U.S. SECURITIES AND EXCHANGE
COMMISSION



Washington, D.C. 20549



FORM 10-K/A

(Amendment No. 3)



(MARK ONE)



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



For the Fiscal Year Ended
December 31, 2010



OR



| ̈ | 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: 000-53934



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. ̈YesxNo



Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ̈YesxNo



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.xYes ̈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). YesxNo ̈



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  ̈                      | Smaller reporting company x
|------------------------- | ------------------- | --------------------------------------------- | ---------------------------
|                          |                     | (Do not check if a smaller reporting company)



Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ̈YesxNo



The aggregate market value of
the shares of common stock, par value $0.001 per share, of the registrant held by non-affiliates on June 30, 2010 was zero.



There were 36,807,075 shares
of common stock of the registrant outstanding as of July 2, 2012.















Explanatory Note



This Amendment
No. 3 to the Annual Report on Form 10-K filed by Trunkbow International, Inc., a Nevada corporation (“we,” “our,”
“us,” or the “Company”), on March 29, 2011 is being filed to (i) amend Item 7 - Management’s Discussion
and Analysis of Financial Condition and Results of Operation (ii) amend Item 8 – Financial Statements and Supplementary
Data and (iii) include certain additional exhibits and updated Exhibit 31 and 32 certifications for our principal executive and
financial officers.





On March 21, 2012, the Company announced that it has engaged
the independent registered public accounting firm Holtz Rubenstein Reminick LLP (“HRR”) to review and issue a new
audit report regarding its consolidated financial statements for the year ending December 31, 2009 because the SEC did not consider
B&P “independent” as defined in the SEC’s rules regarding auditor independence. Even though the Company
disagreed, for the interests of investor transparency and to avoid a complicated on-going regulatory process, on March 20, 2012
the Company engaged HRR to review and issue a new audit report regarding its consolidated financial statements for the year ended
December 31, 2009. The amendments to Items 7 and 8 are being made to reflect that the financial statements for the 2009 fiscal
year have now been audited by HRR, the report of which firm is included together with such financial statements under Item 8.



Except as specifically referenced
herein, this Amendment No. 3 to the Annual Report on Form 10-K/A does not reflect any event occurring subsequent to March 29,
2011, the filing date of the original report, and no other changes have been made to the report.















PART I



|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 18 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, 2010, our
technology is the subject of 164 filed patent applications, of which 50 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”).



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.





1









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.



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”).



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”).



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:





2

















|(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) | 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. Trunkbow Technologies no longer accounts for any of our new business, currently represents less than 10% of our current revenues and is being operationally wound down.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





3









|(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 enble us to offer telecom wireless value-added conten service to individual clients.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



How We Generate Revenue



We develop wireless enablement
platforms targeted at cellular carriers and provide them with constantly improving interactive delivery vehicles to improve cellular
performance and end-user functionality. 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
a one time 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 Color Ring Back Tone (“Caller
CRBT”) and Color Numbering solution, we have revenue sharing agreements with resellers and directly with telecom providers
to receive up to 50% of the subscription revenues generated for up to 5 years and then renewable upon expiration. For our Number
Change Notification (“NCN”) 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:

| | • | System sales to telecom providers which enables the mobile payment function on their network;
| | - | ---------------------------------------------------------------------------------------------

| | • | System sales to telecom providers that enables various MPS compatible SIM and mobile payment functions for their corporate clients; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------

| | • | Revenue share on the MPS compatible SIM cards that are sold to the telecom providers.
| | - | -------------------------------------------------------------------------------------



We generate recurring revenues
in the following ways:

| | • | Up to a 50% share of the monthly function fee charged by the telecom providers;
| | - | -------------------------------------------------------------------------------

| | • | 0.1 – 0.5% of total transaction cost on purchases made through the mobile payment application; and
| | - | --------------------------------------------------------------------------------------------------

| | • | Monthly rental revenues on POS (Point of Sales) machines deployed by Trunkbow.
| | - | ------------------------------------------------------------------------------



We operate under exclusive patent
licensing and revenue sharing agreements for Caller CRBT in three provinces with local branches of China Telecom, two provinces
with local branches of China Mobile and two provinces with local branches of China Unicom, Number Change Notification in two provinces
with local branches of China Unicom and two provinces with local branches of China Telecom, and Mobile Payment System in four provinces
with local branches of China Telecom. These agreements typically have a one to five year term. In addition, we have sold over 10
different other platform services to the mobile operators over the past years.



