Trunkbow International Holdings Limited, a provider of Mobile Payment Solutions (“MPS”) and Mobile Value Added Solutions (“MVAS”) in the PRC, today announced financial results for its fourth quarter and business year ended in December 31, 2010.

Fourth Quarter 2010 Highlights

• Net revenue increased 200.3% year-over-year to $13.7 million
• Gross profit increased 127.8% year-over-year to $10.1 million
• Net income increased 154.1% year-over-year to $8.2 million, or $0.25 per diluted share
• MPS gross revenue grew 487.1% to $7.0 million
• MVAS gross revenue grew 105.3% to $6.9 million

2010 Full-Year Highlights

• Net revenue increased 81.6% year-over-year to $24.4 million
• Gross profit increased 73.6% year-over-year to $19.5 million
• Net income increased 63.3% year-over-year to $13.5 million, or $0.44 per diluted share
• MPS gross revenue grew 24.9% to $12.7 million
• MVAS gross revenue grew 265.6% to $12.2 million

“We are extremely pleased with our results in the quarter that close a year of many important achievements.  We delivered strong growth in revenue and net income in 2010, and we continued to make progress in the roll-out of our MPS solutions,” said Mr. Qiang Li, Trunkbow’s Chief Executive Officer. “Subsequent to the end of the quarter we completed our initial public offering on the NASDAQ Global Market and raised $20 million in gross proceeds to fund the aggressive deployment of our MPS solution in 2011. We expect our growth momentum to continue as we expand into new provinces and reach agreements with additional carriers, and we look forward to reporting on our progress as we reach important milestones.”

Fourth quarter 2010 Results

Net revenue in the fourth quarter of 2010 was $13.7 million, an increase of 200.3% year-over-year. Gross revenue from MPS grew 487.1% to $7.0 million, driven by our geographic expansion into additional provinces. Gross revenue from MVAS grew 105.3% to $6.9 million from the fourth quarter of 2010, driven by new applications on our MVAS platforms, including Color Numbering and the Mobile Business Card. MPS and MVAS accounted for 50.5% and 49.5% of revenues, respectively.

Cost of revenue in the fourth quarter of 2010 was $3.6 million, compared to $0.1 million in the same period of 2009. The increase in cost of revenue was primarily driven by greater scale and the build-out of Trunkbow’s MPS platform.

Gross profit in the fourth quarter of 2010 was $10.1 million, an increase of 127.8% year-over-year. Gross margin was 73.6% in the fourth quarter of 2010, down from 97.0% in the year-ago quarter.  The year-over-year decline in gross margin was primarily due to sales of lower-margin point-of-sale systems, which carry margins below the corporate average.

Operating expenses in the fourth quarter of 2010 were $1.9 million, an increase of 65.0% year-over-year, driven primarily by the increase in selling expenses to support the roll-out of MPS as well by an increase in R&D expenses to position the Company for future growth. Operating expenses were 13.6% of its fourth quarter revenues, versus 24.7% in the fourth quarter of 2009.

Operating income in the fourth quarter of 2010 was $8.2 million, an increase of 149.2% compared to the same period last year. The operating margin was 60.1% in the fourth quarter of 2010, compared to 72.4% in the year-ago quarter. The year-over-year increase in operating income was due to revenue growth, while the reduction in margin was the result of lower gross margins resulting from a sales mix that included equipment sales, which command lower margins than the Company’s software and system integration businesses.

The Company recorded an income tax benefit of $2,276 in the fourth quarter of 2010, representing a reversal of income tax expense recorded in the third quarter of 2010.  The Company recorded no income tax expense in 2010, as its operating companies were exempt from PRC income tax.  In 2011, Trunkbow’s operating companies will be subject to PRC income tax, although at preferential income tax rates.

Net income was $8.2 million in the fourth quarter of 2010, an increase of 154.1% from the comparable period in 2009. Net margin was 60.0% in the fourth quarter of 2010, compared to 70.9% in the fourth quarter of 2009. Earnings per basic and diluted share in the quarter were $0.25, versus $0.16 in the year-ago quarter.  The share count increased 66.0% versus the year-ago quarter.

