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Talon International, Inc. Reports Third Quarter and Nine Months


Talon International, Inc. Reports Third Quarter and Nine Months Financial Results for 2012

LOS ANGELES, CA -- (Marketwire) -- 11/14/12 -- Talon International, Inc. (OTCQB: TALN), a leading global supplier of zippers, apparel fasteners, trim and interlining products, reported financial results for the quarter and nine months ended September 30, 2012.

Highlights


 
--  Third Quarter 2012 sales increase 20% over same period in 2011.
--  Gross profit margin for the Third Quarter 2012 up 2.2 percentage
    points from 2011.

Financial Results

Total sales for the third quarter ended September 30, 2012 were $11.3 million; rising 20% or $1.9 million more than the same period in 2011. Zipper product sales for the quarter ended September 30, 2012 were $5.7 million as compared to $5.0 million for the same quarter in 2011, and Trim product sales for the quarter ended September 30, 2012 were $5.5 million as compared to $4.4 million for the same quarter in 2011. Total sales for the nine months ended September 30, 2012 were $33.2 million; an increase of $1.8 million or 5.8% compared to the same period in 2011. Zipper product sales for the nine months ended September 30, 2012 were $17.1 million as compared to $17.8 million for the same period in 2011, and Trim product sales for the nine months ended September 30, 2012 were $16.1 million as compared to $13.6 million for the same period in 2011. "We are very pleased with the sales gains achieved this quarter and year to date," noted Lonnie Schnell, Talon's CEO. "The sales gains evidence the important strategic wins we continue to achieve as we target bringing new nominations of image-driven and performance active specialty brands to our roster of marquee customers, and as we further our expansion within the European marketplace," Lonnie Schnell continued.

Gross profit for the quarter ended September 30, 2012 was $3.7 million or 32.3% of sales as compared to $2.8 million, or 30.1% of sales for the same quarter in 2011, an increase of $0.8 million and 2.2 percentage points. Gross profit for the nine months ended September 30, 2012 was $10.8 million, or 32.5% of sales, as compared to $9.8 million, or 31.2% of sales for the same period in 2011, an increase of $1.0 million or 1.3 percentage points. T he gross profit increases for the quarter and nine months ended September 30, 2012 as compared to the same period in 2011 were principally attributable to increased sales, an improved mix of higher-margin trim product sales, and a greater mix of sales to specialty retailers as opposed to mass merchandisers.

Operating expenses for the third quarter of 2012 and 2011 were $3.3 million and $3.0 million, respectively. Operating expenses for the first nine months of 2012 and 2011 were $9.9 million and $9.2 million, respectively. The increases in operating spending were associated with additions to our internal sales force and expanding our sales presense in Europe; non-operational professional and advisory fees; and higher legal costs associated with our efforts to secure patent and trademark rights worldwide. These spending increases were partially offset by lower overall net compensation costs. Sales and marketing expenses for the quarter ended September 30, 2012 were $1.2 million as compared to $1.1 million for the same quarter in 2011. Sales and marketing expenses for the first nine months of 2012 were $3.5 million; an increase of $0.4 million over for the same period in 2011. General and administrative expenses for the quarter ended September 30, 2012 totaled $2.1 million compared to $1.8 million for the same period in 2011. General and administrative expenses for the nine months ended September 30, 2012 totaled $6.4 million, reflecting an increase of $0.3 million over the same period in 2011.

Provision for income taxes, net for the three months ended September 30, 2012 was $182,000, as compared to benefit from income taxes, net of $57,000 for the same period in 2011. For the nine months ended September 30, 2012 provision for income taxes was $176,000 as compared to $357,000 for the same period in 2011. The provision for income taxes, net for the nine months ended September 30, 2012 included the reversal of a potential tax liability of $196,000 established in 2007 for foreign tax positions that might have been subject to reversal upon a regulatory review. During the first quarter of 2012, the time limit for assessment of the tax liability expired and the liability was removed.