In determining development priorities,
we conduct research efforts which include client input, market analysis, economic considerations, revenue potential and technical
feasibility. Only when these factors each rise above a predefined threshold will a true development undertaking ensue. As an ISO
9000 certified business entity, which is a family of standards for quality management systems that is maintained by the International
Organization for Standardization, and in keeping with this practice, all projects must adhere to a pre-defined regimen of development
and only ends when acceptance by the client is gained.





4







Our business has grown rapidly
since inception and we anticipate that our business will continue to grow at a rapid pace in the next three to five years. We expect
that our growth will be driven by the broad adoption of our Caller CRBT and Mobile Payment services, geographic expansion and the
introduction of new products and services.



Our customers are primarily
telecom service providers in the PRC, including local branches of China’s three major cellular carriers, China Telecom, China
Unicom and China Mobile. Collectively, these carriers provide services to greater than 700 million cellular subscribers. For the
fiscal years ended December 31, 2009 and 2008, revenues generated directly by sales to China Telecom, China Unicom and China Mobile
accounted for approximately 3%, 6% and nil, and 4%, 95% and nil, respectively, of our total revenues, and 7%, 5% and nil, and 3%,
6% and nil, respectively, for the year ended December 31, 2010 and 2009. When we include resales of our products to these carriers
through intermediaries (i.e., direct and indirect sales to these carriers), then revenues generated from sales to these three carriers
for the fiscal years ended December 31, 2009 and 2008 accounted for approximately 42%, 15% and 42%, and 4%, 95% and nil, respectively,
of our total revenues, and 16%, 47% and 28%, and 42%, 15% and 42%, respectively, for the year ended December 31, 2010 and 2009.
The significant increase in revenues generated from sales to China Mobile for 2009 as compared to 2008 is attributable to the sale
in 2009 of two platforms to two resellers that provided an air-charge system to China Mobile in two provinces. The large variations
in revenues attributable to China Unicom and China Mobile during 2008 and 2009 are mainly attributable to a reorganization of China
Unicom which resulted in that company’s CDMA segment being spun-off into China Telecom and the remaining company being merged
with China Netcom. Even though our relationship with these three continues to expand, it is important to understand the complexity
of these relationships. The significant increase in revenues generated from sales to China Unicom for 2010 as compared to 2009
is contributed from the sale in 2010 of the deployment of our systems including Caller CRBT, Color Numbering, Mobile Business Card
and Mobile Payment.



To be accepted as an approved
vendor of services to any of these carriers, a company must first gain approval at a corporate level by successfully completing
a series of tests of its technology. Once completed, the next step is to gain contracted business from each operating unit. Each
of the 30 provinces, municipalities and autonomous regions contains its own self sufficient cellular operating unit with separate
P&L responsibility. In other words, with 30 regions, there are 30 separate operating companies per cellular carrier. This model
is replicated in each of the three major carriers, resulting in a total of ninety potential clients within China.



The PRC government has mandated
that these mobile payment services and MVAS functions must be available to all provinces over the next five years. With such services
currently available in 13 provinces, the 17 remaining provinces will be seeking them from the market with Trunkbow being a major
incumbent; fully vetted at a corporate level and with patented technology.



While we were initially focused
exclusively on the PRC market, we have built a product set for the global sector. To this end, we are now actively positioning
our product sets with carriers in the US and Europe, and we are entering the global market with a well accepted product set and
excellent credentials.



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 and fourth quarter of the year due to the Chinese Lunar
New Year as a 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.



