC subsidiaries and VIEs is the Renminbi (“RMB”), and the PRC is the primary economic environment in which the Company operates.

For financial reporting purposes, the financial statements of the Company’s PRC subsidiaries and ~~VIES~~VIEs, which are prepared using the RMB, are translated into the Company’s reporting currency, the United States Dollar. Assets and liabilities are translated using the exchange rate at each balance sheet date. Revenue and expenses are translated using average rates prevailing during each reporting period, and shareholders’ equity is translated at historical exchange rates. Adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive income in shareholders’ equity.

The exchange rates applied are as follows:

	December 31,
	2012		2011
	2013		2012
Year end RMB exchange rate		6.~~3086~~1122		6.~~3585~~3086
Average RMB exchange rate		6.~~3116~~1943		6.~~4640~~3116

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions. The resulting exchange differences are included in the determination of net income of the consolidated financial statements for the respective periods.

f) Cash and cash equivalents

Cash and cash equivalents represent cash on hand and deposits held at call with banks. The Group considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.

g) Accounts receivable

Accounts receivable are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible accounts as needed. The allowance for doubtful accounts is the Group’s best estimate of the amount of probable credit losses in the Group’s existing accounts receivable. The Group determines the allowance based on aging data, historical collection experience, customer specific facts and economic conditions. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Group did not have any off-balance-sheet credit exposure relating to its customers, suppliers or others.

h) Inventory

Inventories represent hardware and equipment and are stated at the lower of cost or market value, determined using the specific identification method.

i) Property and equipment, net

Furniture and office equipment, electronic equipment and motor vehicles are recorded at cost less accumulated depreciation. Depreciation is calculated on the straight-line method after taking into account ~~their~~ respective estimated residual values over the following estimated useful lives:

	Years
Motor vehicles		4-8
Furniture and office equipment		5
Electronic equipment		3 - 5
Telecommunication equipment		3 - 5
Leasehold improvements		3

Depreciation expense is included in cost of revenues, selling and distribution expenses, and general and administrative expenses.

When furniture and office equipment, electronic equipment and motor vehicles are retired or otherwise disposed of, resulting gain or loss is included in net income or loss in the year of disposition for the difference between the net book value and proceeds received thereon. Maintenance and repairs which do not improve or extend the expected useful lives of the assets are charged to expenses as incurred.

Impairment of long-lived assets

In accordance with Impairment or Disposal of Long-Lived Assets Subsections of FASB ASC Subtopic 360-10, Property, Plant, and Equipment - Overall, long-lived assets, such as property, plant and equipment, and purchased intangible asset subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Group first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. No impairment of long-lived assets was recognized for the year ended December 31, ~~2012~~2013 and ~~2011~~2012, respectively.

j) Land use right, net

Land use rights are recorded at cost less accumulated amortization. Amortization is provided on a straight-line basis over the estimated useful lives, which are generally 50 years and represent the shorter of the estimated usage periods or the terms of the agreements.

k) Fair value measurement

The Group applies the provisions of ASC Subtopic 820-10, Fair Value Measurements, for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements. ASC Subtopic 820-10 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.

ASC Subtopic 820-10 defines fair value as the price that would be received to sell 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 required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

ASC Subtopic 820-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC Subtopic 820-10 establishes three levels of inputs that may be used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group has the ability to access at the measurement date.

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 inputs are unobservable inputs for the asset or liability.

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

A discussion of the valuation technique used to measure the fair value of the warrant is provided in Note 1520.

The Group did not have any nonfinancial assets and liabilities that are measured at fair value on a recurring basis as of December 31, ~~2012~~2013 and ~~2011~~2012, respectively.

l) Revenue recognition

The Group derives revenues from the MVAS Technology Platform and Mobile Payment Solutions in the form of providing system integration, sales of software, patent licensing, maintenance services and revenue sharing for the two services.

System integration

For the system integration, the Group signs contracts with telecommunication and mobile operators and system integrators to install and integrate the Group’s software with the hardware and software purchased from third-party suppliers.

Deliverables of system integration include: software, hardware, integration, installation, and training. The provision of services is substantially completed, i.e., when the Group purchases the hardware and software from third-party suppliers, integrates them together with the Group’s programs and software, and provides installation and training to customers, customers sign the final acceptance confirmation.

System integration includes a significant software portion. The software is not regarded as incidental to the provision of services as a whole because the marketing of such services focuses on the internally developed technologies included in the software. Therefore, ASC 985-605, Software Revenue Recognition”, is applicable for these services. The Group cannot establish vendor-specific objective evidence of the fair values of the deliverables; therefore, according to ASC 985-605, revenue is recognized when the last deliverable in the arrangement is delivered and when all of the following criteria have been met:

73(1) Persuasive evidence of an arrangement exists;

(1)	Persuasive evidence of an arrangement exists;
(2)	Delivery has occurred;
(3)	The vendor’s fee is fixed or determinable; and
(4)	Collectability is probable.

(2) Delivery has occurred;

(3) The vendor’s fee is fixed or determinable; and

(4) Collectability is probable.

Some of our contracts include postcontract customer support for a period of twelve months or less. We recognize postcontract customer support revenue together with the initial licensing fee on delivery of the software because all of the following conditions are met:

a. The postcontract customer support fee is included with the initial licensing fee.

b. The postcontract customer support included with the initial license is for one year or less.

c. The estimated cost of providing postcontract customer support during the arrangement is insignificant.

d. Unspecified upgrades or enhancements offered during postcontract customer support arrangements historically have been and are expected to continue to be minimal and infrequent.

Sales of software

The Group enters into contracts with the mobile operators or the resellers to provide software that enables the mobile operators to provide mobile payment and value-added service to the end-users.

The Group recognize revenue in accordance with ASC 985-605, (formerly Statement of Position (“SOP”) 97-2 Software Revenue Recognition, as amended and interpreted by Statement of Position 98-9, Modification of SOP 97-2, Software Revenue Recognition, with respect to certain transactions), as well as Technical Practice Aids issued from time to time by the American Institute of Certified Public Accountants and Staff Accounting Bulletin No. 104, Revenue Recognition, that provides further interpretive guidance for public companies on the recognition, presentation and disclosure of revenue in financial statements.

The Group generally recognizes revenue from software and system services when all of the following criteria have been met, which is symbolized by the issuance of the final acceptance:

(1)	Persuasive evidence of an arrangement exists;
(2)	Delivery has occurred;
(3)	The vendor’s fee is fixed or determinable; and
(4)	Collectability is probable.

(1) Persuasive evidence of an arrangement exists;

(2) Delivery has occurred;

(3) The vendor’s fee is fixed or determinable; and

(4) Collectability is probable.

a. The postcontract customer support fee is included with the initial licensing fee.

b. The postcontract customer support included with the initial license is for one year or less.

c. The estimated cost of providing postcontract customer support during the arrangement is insignificant.

d. Unspecified upgrades or enhancements offered during postcontract customer support arrangements historically have been and are expected to continue to be minimal and infrequent.

Patent licensing

The Group enters into contracts with local system integrators who further contract with telecommunication and mobile operators, and provides these system integrators with our patents which permit the system integrators to use the Group’s patents. The system integrators pay the Group a one-time license fee for obtaining the programs and technologies. According to the contracts, these integrators are responsible for the construction and maintenance of the system platform while the Group assists these integrators during construction in form of providing technologies and programs. No PCS is offered in the patent licensing arrangement. When the construction of system platform is completed, these integrators perform examination and sign the final acceptance.

74Patent licensing revenues are recognized when all revenue recognition criteria according to ASC 985-605-25 have been met, which is symbolized by the issuance of the final acceptance. Such criteria include:

Patent licensing revenues are recognized when all revenue recognition criteria according to ASC 985-605-25 have been met, which is symbolized by the issuance of the final acceptance. Such criteria include: (i1) ~~persuasive~~Persuasive evidence ~~that~~of an arrangement exists; ~~(ii) delivery having occurred; (iii) whether the vender’s fee is fixed or determinable; and (iv) collectability being probable. We recognize revenue under ASC 985-605-25 because:~~

(2) Delivery has occurred;

(3) The vender’s fee is fixed or determinable; and

(4) Collectability is probable.

We recognize revenue under ASC 985-605-25 because:

(i) It is our customary practice to have a signed written agreement between us and our customers.

(ii) According to these contracts, the integrators are responsible for the construction and maintenance of the system platform while we assist the integrators during construction in form of providing technologies and programs. Codes and programs were delivered to the integrators during the construction of the system platform. At the same time, we are obligated to provide training and support until the whole platform, including hardware incorporated with our codes and programs, is confirmed and accepted by the integrators. Revenue is recognized upon the final acceptance being signed by the integrators.

(iii) It is our policy to not provide customers the right to any adjustments or refund of any portion of their license fees paid, acceptance provisions, cancellation privileges, or rights of return.

(iv) Collectability is assessed on a customer-by-customer basis. The Company typically sells to customers for whom there is a history of successful collection, and new customers are subject to a credit review process that evaluates the customer’s ability to pay.

Maintenance services

Revenue sharing

We have three to five year contractual agreements with mobile carriers on deploying or managing the mobile value added service platforms or mobile payment platforms. We are obligated to provide maintenance services on the platforms and consulting services to the end-users, and also provide training to the mobile carriers’ employees.

We share revenues with the mobile carriers based upon 10% to 60% of the fees billed to the end-users. The fees billed to the end-users and subject to revenue sharing include monthly functional fees and telephone bills. Revenue is recognized monthly upon the receipt of the sales and usage reports provided by the mobile carriers. Revenue is reported on a net basis since the mobile carriers act as principal when providing services to the end-users.

Royalty income

Other than the one-time license fee, the Group also receives royalties for each end-user subscribed to the services. Royalty revenue is recognized when earned and collectability is reasonably assured, based upon the receipt of reports from mobile carriers.

m) Government grants

Government grants are recognized where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognized as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, it is recognized as deferred income and released to income in equal annual amounts over the expected useful life of the related asset.

n) Cost of revenues

Cost of revenues primarily includes cost of equipment and software purchased from third parties and labor costs.

o) Concentration risk

Credit risk

Financial instruments that potentially expose the Group to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Group places their cash and cash equivalents with financial institutions with high-credit ratings and quality.