2010 Full-Year Results

Net revenue increased 81.6% to $24.4 million in 2010, up from $13.4 million in 2009. Mobile Payment Solutions represented 49% of net revenue for 2010, versus 25% in 2009. Gross profit increased 73.6% to $19.5 million in 2010 from $11.2 million in 2009. The gross margin was 79.8% for 2010, versus 83.5% in 2009 as a result of lower-margin sales of point-of-sale systems. Operating expenses, including selling, general and administrative expenses and R&D increased 99.9% to $5.69 million in 2010. The increase in operating expenses was related to the expansion of the administrative and R&D departments to support growth, as well as the addition of expenses from being a publicly listed company. Interest expense was $0.2 million in, 2010 versus $0.1 million in 2009. Net income was $13.5 million up 63.3% from 2009. Earnings per basic and fully diluted share were $0.44 in 2010 and $0.42 in 2009. The weighted average number of diluted shares increased 58.6% in 2010 versus 2009.

Financial Condition

As of December 31, 2010, the Company had $10.3 million in cash and cash equivalents. Accounts receivable were $25.7 million, versus $10.5 million at the end of 2009.  The increase in receivables was attributable to the rapid increase in revenues combined with the surge in revenues in Q4.  Working capital was $43.8 million at the end of 2010, versus $9.7 million at the end of 2009. Short-term loans were at $1.8 million at the end of 2010.  Shareholders’ equity was $44.5 million, up from $9.8 million at the end of 2009.  Cash from operations was an outflow of $8.6 million, primarily due to the increase in receivables and advances to suppliers for third party software and hardware to be used in the Company’s MVAS and MPS platform deployment in 2011. Cash from investing was an outflow of approximately $1 million, and cash from financing was an inflow of $16.3 million.

Business Outlook

“After a very successful year where we achieved record revenue and net income and made solid progress executing our strategy, we expect our strong performance to continue in 2011,” continued Mr. Li. “In the year ahead, we will leverage our strong R&D capabilities to enhance our product pipeline and develop the next generation of MPS applications. More importantly, we will build on our strong relationships with China’s big three telecom carriers and our resellers to increase market share and expand our MPS platforms into 10 provinces with China Unicom and roll out the new MVAS platforms into 10 new provinces with China Unicom.”

Historically, we have generally experienced a slowdown in revenues in the first quarter due to the Chinese Lunar New Year, since the majority of businesses are shut down for a month-long holiday, though we expect this seasonality to subside as we receive more revenue from recurring streams.

“In 2011, we expect to grow revenues and net income 30%,” continued Mr. Li.

Recent Events

On February 8, 2011 the Company completed an initial public offering of 4,000,000 shares of Common Stock that were priced at $5.00 per share, generating net proceeds of $18.1 million. Following the offering, the Company had 36,507,075 shares issued and outstanding as of March 29, 2011.

Conference Call

The Company will host a conference call to discuss financial results for the fourth quarter and fiscal year 2010 on March 31, 2011 at 8:00 am ET. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: +1 866 788 0546. International callers should dial +1 857 350 1684. The pass code required is 81340376.

If you are unable to participate in the call at this time, a replay will be available for 14 days starting on March 31, 2011. To access the replay, please dial +1 888 286 8010, international callers dial +1 617 801 6888, and enter the pass code 76634048.

About Trunkbow

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

Safe Harbor Statement

This press release contains forward-looking statements that reflect the Company’s current expectations and views of future events that involve known and unknown risks, uncertainties and other factors that may cause its actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.  Such forward looking statements involve known and unknown risks and uncertainties, including but not limited to uncertainties relating to the Company’s relationship with China’s major telecom carriers and its resellers, competition from domestic and international companies, changes in technology, contributions from revenue sharing plans and general economic conditions. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs.  You should understand that the Company’s actual future results may be materially different from and worse than what the Company expects. Information regarding these risks, uncertainties and other factors is included in the Company’s annual report on Form 10-K and other filings with the SEC.

– FINANCIAL TABLES FOLLOW –