Results of Operations



Fiscal
Years Ended December 31, 2010 versus 2009



Net Revenues:  Net
revenues increased $10.96 million, or 81.6%, from $13.43 million for the year ended December 31, 2009 to $24.39 million for the
year ended December 31, 2010. Software sales increased $10.69 million, or 252.6%, from $4.23 million for the year ended December
31, 2009 to $14.92 million for the year ended December 31, 2010, mainly due to increased sales in Mobile Payment by $8.85 million
and MVAS software of Caller CRBT, NCN and Color Numbering by $2.52 million in additional provinces. Our net revenues shifted to
more software sales and less system integration sales during 2010. System integration revenues increased $0.87 million, from $8.5
million for the year ended December 31, 2009 to $9.37 million for the year ended December 31, 2010, due to the change in demand
of our customers for the various components of our services. And our company’s competitive edge is in R&D. So the increase
in Software sales is more than System integration revenues.





5







We started to deploy MPS platforms
with our customers from the third quarter of 2009. We generated revenues of $12.66 million and $12.18 million, $10.14 million and
$3.33 million, from MVAS and MPS solutions for the year ended December 31, 2010 and 2009. MPS solutions have become a significant
revenue segment, representing 49% and 25% for the year ended December 31, 2010 and 2009.



Gross Margin:  Gross
margin increased $8.25 million, or 73.6%, from $11.21 million for the year ended December 31, 2009 to $19.46 million for the year
ended December 31, 2010. The increase in gross margin was due to revenue growth associated with the software sales. Gross margin
rate decreased by 3.7% from 83.5% for the year ended December 31, 2009 to 79.8% for the year ended December 31, 2010. The decrease
in gross margin rate was due to the sale of point of sale system, of which gross margin rate was 23.6%. The increase in business
tax and surcharges in line with the increase of revenues also cut down the gross margin.



The gross margin or the gross
margin rate for the MVAS and MPS was $11.2 million or 90.9% and $8.27 million or 68.5%, respectively, for the year ended December
31, 2010, and $8.64 million or 85.5% and $2.57 million or 77.2%, respectively, for the year ended December 31, 2009.



Operating expenses:  Operating
expenses, including selling, general and administrative expenses and R&D increased $2.84 million, or 99.9%, from $2.85 million
for the year ended December 31, 2009 to $5.69 million for the year ended December 31, 2010. The increase in operating expenses
was related to the expansion of administrative and R&D departments with recruitment of more employees, related office expenses,
as well as the addition of public company related expenses.



Interest expenses:   Interest
expenses increased $0.15 million, or 234.26%, from $0.07 million for the year ended December 31, 2009 to $0.22 million for the
year ended December 31, 2010 due to an increase in interest expenses from the notes payable with an annual interest rate of 12%
and short-term loans with an annual interest rate of 6.6375%.



Research and Development:
For the year ended December 31, 2010 and 2009, we spent $1.2 million and $0.44 million on research and development expenses, of
which $0.61 million and $0.34 million was attributable to MVAS and $0.59 million and $0.1 million was attributable to MPS.



Income from Operations:
Income from operations increased $5.4 million, or 64.6%, from $8.36 million for the year ended December 31, 2009 to $13.76 million
for the year ended December 31, 2010, principally due to revenue growth associated with our geographic expansion into additional
provinces. Income from operations margin rate decreased 5.8% from 62.2% for the year ended December 31, 2009 to 56.4% for the year
ended December 31, 2010, mainly caused by the excessive increase of cost and expenses over the growth of revenue.



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. No Post-Contract Customer Support (PCS) arrangement is included in system integration. 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.





6







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.



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



The FASB issued ASU 2010-13,
Compensation — Stock Compensation (ACS Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment
Award in the Currency of the Market in Which the Underlying Equity Security Trades. The ASU codifies the consensus reached in Emerging
Issues Task Force (EITF) Issue No. 09-J. The amendments to the Codification clarify that an employee share-based payment award
with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity shares
trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity
would not classify such an award as a liability if it otherwise qualifies as equity.



The amendments in the ASU are
effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. Earlier adoption
is permitted. The amendments are to be applied by recording a cumulative-effect adjustment to beginning retained earnings. We are
currently evaluating the impact of adopting this update on our consolidated financial statements.



Foreign Currency Translation





The functional currency of the Company is United States
dollars (“US$”), and the functional currency of Trunkbow Hong Kong is Hong Kong dollars (“HK$”). The functional
currency of the Company’s PRC subsidiaries and VIE 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 VIE, 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.