The Group conducts credit evaluations of customers and generally does not require collateral or other security from customers. The Group establishes an allowance for doubtful accounts primarily based upon the age of the receivables and factors relevant to determining the credit risk of specific customers. The amount of receivables ultimately not collected by the Group has generally been consistent with management’s expectations and the allowance established for doubtful accounts.

Major Customers

The Group had sales to ~~one~~three and ~~five~~one customers that accounted for approximately 3773.2% and 5637.32% of revenues during the years ended December 31, ~~2012~~2013 and ~~2011~~2012, respectively. These customers accounted for approximately 2760.38% and 4527.53% of accounts receivable balance as of December 31, ~~2012~~2013 and ~~2011~~2012, respectively.

Major Suppliers

The Group had purchases from three and two vendors that accounted for approximately 5183.95% and 51.89% of purchases during the years ended December 31, ~~2012~~2013 and ~~2011~~ 2012, respectively. These vendors accounted for approximately nil and 35.6% ~~and nil~~ of accounts payable balance as of December 31, ~~2012~~ 2013 and ~~2011~~2012, respectively.

p) Research and development expenses

Research and development costs are incurred in the development of technologies in mobile value added service platform and mobile payment system, including significant improvements and refinements to existing products and services. The Group applies ASC985-20, Costs of Computer Software to Be Sold, Leased, or Marketed”. In particular, nearly all of the research and development expenditure incurred since the Group’s formation has been to establish the technological feasibility of the Group’s software and techniques. As a result, all research and development costs are expensed as incurred.

q) Operating leases

Leases where substantially all the rewards and risks of ownership of assets remain with the lesser are accounted for as operating leases. Payments made under operating leases are charged to the consolidated statements of operations on a straight-line basis over the lease periods.

r) Taxation

Income taxes

The Group follows the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in in which the differences are expected to reverse. The Group records a valuation allowance to offset deferred tax assets if, based on on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be be realized. The effect on deferred taxes of a change in tax rates is recognized in the income statement in the period that includes the enactment date.

Value added taxes

The Company’s PRC subsidiaries and VIEs are subject to value-added tax (“VAT”) on sales. For Trunkbow Technologies and Trunkbow Shandong, the VAT is calculated at a rate of 17% on revenues from sales of hardware and software as well as the installation and system integration services, which are deemed as mixed-sale of goods and thus subject to VAT. Trunkbow Shenzhen is a small scale tax payer and the VAT is calculated at a rate of 3% on revenues.

Pursuant to the policies issued by Ministry of Finance, State Taxation Administration and General Administration of Customs for Encouraging Software Industry and Integrated Circuits Industry issued in 2000, an enterprise classified as a software enterprise” will be entitled to a rebate of its net VAT liability to the extent that it exceeds 3% of the actual VAT burden relating to self-developed software product sales.

Business tax and surcharges

The Company’s PRC subsidiaries and VIEs are also subject to business tax at a rate of 5% on technical services revenues.

s) Uncertain tax positions

ASC 740-10-25 prescribes a more likely than not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures. For the year ended December 31, ~~2012~~2013 and ~~2011~~2012, the Group did not have any interest and penalties associated with tax positions and the Group did not have any significant unrecognized uncertain tax positions.

The Company’s subsidiaries and VIEs are subject to taxation in PRC and other tax jurisdictions. There is no ongoing examination by taxing authorities at this time. Various tax years during the year ended December 31, ~~2012~~2013 and ~~2011~~2012 of the Company’s subsidiaries and VIEs remain open in the relevant taxing jurisdictions.

t) Earnings per share

Earnings per share is calculated in accordance with ASC 260, Earnings Per Share”. Basic earnings per share is computed by dividing income attributable to holders of common ~~stock~~ stock by the weighted average number of common shares considered to be outstanding during the period. Diluted earnings per share ~~reflect~~ reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted ~~into~~ into common stock. The dilutive effect of outstanding common stock warrants is reflected in the diluted earnings per share by application of the treasury stock method when the impact is dilutive.

u) Appropriated Retained Earnings

The income from the Company’s subsidiaries and VIEs is distributable to its owners after transfer to statutory reserves as required by relevant PRC laws and regulations and the Company’s Articles of Association. As stipulated by the relevant laws and regulations in the PRC, the Company’s PRC subsidiaries and VIEs are required to maintain a statutory surplus reserve fund which is non-distributable to shareholders. Appropriations to such reserve are 10% of net profit after taxation determined in accordance with generally accepted accounting principles of the PRC.

~~Statutory~~The statutory surplus reserve fund is ~~established~~ established for the purpose of offsetting accumulated losses, enlarging productions or increasing share capital. The appropriation may cease to apply if the balance of the fund is equal to 50% of the entity’s registered capital.

v) Comprehensive income

Comprehensive income is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments from owners and distributions to owners. Accumulated other comprehensive income, as presented on the accompanying consolidated balance sheets are the cumulative foreign currency translation adjustments.

w) Commitments and contingencies

In the normal course of business, the Group is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters, including, among others, government investigations, product and environmental liability, and tax matters. In accordance with ASC 450-20, Accounting for Contingencies”, the Group records accruals for such loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Historically, the Group has not experienced any material service liability claims.

x) Recently enacted accounting standards

34 - ACCOUNTS RECEIVABLE, NET

At December 31, ~~2012~~2013 and ~~2011~~2012, accounts receivable consisted of:

	December 31,		December 31,
	2012		2011
	2013		2012
Accounts receivable	$	5147,~~896~~760,~~214~~280	$	4251,~~091~~240,~~386~~651
Less: Allowance for doubtful debts		59,~~000~~169,~~000~~644		~~943~~5,~~619~~000,000
	$	4638,~~896~~590,~~214~~636	$	4146,~~147~~240,~~767~~651

The Group has recognized an allowance of $59,~~000~~169,~~000~~644 for doubtful receivables that are over one year as of December 31, 2013. The Group has not had any write-off of trade receivables during the years presented. $318,~~872~~034,~~629.34~~000 was subsequently collected by ~~April~~September 1622, ~~2013~~2014. $1720,~~819~~521,~~525~~ 935 of accounts receivable as of December 31, ~~2012~~2013 from ~~6 customers from~~ sales arising in ~~2011~~ 2012 and ~~2012~~2013 has been pledged for the short-term bank loans from China Everbright Bank.

78The following analysis details the changes in the Group’s allowances for doubtful accounts:

4 - ADVANCE TO SUPPLIERS

	December 31,		December 31,
	2013		2012

Balance at beginning of the year	$	5,000,000	$	943,619
Increase in allowances during the year		4,169,644		4,056,381
Balance at the end of the year	$	9,169,644	$	5,000,000

At5 - ADVANCE ~~December~~TO ~~31, 2012 and 2011, advance to suppliers consisted of:~~SUPPLIERS

	December 31,		December 31,
	2012		2011
Advances to suppliers	$	15,015,009	$	9,783,454
Less: Allowance for doubtful debts		2,536,221		0
	$	12,478,788	$	9,783,454

At December 31, 2013 and 2012, advance to suppliers consisted of:

	December 31,		December 31,
	2013		2012

Advances to suppliers	$	25,190,112	$	15,015,009
Less: Allowance for doubtful debts		621,240		2,536,221
	$	24,568,872	$	12,478,788

Advance to suppliers represents prepayment to the Group's distributors for the purchase of third party software and hardware to be used in our MVAS/MPS platforms.

~~The~~As of December 31, 2013, the Group has recognized an allowance of $2621,~~536,221~~240 for doubtful accounts that are over one year.

56 - PREPAYMENTS

Prepayments at December 31, ~~2012~~2013 and ~~2011~~2012 are summarized as follows:

	December 31,		December 31,
	2012		2011
	2013		2012
Prepaid advertisement	$	0	$	267,359
Prepaid royalties	$	0	$	284,718
Prepaid royalties		284,718		0
Other prepaid expenses		450,411		211,654
Other prepaid expenses		211,654		48,899
	$	450,411	$	496,372
	$	496,372	$	316,258

Prepaid royalties represented prepayment to Sony Music Entertainment China Holdings Limited for music license used in MPS and MVAS. The license will expire in March 2013. Amortization expense for the years ended December 31, 2012 and 2011 were $647,500 and nil.68

Prepaid ~~advertisement~~royalties isas ~~amortized~~of asDecember ~~the~~31, 2012 ~~expense~~represented ~~incurred.~~prepayment ~~The~~to ~~balance~~Sony asMusic ofEntertainment ~~December~~China ~~31,~~Holdings ~~2011~~Limited ~~was~~for ~~expensed~~music ~~during~~license ~~the~~used ~~year~~in ~~ended~~MPS ~~December~~and ~~31,~~MVAS. ~~2012~~The license expired in March 2013.

Other prepaid expenses included prepaid property management fees, remodeling expenses, office rental and other operating expenses.

67 - OTHER CURRENT ASSETS, NET

Other current assets at December 31, 2012 and 2011 are summarized as follows:

	2013		2012

Deposits	$	347,657	$	408,817
Staff advances		30,766		594
Advance to cloud APP agreement		386,522		2,800,117
Advance to a medical cloud project		1,123,952		6,508,401
	$	1,888,897	$	9,717,929

Less: Allowance for doubtful debts		386,522		0
	$	1,502,375	$	9,717,929

	December 31,		December 31,
	2012		2011
Deposits	$	408,817	$	150,234
Loans to third parties		4,787,116		2,830,856
Staff advances		594		259,008
Advance to cloud APP agreement		2,800,117		800,054
	$	7,996,644	$	4,040,152

Advance for cloud APP agreement represents a contribution per two cooperative agreements the Company entered into with a marketing company to start a music applet development project in December 2011 and January 2012. Since the remaining balance was outstanding for over two years, full allowance was provided for the project.

