2. - LIQUIDITY AND FINANCIAL CONDITION

The Company's cash flows used in operations amounted to approximately $0.7 million for the six months ended June 30, 2013. The Company had working capital of approximately $57.5 million as of June 30, 2013. The Company has historically financed its operations principally from cash flows generated from operating activities and external financing.

As of June 30, 2013, Trunkbow had signed up four agreements in relation to capital expenditure on Guangzhou, Shanghai and Huzhou data centers, and our R&D center. The total capital expenditure of these four centers is approximately $83.3-90.3 million of which $33.5 million will be paid within the next year. As of June 30, 2013, Trunkbow has invested $17.74 million. The Company expects to finance these projects principally from cash collection from our accounts receivables, loans to third parties, advance to suppliers 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 April 1, 2014. 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.