7







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, | 
|-------------------------- | ------------ | 
|                           | 2010         | 
|Year end RMB exchange rate | 6.6118       | 
|Average RMB exchange rate  | 6.7788       | 



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, 2010, our PRC subsidiaries and VIEs had aggregate unappropriated earnings of approximately
$21.1 million 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.



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.



Government Control of Currency Conversion



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.



Cash Flows



In summary, our cash flows were
as follows:



|                                                                        |  | Years Ended December 31, |           
|----------------------------------------------------------------------- |  | ------------------------ | ----------
|                                                                        |  | 2010                     |           
|                                                                        |  |                          |           
|Net cash flows used in operating activities                             |  | $                        | (8,637,933
|Net cash flows used in investing activities                             |  |                          | (999,465  
|Net cash flows provided by financing activities                         |  |                          | 16,333,451
|Effect of foreign currency fluctuation on cash and
    cash equivalents |  |                          | 258,224   
|Net increase (decrease) in cash and cash equivalents                    |  | $                        | 6,954,277 
|Cash and cash equivalents – beginning of year                           |  | $                        | 3,305,473 
|Cash and cash equivalents – end of
    year                             |  | $                        | 10,259,750



8







Operating Activities



Net cash flows used in operating
activities for the year ended December 31, 2010 was $8.64 million as compared with $1.31 million used in operating activities
for the year ended December 31, 2009, for a net increase of $7.33 million. This increase was mainly due to the significant increase
in the change of accounts receivable, loans receivable and other current assets and inventory, offset by the effect of an increase
in changes of tax payable and net income during the year ended December 31, 2010.



The increase in the change of
accounts receivable caused the operating cash flows to be out about $14.48 million. It’s mainly because of the increasing
revenue, which increased by $11.38 million, from $13.47 million to $24.84 million for the year ended December 31, 2009 and 2010,
respectively, while our revenue only increased by $0.55 million, when compared the data from year ended December 31, 2009
to year ended December 31, 2008.



The decrease in operating cash
flows was also attributable to a substantial increase in cash out flows from advances to suppliers of $6.88 million as of December
31, 2010 when compared to December 31, 2009, due to large demand of third party software and hardware to be used in our MVAS and
MPS platform deployment in 2011, and also due to the fact that we obtained lower price through large purchase. While there was
no material change in advance to suppliers as of December 31, 2009 when compared to December 31, 2008, there was no material effect
on the cash flow by advance to suppliers for the year ended December 31, 2009.



The inventory balance increased
significantly by $3.37 million from $0.31 million as of December 31, 2009 to $3.68 million as of December 31, 2010, due to the
purchase of point of sale systems from Verifone, related to the deployment of our mobile payment platforms.



The increase in operating cash
flows was attributable to a substantial increase in tax payable of $2.05 million as of December 31, 2010 when compared to December
31, 2009, due to our large gross margin which caused significant portion of value added tax output not offset by value added tax
input.



Investing Activities



For the year ended December
31, 2010, our main use of investing activities was for loans to third parties. The cash payments used in investing activities was
netted against the collections from amounts due from directors.



Financing Activities



Net cash flows provided
by financing activities for the year ended December 31, 2010 was $16.33 million as compared with $5.05 million provided by financing
activities for the year ended December 31, 2009.



Of the $5 million notes
payable as of December 31, 2009, $2 million was repaid in cash to the note holders in February and March 2010, and $3 million
was converted to 1,500,000 shares of common stock at $2.00 per share as a result of the share exchange and the February 2010 Offering.



The cash provided by financing
activities for the year ended December 31, 2010 included the net proceeds from the February 2010 Offering of $17.07 million and
the short-term loan of $1.77 million, offset by the repayment of $2 million notes payable.



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$24.4 million as of December 31, 2010.



Operating lease commitment



We lease office space under
a lease agreement with a term expiring in April 2014. The lease may be cancelled by either party with 30-days prior written notice.