~~Loans~~Advance to ~~third~~a ~~parties~~cloud ~~as of December~~medical ~~31,~~project ~~2012~~represents ~~and~~our ~~2011~~advance ~~consisted primarily of $3.49 million and $2.67 million of payment to China Telecom Jinan Branch~~ for ~~the purchase~~a ~~of MPS hardware and software for the roll-out of MPS systems and application in Jinan City~~HIS, ~~Shandong~~Health ~~Province. According~~Information to the agreement with China Telecom, Trunkbow will share monthly function fees based on 3% of total principal with China Telecom on the MPS systems and application for consecutive twelve months from January 2012 to December 2012System. The ~~principal~~ ~~and~~contract ~~profit~~was ~~share~~cancelled ~~will be repaid~~ in ~~the~~August ~~second quarter of~~ 2013. ~~The revenue~~ and ~~interest~~we ~~income recognized during~~received ~~the~~$5.38 ~~years~~million ~~ended~~as of December 31, ~~2012~~2013. ~~was~~The ~~$1,006,739~~amount ~~and~~was ~~$224,328,~~fully ~~comparing~~collected ~~with~~as ~~nil~~of ~~and~~July ~~nil~~7, ~~for the same periods in 2011~~2014.

~~Loans~~8 to- ~~third~~LOANS ~~parties~~TO ~~also~~THIRD ~~consisted RMB7,200,000 (approximately $1,141,299) interest free loan to a third party. The term of the loan is nine months starting from December 2012.~~PARTIES

	December 31,		December 31,
	2013		2012

Loans to third parties	$	10,148,621	$	4,787,116

~~Advance~~Loans ~~for~~to ~~cloud~~third ~~APP~~parties ~~agreement~~as ~~represents~~of aDecember ~~contribution~~31, ~~per~~2013 ~~two~~and ~~cooperative~~2012 ~~agreements~~consisted ~~the~~primarily ~~Company~~of ~~entered~~$2.45 ~~into~~and ~~with~~$3.49 amillion ~~marketing~~of ~~company~~payment to ~~start~~China aTelecom ~~music~~Jinan ~~applet~~Branch ~~development~~for the ~~project~~purchase inof ~~December~~MPS ~~2011~~hardware and ~~January~~software ~~2012.~~for ~~The contracts, in~~ the ~~amount~~roll-out of ~~$2,000,000~~MPS systems and ~~$800,063,~~application ~~respectively,~~in ~~call~~Jinan ~~for~~City, ~~50%~~Shandong Province. ~~revenue~~According ~~sharing~~to the agreement with aChina ~~minimum~~Telecom, ~~guarantee~~Trunkbow ofwill ashare 5%monthly ~~and~~function 10fees based on 3% ~~return,~~of ~~respectively.~~total ~~The~~principal ~~terms~~with China ofTelecom on the ~~agreements~~MPS ~~are~~systems ~~nine~~and ~~months~~application ~~starting on~~for ~~January~~consecutive 1,twelve ~~2012.~~months Infrom ~~addition,~~January ~~the~~2012 ~~Company~~to isJanuary ~~guaranteed~~2013. toThe ~~receive~~revenue recognized ~~its~~during ~~initial~~the ~~contribution~~years ofended $2December 31,~~800,063~~ at2013 ~~the~~and ~~end~~2012 ofwas ~~the contract~~nil ~~term.~~and $21,~~377~~006,~~707~~739, ofrespectively. ~~the~~Interest ~~principal~~income ~~was~~recognized during ~~subsequently~~the ~~collected~~years byended ~~April~~December 1631, 2013, ~~the~~and ~~remaining~~2012 ~~principal~~was nil and ~~profit~~ ~~share~~$224,328, ~~will~~respectively. beAs ~~repaid~~of inSeptember ~~the~~19, ~~second~~2014, ~~quarter~~$2.45 ofmillion was ~~2013~~subsequently collected.

Loans to third parties as of December 31, 2013 also consisted $7 ~~- AMOUNT~~.7 ~~DUE~~million ~~FROM~~interest ~~(TO)~~free ~~DIRECTORS~~loans to third parties. The term of the loans varies from three months to one year. The loans were mainly made related to our IDC centers and other projects. As of September 19, 2014, $5.8 million was subsequent collected.

a)9 - AMOUNT AsDUE ofFROM ~~December~~(TO) ~~31, 2012 and 2011, amount due from directors consisted of:~~DIRECTORS

	December 31,		December 31,
	2012		2011
Amount due from Directors	$	9,350	$	758,033

a) As of December 31, 2013 and 2012, amount due from directors consisted of:

Amount due from directors represented advances to the directors for expenses to be paid on behalf of the Company.

	December 31,		December 31,
	2013		2012

Amount due from Directors	$	2,346,489	$	9,350

b)Amount Atdue ~~December~~from ~~31,~~directors ~~2012~~represented advances ~~and~~to ~~2011,~~the ~~amount~~directors ~~due~~for expenses to ~~directors~~be ~~consisted~~ paid on behalf of: the Company. The balance of $2.3 million was fully repaid by the directors in 2014.

	December 31,		December 31,
	2012		2011
Amount due to Directors	$	106,141	$	11,959

b) At December 31, 2013 and 2012, amount due to directors consisted of:

	December 31,		December 31,
	2013		2012

Amount due to Directors	$	129,570	$	106,141

Amount due to directors represented prepayment by the directors for expenses on behalf of the Company.

810 - INVENTORIES

At December 31, ~~2012~~2013 and ~~2011~~2012, inventories consisted of:

	December 31,		December 31,
	2012		2011
	2013		2012
Hardware
-System integration hardware	$	~~378~~4,~~638~~853,656	$	95378,~~354~~638
-Point of sale systems		169,~~653,158~~497		21,~~856~~653,~~892~~158
Project in progress		32,~~641~~286,~~383~~041		13,~~972~~392,~~169~~977
	$	57,~~673~~209,~~179~~194	$	45,~~924~~424,~~415~~773

~~The~~System ~~point~~integration ofhardware ~~sale~~represents hardware ~~systems~~that ~~were~~will ~~purchased from~~be ~~Verifone,~~used ain ~~related~~future ~~party~~system ofintegration ~~the Company~~projects.

8011. - ASSETS HELD FOR SALE

~~9 - PROPERTY~~At ~~AND~~December ~~EQUIPMENT~~31, ~~NET~~2013 and 2012, assets held for sale consisted of:

	December 31,		December 31,
	2013		2012

Accounts receivable	$	676,628	$	655,563
Property and equipment, net		7,646,945		7,408,879
	$	8,323,573	$	8,064,442

Assets held for sale represented communication equipment located in Northeast China and related accounts receivable generated from its operation, the assets also included communication equipment located in Guangzhou. Two third parties intended to purchase the assets at a price of approximately $4.15 million (approximately RMB25.4 million) and $4.3 million (approximately RMB26.3 million). The transaction is expected to finish by the end of 2014. An advance of $2.90 million has been received as of December 31, 2013. The rest of the balance has been received subsequently as of September 22, 2014.

12 - PROPERTY AND EQUIPMENT, NET

Property and equipment of the Group mainly consists of furniture and office equipment and electronic equipment located in the PRC.

Property and equipment as of December 31, ~~2012~~2013 and ~~2011~~2012 are summarized as follows:

	December 31,		December 31,
	2012		2011
	2013		2012
Motor vehicles	$	~~718~~738,~~803~~668	$	~~454~~718,~~309~~803
Furniture and office equipment		~~124~~130,~~863~~959		~~109~~124,~~140~~863
Electronic equipment		~~449~~483,~~328~~663		~~426~~449,~~580~~328
Telecommunication equipment		68,~~319~~761,~~527~~121		~~189~~2,~~659~~990,737
Leasehold improvement		6163,~~050~~012		6061,~~572~~050
		7,673,571		1,240,260
		10,177,423		4,344,781
Less: Accumulated depreciation		1,~~277~~757,~~259~~506		~~385~~944,~~242~~380
Construction in progress		1011,~~896~~739,~~681~~812		10,~~706~~896,~~015~~681
Projects in progress		2223,~~636~~256,~~479~~167		911,~~859~~963,~~770~~516
	$	3943,~~929~~415,~~472~~896	$	2126,~~420~~260,~~803~~598

~~Depreciation expense for the years ended December 31, 2012 and 2011 was $888,548 and $246,028, respectively.~~70

Depreciation expense for the years ended December 31, 2013 and 2012 was $772,218 and $555,085 respectively.

Construction in progress represented phase payments on construction materials to a contractor for the construction of the R&D center in Jinan.

Projects in progress represents projects under construction or installation. These projects will generate shared revenue after completion for a consecutive period from 5 to 10 years. The cost of these projects mainly include hardware, labor and outsourcing costs.

1013 - LAND USE RIGHT, NET

	December 31,		December 31,
	2012		2011
	2013		2012
Land use right	$	6,~~022~~216,~~660~~183	$	56,~~975~~022,~~395~~660
Less: Accumulated amortization		~~191~~321,~~019~~688		69191,~~812~~019
	$	5,~~831~~894,~~641~~495	$	5,~~905~~831,~~583~~641

Trunkbow Shandong acquired the land use right for the construction of the R&D center in Jinan. The land use right expires in June 2061. The amortization of land use right for the years ended December 31, ~~2012~~2013 and ~~2011~~2012 was $~~120~~122,~~597~~881 and $68120,~~673~~597, respectively. The estimated amortization expense will be RMB761,160 (approximately $~~120~~122,~~597~~881) for each of the five succeeding fiscal years. The land use right has been pledged for the bank facility of $~~15,851,377~~16.35 million granted by China Everbright Bank.

8114 - INTANGIBLE ASSETS, NET

11At ~~- INTANGIBLE~~December ~~ASSETS~~31, ~~NET~~2013 and 2012, intangible assets consisted of:

At December 31, 2012 and 2011, intangible assets consisted of:

	December 31,		December 31,
	2013		2012

Software	$	1,246,761	$	3,242
License		42,538		41,214
Domain name		0		249,062
		1,289,299		293,518
Less: Accumulated amortization		219,987		21,624
	$	1,069,312	$	271,894

	December 31,		December 31,
	2012		2011
Software	$	3,242	$	3,216
License		41,214		40,890
Domain name		249,062		0
		293,518		44,106
Less: Accumulated amortization		21,624		10,148
	$	271,894	$	33,958

Amortization expense for the years ended December 31, 2013 and 2012 was $195,049 and $11,389, respectively.