The net income for the quarter ended September 30, 2012 was $187,000 as compared to a net loss of $126,000 for the same quarter in 2011. The net income for the nine months ended September 30, 2012 was $652,000 as compared to a net income of $129,000 for the same period in 2011.

Conference Call

Talon International will hold a conference call on Wednesday, November 14, 2012, to discuss its third quarter financial results for 2012. Talon's CEO Lonnie D. Schnell will host the call starting at 4:30 P.M. Eastern Time. A question and answer session will follow the presentation.

To participate, dial the appropriate number 5-10 minutes prior to the start time, request the Talon International conference call and provide the conference ID.

Date: Wednesday, November 14, 2012 Time: 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) Domestic callers: 1-877-317-6789

International callers: 1-412-317-6789 Conference ID#: TALON

A replay of the call will be available after 7:30 p.m. Eastern Time on the same day and until December 14, 2012. The toll-free replay call-in number is 1-877-870-5176 for domestic callers and 1-858-384-5517 for international. Pin number 10021202.

About Talon International, Inc.

Talon International, Inc. is a global supplier of apparel fasteners, trim and interlining products to manufacturers of fashion apparel, specialty retailers, mass merchandisers, brand licensees and major retailers. Talon manufactures and distributes zippers and other fasteners under its Talon(R) brand, known as the original zipper invented in 1893. Talon also designs, manufactures, engineers, and distributes apparel trim products and specialty waistbands under its trademark names, Talon(R), TekFit(R) and Tag-It to major apparel brands and retailers including Abercrombie and Fitch, Polo Ralph Lauren, Kohl's, J.C. Penney, Fat Face, Victoria's Secret, Wal-Mart, Tom Tailor, Phillips-Van Heusen, and Juicy Couture. The company has offices and facilities in the United States, United Kingdom, Hong Kong, China, Taiwan, India and Bangladesh.


 
                                                                            
                                                                            
                         TALON INTERNATIONAL, INC.                          
   CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)    
                                (Unaudited)                                 
                                                                            
                            Three Months Ended         Nine Months Ended    
                               September 30,             September 30,      
                         ------------------------  ------------------------ 
                             2012         2011         2012         2011    
                         -----------  -----------  -----------  ----------- 
Net sales                $11,288,717  $ 9,404,648  $33,214,516  $31,385,122 
Cost of goods sold         7,637,845    6,576,861   22,434,159   
21,603,444 
                         -----------  -----------  -----------  ----------- 
  Gross profit             3,650,872    2,827,787   10,780,357    9,781,678 
                                                                            
Sales and marketing                                                         
 expenses                  1,205,552    1,137,597    3,469,024    3,101,644 
General and                                                                 
 administrative expenses   2,070,088    1,847,645    6,435,569    6,126,856 
                         -----------  -----------  -----------  ----------- 
  Total operating                                                           
   expenses                3,275,640    2,985,242    9,904,593    9,228,500 
                         -----------  -----------  -----------  ----------- 
                                                                            
Income (loss) from                                                          
 operations                  375,232     (157,455)     875,764      553,178 
                                                                            
Interest expense, net          5,950       25,484       47,710       67,117 
                         -----------  -----------  -----------  ----------- 
Income (loss) before                                                        
 provision for income                                                       
 taxes                       369,282     (182,939)     828,054      486,061 
Provision for (benefit                                                      
 from) income taxes, net     182,417      (56,919)     175,685      356,684 
                         -----------  -----------  -----------  ----------- 
                                                                            
Net income (loss)        $   186,865  $  (126,020) $   652,369  $   129,377 
                                                                            
Series B Preferred Stock                                                    
 Liquidation Preference                                                     
 Increase                   (857,877)    (739,549)  (2,408,257)  (2,076,084)
                         -----------  -----------  -----------  ----------- 
Loss applicable to                                                          
 Common Shareholders     $  (671,012) $  (865,569) $(1,755,888) $(1,946,707)
                         ===========  ===========  ===========  =========== 
                                                                            