9







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



|                              |  | Office Rental |        
|----------------------------- |  | ------------- | -------
|Year ending December 31, 2011 |  | $             | 227,946
|Year ending December 31, 2012 |  |               | 155,897
|Year ending December 31, 2013 |  |               | 28,025 
|Year ending December 31, 2014 |  |               | 6,171  
|Total                         |  | $             | 418,039



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



10









PART IV



|Item 1. | 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*                 |  | 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          
|                       |  |                                                                                                                                                                                     
|10.21*                 |  | Guaranty of Dr. Wanchun Hou with respect to Exhibit 10.20                                                                                                                           
|                       |  |                                                                                                                                                                                     
|10.22*                 |  | Guaranty of Qiang Li with respect to Exhibit 10.20                                                                                                                                  
|                       |  |                                                                                                                                                                                     
|10.23*                 |  | 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 10.20
|                       |  |                                                                                                                                                                                     
|10.24*                 |  | 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          
|                       |  |                                                                                                                                                                                     
|10.25*                 |  | Guaranty of Dr. Wanchun Hou with respect to Exhibit 10.24                                                                                                                           
|                       |  |                                                                                                                                                                                     
|10.26*                 |  | Guaranty of Qiang Li with respect to Exhibit 10.24                                                                                                                                  
|                       |  |                                                                                                                                                                                     
|10.27*                 |  | 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 10.24
|                       |  |                                                                                                                                                                                     
|14.1                   |  | Code of Ethics(3)                                                                                                                                                                   





11









|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.

|* | 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.
|--- | --------------------------------------------------------------------------------------------------------------------------------------





12











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
|------------- | ---------------------------------------
|              |                                        
|July 3, 2012  |                                        
|(Date Signed) |                                        



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                                     |  | July 3, 2012
|Dr. Hou WanChun     |  |                                                                        |  |             
|                    |  |                                                                        |  |             
|/s/ Li Qiang        |  | Chief Executive Officer and Director
    (Principal Executive Officer) |  | July 3, 2012
|Li Qiang            |  |                                                                        |  |             
|                    |  |                                                                        |  |             
|/s/ Ye Yuan Jun     |  | Chief Financial Officer (Principal Accounting Officer)                 |  | July 3, 2012
|Ye Yuan Jun         |  |                                                                        |  |             
|                    |  |                                                                        |  |             
|/s/ Bao Jihong      |  | Director                                                               |  | July 3, 2012
|Bao Jihong          |  |                                                                        |  |             
|                    |  |                                                                        |  |             
|/s/ Wang Xin        |  | Director                                                               |  | July 3, 2012
|Wang Xin            |  |                                                                        |  |             
|                    |  |                                                                        |  |             
|/s/ Albert Liu      |  | Director                                                               |  | July 3, 2012
|Albert Liu          |  |                                                                        |  |             
|                    |  |                                                                        |  |             
|/s/ Regis Kwong     |  | Director                                                               |  | July 3, 2012
|Regis Kwong         |  |                                                                        |  |             
|                    |  |                                                                        |  |             
|/s/ Dr. Tan Kok Hui |  | Director                                                               |  | July 3, 2012
|Dr. Tan Kok Hui     |  |                                                                        |  |             
|                    |  |                                                                        |  |             
|/s/ Iris Geng       |  | Director                                                               |  | July 3, 2012
|Iris Geng           |  |                                                                        |  |             
|                    |  |                                                                        |  |             
|/s/ Dr. Lv Ting Jie |  | Director                                                               |  | July 3, 2012
|Dr. Lv Ting Jie     |  |                                                                        |  |             
|                    |  |                                                                        |  |             
|/s/ Huang Zhaoxing  |  | Director                                                               |  | July 3, 2012
|Huang Zhaoxing      |  |                                                                        |  |             
|                    |  |                                                                        |  |             
|/s/ Li Dong         |  | Director                                                               |  | July 3, 2012
|Li Dong             |  |                                                                        |  |             