~~Amortization~~15 - LONG-TERM ~~expense for the years ended December 31, 2012 and 2011 was $11,389 and $9,411, respectively.~~PREPAYMENT

12 - LONG-TERM PREPAYMENT

	December 31,		December 31,
	2013		2012

Prepaid membership fee	$	201,237	$	223,856
Other prepaid expenses		23,260		145,129
	$	224,497	$	368,985

	December 31,		December 31,
	2012		2011
Office rental	$	0	$	8,191
Prepaid membership fee		223,856		250,758
Deposits		0		158,456
Prepaid royalties		0		1,857,011
Other prepaid expenses		145,129		458,947
	$	368,985	$	2,733,363

~~The~~16 ~~prepaid royalties~~- ~~represented prepayment~~ACCRUED toEXPENSES ~~Sony~~AND ~~Music~~OTHER ~~Entertainment~~CURRENT ~~China Holdings Limited for music license used in MPS and MVAS.~~LIABILITIES

~~13 - ACCRUED~~The ~~EXPENSES~~breakdowns ~~AND~~of ~~OTHER~~accrued ~~CURRENT~~expenses ~~LIABILITIES~~and other current liabilities as of December 31, 2013 and 2012 are as follows:

The breakdowns of accrued expenses and other current liabilities as of December 31, 2012 and 2011 are as follows:

	December 31,		December 31,
	2013		2012

Accrued payroll	$	499,922	$	334,654
Advance from customers		3,612,127		252,988
Loans from third parties		3,746,605		2,085,138
Payables to staff		223,840		235,479
Accrued expenses		850,474		540,399
Professional fees payable		111,020		521,759
Others		25,260		12,810
	$	9,069,248	$	3,983,227

	December 31,		December 31,
	2012		2011
Accrued payroll	$	334,654	$	477,091
Advance from customers		252,988		25,717
Loans from third parties		2,085,138		39,317
Payables to staff		235,479		160,006
Accrued expenses		540,399		357,481
Professional fees payable		521,759		231,454
Royalties payable		0		925,062
Others		12,810		0
	$	3,983,227	$	2,216,128

Advance from customers included a $2.90 million advance related to assets held for sale.

Loans from third parties ~~mainly~~as ~~consisted~~of ~~RMB10~~December 31,~~000,000~~ ~~(approximately~~2013 consisted $~~1,585,138)~~3.7 million interest free ~~loan~~ loans from a third ~~party~~parties. The term of the ~~loan~~loans isvaries from one ~~year~~to ~~starting~~six ~~from October 2012~~months.

8217 - SHORT-TERM LOANS

14 - SHORT-TERM LOANS

	December 31,		December 31,
	2013		2012

Agriculture Bank of China	$	0	$	2,686,808
China Merchants Bank		0		792,569
China Everbright Bank		16,360,722		7,695,819
China Construction Bank		2,454,108		0
China Guangfa Bank		4,908,216		0
	$	23,723,046	$	11,175,196

	December 31,		December 31,
	2012		2011
China Minsheng Banking Corporation Limited	$	0	$	6,460,945
Agriculture Bank of China		2,686,808		0
China Merchants Bank		792,569		0
China Everbright Bank		7,695,819		0
	$	11,175,196	$	6,460,945

Among the short term loan of $2,686,808 as of December 31, 2012, $1,585,138 was due and subsequently repaid on March 3, 2013, and $1,101,670 on March 20, 2013. The interest expense related to the loans for the years ended December 31, 2013 and 2012 was $28,856 and $321,572, respectively.

~~Among~~The ~~the~~ short- term loan of $6792,~~460,945~~569 as of December 31, ~~2011~~2012 from China ~~Minsheng~~Merchants ~~Banking~~Bank ~~Corporation~~was ~~Limited,~~due ~~$4,718,094~~and ~~was~~subsequently repaid on ~~November~~January 3012, ~~2012,~~ ~~$1,742,851~~2013. Interest on ~~December~~the 28bank facility is a floating lending rate, ~~2012~~30% over the PBOC benchmark rate. The interest expense related to the ~~short term~~ loan for the years ended December 31, ~~2012~~ 2013 and ~~2011~~2012 was $~~596~~2,~~822~~448 and $5127,~~230~~234, respectively.

~~Total~~On ~~bank~~December ~~facility~~27, ~~from~~2012, ~~Agriculture~~Trunkbow ~~Bank~~Shandong ofobtained ~~China~~a ~~was~~ RMB 70100,000,000 (approximately $1115,~~095~~851,~~964~~377) total bank facility from China Everbright Bank. Among the ~~outstanding~~$16,360,722, ~~loan~~$3,612,446 is ofdue on April 10, 2014, $23,~~686~~579,~~808~~726 ason ofApril ~~December 31~~12, ~~2012~~2014, $1,~~585~~295,~~138 was~~769 due ~~and~~on ~~subsequently~~April ~~repaid~~14, 2014, $4,927,849 on ~~March~~June 323, ~~2013,~~2014 and $12,~~101~~944,~~670~~ 930 on ~~March~~June 2026, ~~2013~~2014. The ~~loan~~loans ~~was~~were ~~secured~~subsequently repaid on time. The loans are personally guaranteed by aMr. ~~transfer~~Wanchun ~~with~~Hou ~~full~~and Mr. Qiang ~~recourse~~Li, ofand secured by Trunkbow Shandong’s accounts receivable of RMB125,434,169 (approximately $320,~~021~~522,~~881~~000), and is ~~guaranteed~~secured by Trunkbow ~~Mr.~~Shandong’s ~~Wanchun~~future ~~Hou~~revenue of RMB48,430,000 (approximately $7,835,682) from contracts of Shanghai data center and also ~~Mr.~~pledged ~~Qiang~~by LiTrunkbow Shandong’s land use rights. Interest on the bank facility is a floating lending rate, 2515% over the PBOC benchmark rate. The interest expense related to the ~~loans~~ loan for the years ended December 31, ~~2012~~2013 and ~~2011~~2012 was $~~321~~1,~~572~~152,900 and $10,865, ~~nil~~respectively.

~~Total~~Trunkbow ~~bank~~Shenzhen ~~facility~~obtained ~~from~~a ~~China~~loan ~~Merchants Bank~~of ~~was RMB 15~~RMB15,000,000 (approximately $2,~~377~~454,~~707~~108). ~~The~~from ~~balance~~China ofConstruction ~~$792,569~~Bank. asThe ofloan ~~December~~is ~~31, 2012 was~~ due ~~and subsequently repaid~~ on ~~January~~September 1228, ~~2013~~2014. The loan ~~was~~is ~~personally~~ guaranteed by ~~Mr.~~Trunkbow Shandong ~~Wanchun~~and ~~Hou~~personally ~~and~~guaranteed by Mr. Qiang Li. ~~Interest~~The oninterest ~~the~~rate ~~bank facility~~ is ~~a floating lending rate, 30~~7.2% ~~over the PBOC benchmark rate~~. The interest expense related to the loan for the year ~~years~~ ended December 31, ~~2012~~2013 and ~~2011~~2012 was $2738,~~234~~100 and nil, respectively.

On December 2724, ~~2012~~2013, ~~Trunkbow~~Delixunda ~~Shandong obtained~~ received a ~~RMB~~loan ~~100~~of RMB30,000,000 (approximately $154,~~851~~908,~~377~~216) ~~total bank facility~~ from China ~~Everbright~~ Guangfa Bank. ~~$7,695,819~~The ofloan ~~the total facility was received on December 27, 2012 and $8,155,559 on January 15, 2013. Among the $15,851,377, $2,921,383~~ is due on ~~June 30, 2013, $3,740,925 due on~~ December 2524, ~~2013,~~ ~~$1,033,510 due on December 26, 2013 and $8,155,559 on October 14, 2013~~2014. The ~~loans~~loan ~~are~~is ~~personally~~ guaranteed ~~by Mr.~~ ~~Wanchun Hou and Mr. Qiang Li, and secured~~ by ~~Trunkbow~~Beijing ~~Shandong’s~~Jijiaowang ~~accounts~~education ~~receivable~~technology of RMB112,416,256 (approximately $17,819,525), and secured by Trunkbow Shandong’s future revenue of RMB48,430,000 (approximately $76,768,221) from contracts of Shanghai data center and also pledged by Trunkbow Shandong’s land use rightsLimited. ~~Interest on~~The ~~the~~interest ~~bank~~rate ~~facility~~ is ~~a floating lending rate, 15~~7.86% ~~over the PBOC benchmark rate~~. The interest expense related to the loan for the year ~~years~~ ended December 31, ~~2012~~2013 and ~~2011~~2012 was $106,~~865~~585 and nil, respectively.

1518 - TAXES PAYABLE

	December 31,		December 31,
	2012		2011
	2013		2012
Value Added Tax Payable	$	2,~~629~~360,~~583~~657	$	~~968~~2,~~363~~629,583
Income Tax Payable		34,~~835~~160,~~663~~731		3,~~056~~835,~~321~~663
Others		~~392~~265,~~732~~280		~~185~~392,~~223~~732
	$	6,~~857~~786,~~978~~668	$	46,~~209~~857,~~907~~978

~~16 - INCOME TAXES~~72

19 - INCOME TAXES

Corporation Income Tax (“CIT”)

(i) The Company is incorporated in the state of Nevada. Under the current law of Nevada, the Company is not subject to state corporation income tax. The Company became a holding company and does not conduct any substantial operations of its own after the Share Exchange. No provision for federal corporate income tax has been made in the financial statements as the Company has no taxable income for the year ended December 31, ~~2012~~2013. And earnings in the PRC are intended to be permanently reinvested in the PRC operation.

Trunkbow was established in the British Virgin Islands on July 17, 2009. Under the current laws of the British Virgin Islands, Trunkbow is not subject to tax on income or capital gains. In addition, upon payments of dividends by Trunkbow, no British Virgin Islands withholding tax is imposed.