Per share amounts:                                                          
Net income (loss) per                                                       
 share                   $      0.01  $     (0.01) $      0.03  $      0.01 
Available to Preferred                                                      
 Shareholders                  (0.04)       (0.03)       (0.11)       (0.11)
                         -----------  -----------  -----------  ----------- 
Basic and diluted net                                                       
 loss per share                                                             
 applicable to Common                                                       
 Shareholders            $     (0.03) $     (0.04) $     (0.08) $     (0.10)
                         ===========  ===========  ===========  =========== 
                                                                            
Weighted average number                                                     
 of common shares                                                           
 outstanding - Basic and                                                    
 diluted                  22,911,678   20,602,982   22,141,684   20,421,664 
                         ===========  ===========  ===========  =========== 
                                                                            
Net income (loss)        $   186,865  $  (126,020) $   652,369  $   129,377 
Other comprehensive                                                         
 income (loss) -                                                            
  Foreign currency                                                          
   translation               (24,414)      19,340      (10,728)      (2,319)
                         -----------  -----------  -----------  ----------- 
Total comprehensive                                                         
 income (loss)           $   162,451  $  (106,680) $   641,641  $   127,058 
                         ===========  ===========  ===========  =========== 
                                                                            
                                                                            
                                                                            
                                                                            
                         TALON INTERNATIONAL, INC.                          
                        CONSOLIDATED BALANCE SHEETS                         
                                                                            
                                               September 30,   December 31, 
                                                    2012           2011     
                                               -------------  ------------- 
                                                (Unaudited)                 
Assets                                                                      
Current assets:                                                             
  Cash and cash equivalents                    $   6,825,046  $   5,749,341 
  Accounts receivable, net                         4,447,029      3,777,771 
  Inventories, net                                   674,413      1,076,522 
  Prepaid expenses and other current assets          562,067        314,761 
                                               -------------  ------------- 
Total current assets                              12,508,555     10,918,395 
                                                                            
Property and equipment, net                          861,805      1,092,609 
Intangible assets, net                             4,279,146      4,110,751 
Other assets                                         193,267        236,411 
                                               -------------  ------------- 
Total assets                                   $  17,842,773  $  16,358,166 
                                               =============  ============= 
                                                                            
Liabilities, Preferred Stock and Stockholders'                              
 Equity (Deficit)                                                           
Current liabilities:                                                        
  Accounts payable                             $   7,233,136  $   6,607,041 
  Accrued expenses                                 1,693,906      1,543,465 
  Notes payable to related parties                         -        239,942 
  Other notes and current portion of capital                                
   lease obligations                                   3,333         73,148 
                   
                            -------------  ------------- 
Total current liabilities                          8,930,375      8,463,596 
                                                                            
Capital lease obligations, net of current                                   
 portion                                                 657         10,461 
Deferred income taxes                                950,224        751,148 
Other liabilities                                    178,745        379,803 
                                               -------------  ------------- 
Total liabilities                                 10,060,001      9,605,008 
                                               -------------  ------------- 
                                                                            
Series B Convertible Preferred Stock, $0.001                                
 par value; 407,160 shares authorized, issued                               
 and outstanding                                  23,079,995     20,671,738 
Stockholders' Equity (Deficit):                                             
Series A Preferred Stock, $0.001 par value;                                 
 250,000 shares authorized; no shares issued                                
 or outstanding                                            -              - 
Common Stock, $0.01 par value, 100,000,000                                  
 shares authorized; 23,400,808 and 21,000,808                               
 shares issued and outstanding at September                                 
 30, 2012 and December 31, 2011, respectively         23,401         21,001 
Additional paid-in capital                        58,333,684     57,948,111 
Accumulated deficit                              (73,705,809)   (71,949,921)
Accumulated other comprehensive income                51,501         62,229 
                                               -------------  ------------- 
Total stockholders' equity (deficit)             (15,297,223)   (13,918,580)
                                               -------------  ------------- 
Total liabilities, preferred stock and                                      
 stockholders' equity (deficit)                $  17,842,773  $  16,358,166 
                                               =============  ============= 

Company Contact

Talon International, Inc. Rayna Hernandez Tel (818) 444-4128 raynah@talonzippers.com

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