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*                 |  | 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          
|                       |  |                                                                                                                                                                                     
|10.21*                 |  | Guaranty of Dr. Wanchun Hou with respect to Exhibit 10.20                                                                                                                           
|                       |  |                                                                                                                                                                                     
|10.22*                 |  | Guaranty of Qiang Li with respect to Exhibit 10.20                                                                                                                                  
|                       |  |                                                                                                                                                                                     
|10.23*                 |  | 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 10.20
|                       |  |                                                                                                                                                                                     
|10.24*                 |  | 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          
|                       |  |                                                                                                                                                                                     
|10.25*                 |  | Guaranty of Dr. Wanchun Hou with respect to Exhibit 10.24                                                                                                                           
|                       |  |                                                                                                                                                                                     
|10.26*                 |  | Guaranty of Qiang Li with respect to Exhibit 10.24                                                                                                                                  
|                       |  |                                                                                                                                                                                     
|10.27*                 |  | 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 10.24
|                       |  |                                                                                                                                                                                     
|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.                                                                             















|* | 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.
|--- | --------------------------------------------------------------------------------------------------------------------------------------



















REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM





To the Board of Directors and Shareholders of
Trunkbow International Holdings Limited



We have audited the accompanying consolidated
balance sheet of Trunkbow International Holdings Limited (“the Company”) as of December 31, 2010, and the related
consolidated statement of income and comprehensive income, changes in stockholders’ equity and cash flows for the year then
ended. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion
on these financial statements based on our audit.



We conducted our audit 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
audit 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 audit 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, 2010, and the results of its operations and its cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.



/s/ Bernstein & Pinchuk LLP



March 31, 2011 except for Note 24, as to which the date
is December 30, 2011 and Note 26, which is dated July 3, 2012

New York, New York







F-1











Report of Independent
Registered Public Accounting Firm



Board of Directors and Stockholders

Trunkbow International Holdings Limited

Beijing, China



We have audited the accompanying consolidated
balance sheet of Trunkbow International Holdings Limited and Subsidiaries (the “Company”) as of December 31, 2009,
and the related consolidated statements of income and comprehensive income, stockholders’ equity, and cash flows for the
year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these consolidated financial statements based on our audit.



We conducted our audit 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
audit 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. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as, evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.



In our opinion, the financial statements
referred to above present fairly, in all material respects, the consolidated financial position of Trunkbow International Holdings
Limited and Subsidiaries as of December 31, 2009, and the consolidated results of its operations and its consolidated cash flows
for the year then ended, in conformity with accounting principles generally accepted in the United States of America.





/s/ Holtz
Rubenstein   Reminick LLP

Melville, New York

July 3, 2012







F-2











TRUNKBOW INTERNATIONAL
HOLDINGS LIMITED

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                       |  | December 31, |           
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ----------
|                                                                                                                                                                       |  | 2010         |           
|ASSETS                                                                                                                                                                 |  |              |           
|Current assets                                                                                                                                                         |  |              |           
|Cash and cash equivalents                                                                                                                                              |  | $            | 10,259,750
|Restricted deposit                                                                                                                                                     |  |              | 362,987   
|Accounts receivable                                                                                                                                                    |  |              | 25,658,184
|Advances to suppliers                                                                                                                                                  |  |              | 6,881,368 
|Loans receivable and other current assets, net                                                                                                                         |  |              | 3,900,168 
|Due from directors                                                                                                                                                     |  |              | 79,256    
|Inventories                                                                                                                                                            |  |              | 3,681,450 
|Total current assets                                                                                                                                                   |  |              | 50,823,163
|Property and equipment, net                                                                                                                                            |  |              | 484,761   
|Long-term prepayment                                                                                                                                                   |  |              | 358,397   
|TOTAL ASSETS                                                                                                                                                           |  | $            | 51,666,321
|LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                   |  |              |           
|Current liabilities                                                                                                                                                    |  |              |           
|Accounts payable                                                                                                                                                       |  | $            | 853,762   
|Accrued expenses and other current liabilities                                                                                                                         |  |              | 593,846   
|Short-term loan                                                                                                                                                        |  |              | 1,814,937 
|Due to directors                                                                                                                                                       |  |              | —         
|Notes payable                                                                                                                                                          |  |              | —         
|Taxes payable                                                                                                                                                          |  |              | 3,718,963 
|Total current liabilities                                                                                                                                              |  |              | 6,981,508 
|Other non-current liabilities                                                                                                                                          |  |              | 138,767   
|Total liabilities                                                                                                                                                      |  |              | 7,120,275 
|COMMITMENTS AND CONTINGENCIES                                                                                                                                          |  |              |           
|STOCKHOLDERS’ EQUITY                                                                                                                                                   |  |              |           
|Preferred Stock: par value USD0.001, authorized 10,000,000 shares, none
    issued and outstanding at December 31, 2010 and 2009                                       |  |              | —         
|Common Stock: par value USD0.001, authorized 190,000,000 shares, issued
    and outstanding 32,472,075 shares at December 31, 2010 and 19,562,888 at December 31, 2009 |  |              | 32,472    
|Additional paid-in capital                                                                                                                                             |  |              | 21,384,050
|Appropriated retained earnings                                                                                                                                         |  |              | 2,428,847 
|Unappropriated retained earnings                                                                                                                                       |  |              | 20,125,001
|Accumulated other comprehensive income/(loss)                                                                                                                          |  |              | 575,676   
|Total stockholders’ equity                                                                                                                                             |  |              | 44,546,046
|TOTAL LIABILITIES AND STOCKHOLDERS’
    EQUITY                                                                                                                         |  | $            | 51,666,321