Trunkbow Hong Kong was incorporated in Hong Kong on July 9, 2004. Taxable profits are subject to Hong Kong profits tax on corporations at the rate of 16.5%. The payments of dividends by Hong Kong companies are not subject to any Hong Kong withholding tax.

(ii) PRC subsidiaries and VIEs

The subsidiaries and VIEs incorporated in the PRC are generally subject to a corporate income tax rate of 25% commencing January 1, 2008 except for those subsidiaries and VIEs that enjoy tax holidays or preferential tax treatment, as discussed below.

Trunkbow Shandong

Trunkbow Shandong, a PRC company, is a wholly foreign-owned entity under PRC law and is governed by the income tax law of the PRC and is subject to PRC enterprise income tax. The statutory income tax rate commencing January 1, 2008 was 25%.

On October 16, 2009, Trunkbow Shandong was certified as a software enterprise by Shandong Economic and Information Technology Committee. Pursuant to the PRC tax laws, newly established and certified software enterprises are entitled to tax preferential policies of full exemption from income tax for the first two years and a 50% reduction for the next three years, commencing from the first profit-making year after offsetting all tax losses carried forward from the previous five years. The first profit making year for Trunkbow Shandong was 2009. On January 7, 2010, Trunkbow Shandong obtained the official approval from the tax bureau of Shandong Province Jinan City High-tech Industry Development Zone on the preferential tax exemption.

Pursuant to the aforementioned taxation laws, Trunkbow Shandong was exempt from income tax for the years ended December 31, 2009 and 2010, and thereafter, a half tax rate of 12.5% will be enacted for the years ended December 31, 2011, 2012 and 2013.

In March 2012, Trunkbow Shandong was recognized as New and High-Tech Enterprise. Under the Enterprise Income Tax Law effective from January 1, 2008, Trunkbow Shandong will be entitled to the 15% of preferential tax rate for the years ended December 31, 2014, 2015 and 2016.

Trunkbow Shenzhen

Trunkbow Shenzhen, a PRC company, is a wholly foreign-owned entity under PRC law. Because it was incorporated in Shenzhen, a special economic zone in the PRC, is entitled to preferential income tax rate of 15% in 2007. According to the pronouncement of tax bureau, for companies established after March 16, 2007, the income tax rate will be immediately raised to the unified tax rate of 25% started from January 1, 2008. As Trunkbow Shenzhen was established on September 7, 2007, the income tax rate from year 2008 on was 25%.

On June 8, 2011, Trunkbow Shenzhen was certified as a software enterprise by Shenzhen Technology, Industry, Commerce and Information Committee. Pursuant to the PRC tax laws, newly established and certified software enterprises are entitled to tax preferential policies of full exemption from income tax for the first two years and a 50% reduction for the next three years, commencing from the first profit-making year after offsetting all tax losses carried forward from the previous five years. Trunkbow Shenzhen started profit-making in 2012 and is applying for tax exemption.

Trunkbow Technologies

Trunkbow Technologies was registered in Shenzhen, a special economic zone in the PRC, which is entitled to preferential income tax rates of 18% and 15% in 2008 and 2007 respectively. According to the pronouncement of tax bureau, for companies established before March 16, 2007, the income rate will gradually increase to 25% within 4 years, 20% in 2009, 22% in 2010, 24% in 2011 and 25% from 2012.

Delixunda

Delixunda was registered in Beijing, the PRC. The applicable income tax rate for Delixunda was 25% for the year ended December 31, 2012. Delixunda was in net operation loss as of December 31, 2012, and no income tax provision was recorded.

The current and deferred portions of income tax expense included in the consolidated statements of income and comprehensive income are as follows:

	Years ended December 31,
	2012			2011
	2013			2012
Current income tax expense
China	$	2926,~~642,846~~877		$	12,~~955~~642,~~921~~846
Other jurisdiction		0			~~118,721~~0
Deferred income tax
China		(~~822~~248,~~751~~229	)		(~~116~~822,~~027~~751	)
Other jurisdiction		0			0
Income tax expense	$	1678,~~820,095~~648		$	1,~~958~~820,~~615~~095

2) Deferred tax assets

	December 31,		December 31,
	2012		2011
	2013		2012
Deferred tax assets	$	~~942~~1,~~028~~223,861	$	~~117~~942,~~952~~028

Deferred tax asset as of ~~December~~ December 31, ~~2012~~2013 and ~~2011~~2012 represented the deferred income tax asset arising from the allowance for doubtful debts of $79,~~536~~790,~~221~~884 and $~~943~~7,~~619~~ 536,221 respectively.

3) The following is a reconciliation of tax computed by applying the statutory income tax rate to PRC operations to income tax expenses for years ended December 31, ~~2012~~2013 and ~~2011~~2012 respectively:

	Years Ended December 31,
	2012			2011
	2013			2012
PRC statutory tax rate		25	%		25	%
Accounting income before tax	$	186,~~938~~868,~~320~~876		$	2118,~~064~~938,~~652~~320
Computed expected income tax expenses		41,~~734~~717,~~580~~219			54,~~266~~734,~~163~~580
Accumulated loss from subsidiaries and VIEs		~~141~~120,~~258~~474			95141,~~612~~258
Non-deductible expenses		~~119~~66,~~834~~228			~~121~~119,~~713~~834
Less: non taxable income		~~416~~581,~~902~~255			1416,~~803,700~~902
Add: Prior year adjustment		~~(18,969~~0	)		0(18,969	)
Less: tax exemption		2644,~~739,706~~018			12,~~839~~739,~~894~~706
Income tax expenses	$	1678,~~820,095~~648		$	1,~~839~~820,~~894~~095

1720 - STOCKHOLDERS’ EQUITY

Preferred stock

The Company authorized 10,000,000 shares of preferred stock, with a par value of $.001 per share, but no preferred shares were issued and outstanding as of December 31, ~~2012~~2013.

Common stock

Pursuant to the terms of the Share Exchange Agreement, Trunkbow shareholders transferred to the Company all of the Trunkbow shares in exchange for the issuance of 19,562,888 shares of the Company’s common stock. Accordingly, the Company reclassified its common stock and additional paid-in-capital accounts for the year ended December 31, 2009.

8574

Pursuant to the Purchase Agreement entered into concurrently with the Share Exchange Agreement, an aggregate of 8,447,575 shares and 1,689,515 warrants were sold for aggregate gross proceeds equal to $16,895,150. Certain holders of outstanding warrants of the Company issued to creditors and claimants of visitalk.com, Inc. in accordance with such company’s Chapter 11 reorganization plan exercised the 2,774,500 warrants owned by them for an aggregate exercise price of $5.5 million and received warrants to purchase an aggregate of 554,900 shares of Common Stock.

On February 3, 2011, the Company announced its initial public offering of 4,000,000 shares of Common Stock priced at $5.00 per share. The shares began trading on February 3, 2011, on the NASDAQ Global Market under the ticker symbol TBOW”. The net proceeds were $18,109,988 after deduction of $1,400,000 of underwriter’s commission, and $490,012 of legal and professional fees.

Warrants

In connection with the February 2010 offering, we issued warrants to purchase 2,805,519 shares of common stock at an exercise price of $2.00. The warrants have a five year term and are excisable immediately. The exercise price and number of shares of Common Stock issuable upon exercise of the warrants may be adjusted in certain circumstances, including in the event of a stock dividend, or our recapitalization, reorganization, merger or consolidation.

No fractional shares will be issued upon exercise of the warrants. If, upon exercise of a warrant, a holder would be entitled to receive a fractional interest in a share, we will pay to the holder cash equal to such fraction multiplied by the then fair market value of one full share.

The estimated fair values of the warrants issued to investors were determined at February 10, 2010 using Binominal Option Pricing Model. The fair values of the warrants are summarized as follows:

Fair value of warrant per share (US$) at date of issuance: $1.18

Key assumptions adopted in Binomial Option Pricing Model for the estimation of the fair value of the warrants outstanding were summarized as follows:

Expected volatility		73	%
Expected dividends yield		0	%
Time to maturity		5 years
Risk-free interest rate per annum		2.218	%
Fair value of underlying common shares (per share)	$	1.95

As of December 31, ~~2012~~2013, 305,000 warrants had been exercised at $2.00 per share.

In connection with our IPO in February 2011, the Company granted Roth Capital Partners, LLC warrants (the “Roth Capital Warrants”) to purchase up to a total of 200,000 shares of our common stock as partial underwriting compensation. The warrants have a term of three years and an exercise price of $6, provide for cashless exercise at all times and, in accordance with FINRA Rule 5110(g)(1), may not be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such warrant by any person until August 7, 2011, except as provided in FINRA Rule 5110(g)(2). The exercise price and number of shares of Common Stock issuable upon exercise of the warrants may be adjusted in certain circumstances, including in the event of a stock dividend, or our recapitalization, reorganization, merger or consolidation.

The estimated fair values of the warrants issued to Roth were determined at February 8, 2011 using Binominal Option Pricing Model. The fair values of the warrants are summarized as follows:

Fair value of warrant per share (US$) at date of issuance: $1.68.

Key assumptions adopted in Binomial Option Pricing Model for the estimation of the fair value of the warrants outstanding were summarized as follows:

Expected volatility		59.5	%
Expected dividends yield		0	%
Time to maturity		3 years
Risk-free interest rate per annum		1.745	%
Fair value of underlying common shares (per share)	$	4.85

8675

In accordance with ASC Topic 340 subtopic 10 section S99-1, specific incremental costs directly attributable to a proposed or actual offering of securities may properly be deferred and charged against the gross proceeds of the offering. In accordance with the SEC accounting and reporting manual cost of issuing equity securities are charged directly to equity as deduction of the fair value assigned to share issued.” Accordingly, we concluded that the Roth Capital Warrants are directly attributable to the February 2011 financing. If we had not issued the Roth Capital Warrants, we would have had to pay the same amount of cash as the fair value. Therefore, we deducted the total fair value of the Roth Capital Warrants of $336,000 as from the fair value assigned to the common stock. The Roth Capital Warrants met the scope exceptions of ASC Topic 815 as they were deemed to be indexed to the Company’s own stock, and were eligible to be classified as equity.

As of December 31, ~~2012~~2013, no warrants had been exercised by Roth Copital Partners, LLC.

On July 11, 2011, the Company issued China High Growth Capital LTD warrants to purchase up to a total of 250,000 shares of our common stock as compensation for business development and consulting services. The warrant, which was exercisable at issuance, has a term of five years and an exercise price of $2 per share. The exercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances, including in the event of a stock dividend, or our recapitalization, reorganization, merger or consolidation.

The estimated fair value of the warrant issued to China High Growth Capital LTD was determined at July 11, 2011 using Binominal Option Pricing Model. The fair values of the warrants are summarized as follows:

Fair value of warrant per share (US$) at date of issuance: $1.40.

Key assumptions adopted in Binomial Option Pricing Model for the estimation of the fair value of the warrants outstanding were summarized as follows:

Expected volatility		59.5	%
Expected dividends yield		0	%
Time to maturity		5 years
Risk-free interest rate per annum		2.294	%
Fair value of underlying common shares (per share)	$	2.44

The China High Growth Capital LTD Warrants are directly attributable to compensation for business development and consulting services for a period from July 1, 2011 to October 31, 2011. If we had not issued the China High Growth Capital LTD Warrants, we would have had to pay the same amount of cash as the fair value. Total fair value of the China High Growth Capital LTD Warrants is $350,000. Therefore, we recorded $350,000 as general and administration expenses during the year ended December 31, 2011.

As of December 31, ~~2012~~2013, no warrants had been exercised by China High Growth Capital LTD.

~~Escrow shares~~76

In21 - REVENUES ~~connection~~AND ~~with~~COST ~~the~~OF Share Exchange Agreement, Chief Honor Investments Limited and Capital Melody Limited (collectively referred to as “Controlling Stockholders”) entered into an Investor Side Letter Agreement with certain investors (“Investors”). Pursuant to the side letter, a) the Controlling Stockholders agree to deliver to the Investors, as a group, an aggregate of 337,500 shares of Common Stock of the Company, if the Company fails to achieve at least $8,000,000 in consolidated net income in accordance with the U.S. generally accepted accounting principles as set forth in the final audit for Trunkbow’s consolidated group for the fiscal year ending December 31, 2009; b) If the Company’s consolidated net income per share for the year ended December 31, 2011 (the “Actual 2010 EPS”) is not at least $0.37 on a fully diluted basis then theControlling Stockholders shall deliver additional shares, on a pro rata basis to each Investor, with the maximum aggregate number of 8,437,500 shares; c) if the Company fails to cause its Common Stock to be listed on the NASDAQ Stock market, the NYSE Amex or the New York Stock Exchange within twelve months of the effective date of the Form 10 registration statement, each of the Controlling Shareholders agrees that they shall immediately issue and deliver to the Investors, as a group, an aggregate of 675,000 shares of Common Stock of the Company, to be divided among each Investor on a pro rata basis as partial liquidated damages and not as a penalty.REVENUES

The purpose of the Investor Side Letter Agreement was an inducement made to facilitate the respective offerings, and not part of a compensatory arrangement to management. The escrow shares will not be released or cancelled due to the discontinued employment of any management of the Company.

Because the above conditions have been met, the escrow shares were released to the Controlling Stockholders in the third quarter of 2011.

18 - REVENUES AND COST OF REVENUES

The following consolidated result of operations includes the results of operations of the Company, all the subsidiaries and our contractually controlled entity, Trunkbow Technologies (Shenzhen) Company, Limited.

For the years ended December 31, ~~2012~~2013 and ~~2011~~2012, revenues and cost of revenues consisted of:

	Years Ended December 31,
	2012		2011
	2013		2012
Gross Revenues
System integration	$	53,~~896~~272,~~575~~377	$	125,~~567~~896,~~498~~575
Software sales		2513,~~043~~898,~~872~~334		1325,~~451~~043,~~015~~872
Maintenance service		~~505~~372,~~944~~187		1505,~~617,431~~944
Shared revenue		42,~~013~~678,~~906~~567		24,~~079~~013,~~463~~906
		35,460,297		29,715,407
		20,221,465		35,460,297
Less:
Business tax and surcharges		~~691~~366,~~297~~097		~~638~~691,~~377~~297
Cost of Revenues
Equipment costs		4,~~454~~792,~~293~~930		54,~~339~~454,~~688~~293
Labor Costs		~~653~~593,~~343~~057		~~790~~653,~~383~~343
		5,107,636		6,130,071
		5,385,987		5,107,636
Gross profit	$	2914,~~661~~469,~~364~~381	$	2229,~~946~~661,~~959~~364

1922 - ~~GOVERNMENT~~SEGMENT ~~GRANTS~~INFORMATION

	Years Ended December 31,
	2012		2011
Government Grants	$	379,159	$	5,651,686

The Group’s grant income for the year ended 2011 mainly includes $4,795,792 of special development funds for mobile payment solutions and other subsidies of $855,894 on patents, other software development and successful completion of our initial public offering from the local government. Such grants were recorded in the statements of income and comprehensive income immediately.

20 - SEGMENT INFORMATION

ASC 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Group’s chief operating decision maker is the Chief Executive Officer, who reviews consolidated results of operations prepared in accordance with U.S. GAAP when making decisions about allocating resources and assessing performance of the Group; hence, the Group has only one operating segment.

The Group operates in the PRC and all of the Group’s long-lived assets are located in the PRC. As of December 31, ~~2012~~2013, the Company provides two products and services: MVAS Technology Platforms and Mobile Payment Solutions. MVAS Technology Platforms enable the operators to offer mobile value added services to end-users through our major products including Caller Color Ring Back Tone, Number Change Notification and Color Numbering. Mobile Payment Solutions allows RF-SIM (radio frequency SIM) enabled mobile phones worldwide to be utilized as payment tools and ~~authentication~~ authentication devices, and also enables the end-user to consolidate a variety of functions and services into one phone.

We do not track our assets by operating segments. Consequently, it is not practical to show assets by operating segments results.

The gross revenues and cost of revenues consist of the following products and services:

	Years Ended December 31,
	2012		2011
	2013		2012
MVAS Technology Platforms
Gross Revenues	$	2112,~~643~~391,~~519~~637	$	1721,~~429~~643,~~377~~519
Business tax and surcharges		~~431~~223,~~377~~282		~~413~~431,~~491~~377
Cost of Revenues		31,~~469~~585,~~481~~646		43,~~184~~469,~~549~~481
	$	1710,~~742~~582,~~661~~709	$	1217,~~831~~742,~~337~~661
Mobile Payment Solutions
Gross Revenues	$	137,~~816~~829,~~778~~828	$	1213,~~286~~816,~~030~~778
Business tax and surcharges		~~259~~142,~~920~~815		~~224~~259,~~886~~920
Cost of Revenues		13,~~638~~800,~~155~~341		1,~~945~~638,~~522~~155
	$	113,~~918~~886,~~703~~672	$	1011,~~115~~918,~~622~~703

~~21 - EMPLOYEE DEFINED CONTRIBUTION PLAN~~77

Full time employees of the Group in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require that the PRC subsidiaries of the Group make contributions to the government for these benefits based on certain percentages of the employees’ salaries. The Group has no legal obligation for the benefits beyond the contributions made. The total amounts for such employee benefits, which were expensed as incurred, were23 ~~$729,031~~- EMPLOYEE ~~and~~DEFINED ~~$514,865~~CONTRIBUTION ~~for years ended December 31, 2012 and 2011, respectively.~~PLAN

89Full time employees of the Group in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require that the PRC subsidiaries of the Group make contributions to the government for these benefits based on certain percentages of the employees’ salaries. The Group has no legal obligation for the benefits beyond the contributions made. The total amounts for such employee benefits, which were expensed as incurred, were $559,330 and $729,031 for years ended December 31, 2013 and 2012, respectively.

2224 - COMMITMENTS AND CONTINGENCIES

Commitments

Leasing Arrangements

The Group has entered into commercial leases for offices with a term expiring in December 2015. The lease may be cancelled by either party with 30-days prior written notice. Future minimum rental payments under this operating lease are as follows:

	Office Rental
Year ending December 31, 2013	$	553,317
Year ending December 31, 2014	$	446,538
Year ending December 31, 2014		502,177
Year ending December 31, 2015		185,624
Year ending December 31, 2015		179,759
Total	$	632,162
Total	$	1,235,253

Capital Commitment

1) Construction of R&D center

We paid out phase payments of RMB66,050,000 (approximately $10.47 million) to the contractor for our new R&D center in Jinan during the year ended December 31, 2011. We expect to make further payments as the construction progresses, although the timing and amount of such payments have not been agreed with the contractor as of the date hereof. The building is estimated to be substantially completed by ~~the end of 2014~~2015, and the overall budget for the construction is between $23 - $30 million.

2) Guangzhou data center

On February 17, 2012, Trunkbow Shandong entered into a framework agreement with China Communications Services Corporation, Limited ("CCSC") for the construction, management and operation of a cloud data center in Guangzhou, China. Construction on the facility began in the second quarter, with the first phase scheduled for completion by the end of 2012. Under the agreement, Trunkbow will invest RMB72 million (approximately $11.3 million) in the project. Trunkbow invested $45.27 million as of December 31, ~~2012~~2013.

3) Shanghai data center

On June 6, 2012, Trunkbow Shandong entered into a cooperation agreement with Shanghai Telecommunication Engineering Co., Ltd ("STE") for the construction, management and operation of a cloud data center to be located in Shanghai, China. Under the agreement, Trunkbow will invest RMB180 million (approximately $28 million). Trunkbow invested $~~1.6~~14 million as of December 31, ~~2012~~2013.

4) Huzhou data center

On October 10, 2012, Trunkbow Shandong entered into a framework agreement with Shanghai Telecommunication Engineering Co., Ltd ("STE") for the construction of a cloud data center in Huzhou, Zhejiang Province. Total construction cost is RMB130 million (approximately $21 million). Trunkbow invested $19.6 million as of December 31, 2013.

Contingencies

1) Lawsuit

On November 8, 2012, a putative class action lawsuit was filed by a purported Trunkbow shareholder in District Court, Clark County, Nevada, captioned Hansen v. Trunkbow, et al., Case No. A-12-671652-C (the “Hansen Action”). The complaint named as defendants several directors and officers of Trunkbow, namely, Wanchun Hou, Qiang Li, Jihong Bao, Xin Wang, Albert Liu, Regis Kwong, Kokhui Tan, Iris Geng, Tingjie Lv, Zhaoxing Huang and Dong Li (the “Individual Defendants”). Although Trunkbow was included among the defendants listed in the caption, the complaint did not assert a cause of action against the Company. The plaintiff in the Hansen ~~seeks~~Action sought recovery on behalf of all Trunkbow shareholders for alleged breaches of fiduciary duties by the Individual Defendants in connection with the ~~Proposed~~proposed ~~Transaction~~“going-private” transaction ininvolving ~~which~~ the ~~Chairman~~acquisition of ~~Trunkbow’s~~all ~~Board~~ of ~~Directors, Wanchun~~the ~~Hou,~~outstanding ~~and~~shares ~~Trunkbow’s~~of ~~CEO,~~our ~~Qiang~~common ~~Li,~~stock ~~have~~not ~~offered~~beneficially toowned ~~acquire~~by ~~all~~the ofConsortium Members ~~the~~at ~~outstanding~~a ~~shares~~price of ~~the~~US$1.46 ~~Company’s common~~per ~~stock~~share ~~not~~in ~~currently~~cash ~~owned~~(the by“Proposed ~~them~~Transaction”). On November 14, 2012, another putative class action lawsuit was filed by a purported Trunkbow shareholder in District Court, Clark County, Nevada, captioned Robert Davis v. Hou, et al., Case No. A-12-671946-C (the “Davis Action”). Trunkbow iswas named as a defendant in this action, along with each of the Individual Defendants named in the ~~Hanson~~Hansen complaint. The plaintiff in the Davis ~~seeks~~Action sought recovery on behalf of all Trunkbow shareholders for alleged breaches of fiduciary duties by the Individual Defendants in connection with the Proposed Transaction, and for aiding and abetting such alleged breaches by Trunkbow. The plaintiffs in both ~~cases~~actions ~~allege~~alleged that the share price proposed by Hou and Li iswas inadequate in light of the Company’s intrinsic value and anticipated future growth. Among other things, the plaintiffs in both actions ~~seek~~sought to enjoin the Proposed Transaction until such time as the Individual Defendants have acted in accordance with their fiduciary duties. Only the Company ~~has~~ ~~been~~was served in the actions, but it ~~need~~had ~~not~~no ~~respond~~obligation to respond to the complaints until after a transaction agreement ~~has~~had been signed~~, if~~ ~~that occurs,~~ and an amended complaint ~~has~~had been filed.

2) Land Use Right:

Trunkbow Shandong obtained the land use right on July 6, 2011. As of December 31, ~~2012~~2013, Trunkbow Shandong has made phase payments of $1011,~~896~~739,~~681~~812 on the construction materials but the construction work has not yet started as of the year end date. According to the Decree No. 53 promulgated by Ministry of Land and Resources of the People’s Republic of China, local governments have the right to rescind the land use right ~~without~~ without compensation if the land is left idle for two years starting from the date the land is acquired. We have obtained the construction permit but currently are awaiting the builder's license. We expect to start the construction ~~before~~in October ~~July 6, 2013~~2014.

9025 - EARNINGS PER SHARE

23 - EARNINGS PER SHARE

	Years Ended December 31,
	2013		2012

Numerator:
Net income	$	3,387,261	$	12,681,029
Denominator:
Weighted average number of common shares outstanding - Basic		36,807,075		36,807,075
Effect of dilutive securities - Warrant		0		5,128
Weighted average number of common shares outstanding - Diluted		36,807,075		36,812,203
Earnings per share
-Basic	$	0.09	$	0.34
-Diluted	$	0.09	$	0.34

	Years Ended December 31,
	2012		2011
Numerator:
Net income	$	12,681,029	$	16,940,248
Denominator:
Weighted average number of common shares outstanding - Basic		36,807,075		36,263,911
Effect of dilutive securities - Warrant		5,128		899,779
Weighted average number of common shares outstanding - Diluted		36,812,203		37,163,690
Earnings per share
-Basic	$	0.34	$	0.47
-Diluted	$	0.34	$	0.46

For the year ended December 31, 2013, the Roth Capital Warrants, the China High Growth Capital LTD warrants and the February 2010 warrants were not included in the calculation of diluted earnings per share because the effect was anti-dilutive, as the exercise price of $6, $2 and $2, respectively, was higher than the average stock price of $1.09 for the year ended December 31, 2013.

For the year ended December 31, 2012, the Roth Capital Warrants, the China High Growth Capital LTD warrants and the February 2010 warrants were not included in the calculation of diluted earnings per share because the effect was anti-dilutive, as the exercise price of $6, $2 and $2, respectively, was higher than the average stock price of $1.40 for the year ended December 31, 2012.

~~For~~26 ~~the year ended December 31, 2011, the Roth Capital Warrants (200,000 shares) were not included in the calculation of diluted earnings per share because the effect was anti~~-~~dilutive,~~ RELATED asPARTY ~~the exercise price of $6 was higher than the average stock price of $3.24 for the year ended December 31, 2011.~~TRANSACTIONS

24(1) ~~- RELATED~~Guarantee ~~PARTY~~and ~~TRANSACTIONS~~pledge of assets by related parties

~~(1)~~The ~~Purchase~~loans from ~~related~~China ~~parties~~Everbright Bank and China Construction Bank were guaranteed by Mr. Wanchun Hou and Mr. Qiang Li.

On(2) ~~March~~Vehicle ~~10,~~rental ~~2011,~~from werelated entered into a series of contractual arrangements with Delixunda and its shareholders, Mr. Xin Wang, our Chief Technology Officer and Director and another employee of the Company. Through these arrangements, we contractually control Delixunda.parties

Trunkbow (2Asia Pacific) ~~Guarantee~~Investment ~~and~~Holdings ~~pledge~~Limited, ofour ~~assets~~wholly owned Hong Kong subsidiary, entered into a vehicle rental agreement with Mr. Qiang Li for consecutive twelve months starting from January 1, 2013. Monthly rental fee is $12,000 on four cars owned by ~~related~~Mr. ~~parties~~Li and $36,000 was paid to Mr. Li as deposit. Rental expense for the year ended December 31, 2013 was $144,000.

~~The loans from Agriculture Bank of China, China Merchants Bank and China Everbright Bank were guaranteed by Mr. Wanchun Hou and Mr. Qiang Li.~~80

~~(3)~~27 - ~~Vehicle~~VARIABLE ~~rental~~INTEREST ~~from related parties~~ENTITIES

Trunkbow (Asia Pacific) Investment Holdings Limited, our wholly owned Hong Kong subsidiary, entered into a vehicle rental agreement with Mr. Qiang Li for consecutive twelve months starting from January 1, 2012. Monthly rental fee is $12,000 on four cars owned by Mr. Li and $36,000 was paid to Mr. Li as deposit. Rental expense for the year ended December 31, 2012 was $144,000.

25 - VARIABLE INTEREST ENTITIES

To satisfy PRC laws and regulations, the Company conducts certain business in the PRC through its variable interest entity.

In December 2007, a series of agreements were entered into amongst Trunkbow Shandong, Trunkbow Technologies and its controlling shareholders, providing Trunkbow Shandong the ability to control Trunkbow Technologies, including its financial interest.

Resulting from the contractual arrangements between Trunkbow Shandong, Trunkbow Technologies and its controlling shareholders, the Company includes the assets, liabilities, revenues and expenses of Trunkbow Technologies in its consolidated financial statements. The contractual arrangements with Trunkbow Technologies are summarized below:

Exclusive Business Cooperation Agreements. Pursuant to Exclusive Business Cooperation Agreements entered into amongst Trunkbow Shandong, Trunkbow Technologies and its controlling shareholders in December 2007, Trunkbow Shandong has the exclusive right to provide to our PRC operating subsidiaries complete technical support, business support and related consulting services, which include, among other things, technical services, business consultations, equipment or property leasing, marketing consultancy and product research. Each of our PRC operating subsidiaries has agreed to pay an annual service fee to Trunkbow Shandong equal to 100% of its audited total amount of operational income each year. Each of our PRC operating subsidiary has also agreed to pay a monthly service fee to Trunkbow Shandong equal to 100% of the net income generated on a monthly basis. The payment and terms of payment are fixed to ensure that Trunkbow Shandong obtains 100% of the net income for that month, although adjustments may be made upon approval by Trunkbow Shandong to provide for operational needs. If at year end, after an audit of the financial statements of any of our PRC operating subsidiaries, there is determined to be any shortfall in the payment of 100% of the annual net income, such PRC operating subsidiary must pay such shortfall to Trunkbow Shandong. Each agreement has a ten-year term, subject to renewal and early termination in accordance with the terms therein.

Exclusive Option Agreements. Under Exclusive Option Agreements entered into amongst Trunkbow Shandong, Trunkbow Technologies and its controlling shareholders in December 2007, each of the PRC Shareholders irrevocably granted to Trunkbow Shandong or its designated person an exclusive option to purchase, to the extent permitted by PRC law, a portion or all of their respective equity interest in any PRC Operating Subsidiary for a purchase price of RMB10 or a purchase price to be adjusted to be in compliance with applicable PRC laws and regulations. Trunkbow Shandong or its designated person has the sole discretion to decide when to exercise the option, whether in part or in full. Each of these agreements has a ten-year term, subject to renewal at the election of Trunkbow Shandong.

Share Pledge Agreements. Under the Share Pledge Agreements entered into by and among Trunkbow Shandong, our PRC operating subsidiaries and each of Mr. Wanchun Hou, Mr. Qiang Li and Mr. Liangyao Xie, (the “PRC Shareholders”) in December 2007, the PRC Shareholders pledged, all of their equity interests in PRC Operating Subsidiaries to guarantee our PRC operating subsidiaries’ performance of its obligations under the Exclusive Business Cooperation Agreement. If the PRC operating subsidiaries or any of the PRC Shareholders breaches its/his/her respective contractual obligations under this agreement, or upon the occurrence of one of the events regarded as an event of default under each such agreement, Trunkbow Shandong, as pledgee, will be entitled to certain rights, including the right to dispose of the pledged equity interests. The PRC Shareholders agreed not to dispose of the pledged equity interests or take any actions that would prejudice Trunkbow Shandong's interest, and to notify Trunkbow Shandong of any events or upon receipt of any notices which may affect Trunkbow Shandong's interest in the pledge. Each of the equity pledge agreements will be valid until all the payments due under the Exclusive Business Cooperation Agreement have been fulfilled.

Powers of Attorney. The PRC Shareholders each executed a power of attorney in December 2007, to appoint Trunkbow Shandong as their exclusive attorneys-in-fact to vote on their behalf on all matters with respect to our PRC operating subsidiaries that require shareholder approval. The term of each power of attorney is valid so long as such shareholder is a shareholder of the respective PRC operating subsidiary.

We entered into a series of contractual arrangements with Beijing Delixunda Technology Co., Ltd. (“Delixunda”) and its shareholders on March 10, 2011. Delixunda is a telecom value-added service licensed company and was established as a limited liability company on December 1, 2009 in Beijing, the PRC. Delixunda has no operations prior to February 10, 2011. As a result of the contractual arrangements with Delixunda, we indirectly own the telecom value-added service license, which would enable us to offer telecom wireless value-added service to individual clients. In addition, the pledges supporting these contractual arrangements have not been registered as required by PRC law, which could also result in the invalidation of these arrangements under PRC law.

9281

As a result of these contractual arrangements, we are considered to be the primary beneficiary of Trunkbow Technologies and Delixunda; we consolidate the results of operations, assets and liabilities of Trunkbow Technologies and Delixunda in our financial statements. Although we have been advised by our PRC legal counsel that each contract under these contractual arrangements is valid and binding under current PRC laws and regulations, our contractual arrangements with Trunkbow Technologies and Delixunda may not be as effective in providing us with control over the Trunkbow Technologies and Delixunda as direct ownership. We rely on these contractual rights to effect control and management of the VIEs, which exposes it to the risk of potential breach of contract by the shareholders of Trunkbow Technologies and Delixunda for a number of reasons. For example, their interests as shareholders of Trunkbow Technologies and Delixunda and our interests may conflict and we may fail to resolve such conflicts; the shareholders may believe that breaching the contracts will lead to greater economic benefit for them; or the shareholders may otherwise act in bad faith. If any of the foregoing were to happen, we may have to rely on legal or arbitral proceedings to enforce our contractual rights, including specific performance or injunctive relief, and claiming damages. Such arbitral and legal proceedings may cost substantial financial and other resources, and result in disruption of our business, and we cannot assure that the outcome will be in our favor. Apart from the above risks, there are no significant judgments or assumptions regarding enforceability of the contractual agreements with Trunkbow Technologies or Delixunda.

In addition, as all of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through either arbitration or litigation in the PRC, they would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could further limit our ability to enforce these contractual arrangements. Furthermore, these contracts may not be enforceable in the PRC if PRC government authorities or courts take a view that such contracts contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons. At present, the equity interest pledge agreement has not been registered with the relevant PRC authorities, which will affect our ability to enforce its provisions prior to such registration. In the event we are unable to enforce these contractual arrangements, we may not be able to exert effective control over our VIEs, and our ability to conduct our business may be materially and adversely affected. If the applicable PRC authorities invalidate our contractual arrangements for violation of PRC laws, rules and regulations, in such an event, we would lose control of the VIEs resulting in its deconsolidation in financial reporting and loss in our market valuation.

In addition, if our VIEs or all or part of its assets become subject to court injunctions or asset freezes or liens or rights of third-party creditors, we may be unable to continue some of our businesses, which could adversely affect our business, financial condition and results of operations. If our VIEs undergoes a voluntary or involuntary liquidation proceeding, its shareholders or unrelated third-party creditors may claim rights to some or all of its assets. The occurrence of any of these events may hinder our ability to operate business, which could in turn materially harm our business and ability to generate revenues and cause the market price of our ordinary shares to decline significantly.

Most of our operations are conducted through our affiliated companies, including our VIEs which we control through contractual agreements in the form of a variable interest entity. Current regulations in the PRC permit our PRC subsidiaries to pay dividends to us only out of its accumulated distributable profits, if any, determined in accordance with their articles of association and PRC accounting standards and regulations. The ability of these PRC affiliates to make dividends and other payments to us may be restricted by factors that include changes in applicable foreign exchange and other laws and regulations.

Under PRC law, our subsidiary may only pay dividends after 10% of its after-tax profits have been set aside as reserve funds, unless such reserves have reached at least 50% of its registered capital. Such cash reserve may not be distributed as cash dividends.

The PRC Income Tax Law also imposes a 10% withholding income tax on dividends generated on or after January 1, 2008 and distributed by a resident enterprise to its foreign investors, if such foreign investors are considered as non-resident enterprise without any establishment or place within China or if the received dividends have no connection with such foreign investors’ establishment or place within China, unless such foreign investors’ jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement.

9382

Summary information regarding consolidated VIEs is as follows:

	December 31,		December 31,
	2012		2011
	2013		2012
Assets:
Cash and cash equivalents	$	6940,~~558~~655	$	~~206~~69,~~492~~558
Accounts receivable		2,~~606~~584,~~362~~495		2,~~719~~606,~~991~~362
Other current assets		604,~~357~~967,828		960,~~431~~357
Inventories		~~362~~207,~~478~~168		~~134~~362,~~126~~478
Due from directors		24,~~257~~292		32,~~103~~257
Property and equipment, net		~~159~~121,~~701~~988		~~108~~159,~~740~~701
Long-term prepayment		~~1664~~0		71,~~431~~664
Total Assets	$	37,~~262~~926,~~377~~426	$	3,~~189~~262,~~314~~377
Liabilities:
Accounts payable	$	~~541~~385,~~630~~507	$	~~180~~541,~~338~~630
Accrued expenses and other current liabilities		1,~~473~~718,~~539~~884		1,~~235~~473,~~494~~539
Due to directors		146,883		55,319
Short-term loans		4,908,216		0
Taxes payable		1,699,564		1,721,633
Due to directors		152,088		146,883
Total Liabilities	$	3,861,616	$	3,192,784
Taxes payable		1,789,505		1,699,564
Total Liabilities	$	8,954,200	$	3,861,616

The assets of the VIEs can be used only to settle the obligations of the VIEs. Conversely, liabilities recognized as of consolidating VIEs do not represent additional claims on the Company’s assets.

For the fiscal year ended December 31, 2013, the financial performance of VIEs reported in the consolidated statements of income and comprehensive income includes revenues of $1,497,924, cost of revenues of $984,210, operating expenses of $911,727 and net loss of $403,858.

For the fiscal year ended December 31, 2012, the financial performance of VIEs reported in the consolidated statements of income and comprehensive income includes revenues of $591,430, cost of revenues of $437,367, operating expenses of $743,293 and net loss of $595,458.

~~For~~28 ~~the~~- SUBSEQUENT fiscal year ended December 31, 2011, the financial performance of VIEs reported in the consolidated statements of income and comprehensive income includes revenues of $411,798, cost of revenues of $204,175, operating expenses of $331,130 and net loss of $177,935.EVENTS

26 - SUBSEQUENT EVENTS

The Company has evaluated subsequent events from the balance sheet date through the date that the financial statements are issued and material subsequent event is as follows:

1) Bank facility

As part of the total bank facility obtained from China Everbright Bank ~~on December 27~~, ~~2012,~~ Trunkbow Shandong further received RMB51,~~450~~880,~~160~~000 (approximately $8,~~155~~488,~~559~~000) on ~~January~~April 1511, 2014, ~~2013~~and RMB48,120,000 (approximately $7,873,000) on June 20, 2014. The loans is secured by its accounts receivable of ~~RMB 69~~ RMB126,~~113~~053,~~691~~ 020 (approximately $1020,~~955~~620,~~472~~000). ~~This~~Among ~~short-term~~the ~~loan~~loans, $3,403,000 is due on ~~October~~March 27, 2015, $5,085,000 is due on April 4, 2015, $4,342,000 is due on June 13, 2015 and 3,531,000 is due on June 14, ~~2013~~2015. The ~~loan~~loans isare also personally guaranteed by Mr. Wanchun Hou and Mr. Qiang Li. Interest on the bank facility is ~~a floating lending rate, 15~~7.00% ~~over the PBOC benchmark rate~~.

942) Go-private transaction

On April 14, 2014, at a special meeting of the stockholders of the Company, the Company's stockholders voted in favor of the proposal to adopt the previously announced Merger Agreement, dated December 10, 2013, by and among the Company, Trunkbow Merger Group Limited (“Parent”) and Trunkbow International Merger Sub Limited (“Merger Sub”), pursuant to which Merger Sub would be merged with and into the Company, with the Company continuing as the surviving company after the merger as a wholly owned subsidiary of Parent (the "Merger"). The Merger Agreement was approved by approximately 81.7% of the outstanding shares of Company common stock and approximately 67.5% of the outstanding shares of Company common stock (excluding the shares of Company common stock held by Dr. Wanchun Hou and Mr. Qiang Li and their respective affiliates), satisfying the voting requirements to adopt the Merger Agreement.

On April 24, 2014, the Company filed a Form 15 with the SEC to terminate its reporting obligations under the Securities Exchange Act of 1934.

3) Sale of our asset

On June 3, 2014, we entered into an agreement with a third party who intended to purchase our communication equipment at a price of $4.3million (approximately RMB26.3 million). As of September 23, 2014, we have subsequently collected the $4.3 million.

4) Establishment of new subsidiaries

During April and May 2014, we established five subsidiaries in Huzhou, Nanjing, Shanghai, Ningxia and Zibo in the PRC. These subsidiaries are principally engaged in research and development of system and application platforms, server rental, network engineering, operation and maintenance.

Filing Compare · Trunkbow International Holdings Ltd