See
notes to the consolidated financial statements.



F-3







TRUNKBOW INTERNATIONAL
HOLDINGS LIMITED

CONSOLIDATED STATEMENTS
OF INCOME AND COMPREHENSIVE INCOME



|                                                     |  | Years Ended December 31, |           
|---------------------------------------------------- |  | ------------------------ | ----------
|                                                     |  | 2010                     |           
|                                                     |  |                          |           
|Revenues                                             |  | $                        | 24,843,836
|Less: Business tax and surcharges                    |  |                          | 455,919   
|Net revenues                                         |  |                          | 24,387,917
|Cost of revenues                                     |  |                          | 4,929,974 
|Gross margin                                         |  |                          | 19,457,943
|Operating expenses                                   |  |                          |           
|Selling and distribution expenses                    |  |                          | 1,412,499 
|General and administrative expenses                  |  |                          | 3,075,833 
|Research and development expenses                    |  |                          | 1,203,264 
|                                                     |  |                          | 5,691,596 
|Income from operations                               |  |                          | 13,766,347
|                                                     |  |                          |           
|Interest income                                      |  |                          | (37,204   
|Interest expense                                     |  |                          | 220,668   
|Other expenses                                       |  |                          | 41,998    
|                                                     |  |                          | 225,462   
|Income before income tax expense                     |  |                          | 13,540,885
|Income tax expense                                   |  |                          | —         
|Net income                                           |  |                          | 13,540,885
|Foreign currency translation fluctuation             |  |                          | 1,170,811 
|Comprehensive income                                 |  | $                        | 14,711,696
|Weighted average number of common shares outstanding |  |                          |           
|Basic and diluted                                    |  |                          | 31,022,002
|Earnings per share                                   |  |                          |           
|Basic and diluted                                    |  | $                        | 0.44      



See
notes to the consolidated financial statements.



F-4







TRUNKBOW INTERNATIONAL
HOLDINGS LIMITED

CONSOLIDATED STATEMENTS
OF CASH FLOWS



|                                                                              |  | Years Ended December 31, |            
|----------------------------------------------------------------------------- |  | ------------------------ | -----------
|                                                                              |  | 2010                     |            
|                                                                              |  |                          |            
|Cash flows from operating activities                                          |  |                          |            
|Net income                                                                    |  | $                        | 13,540,885 
|Adjustments to reconcile net income to net cash used in operating activities: |  |                          |            
|Depreciation and amortization                                                 |  |                          | 93,135     
|Loss on disposal of property and equipment                                    |  |                          | —          
|Provision for doubtful debts                                                  |  |                          | —          
|Changes in operating assets and liabilities:                                  |  |                          |            
|Accounts receivable                                                           |  |                          | (14,480,828
|Advance to suppliers and other assets                                         |  |                          | (6,369,759 
|Inventories                                                                   |  |                          | (3,280,951 
|Long-term prepayment                                                          |  |                          | (784,576   
|Accounts payable                                                              |  |                          | 498,222    
|Accrued expenses and other current liabilities                                |  |                          | 118,273    
|Amount due to directors                                                       |  |                          | (24,641    
|Taxes payable                                                                 |  |                          | 2,052,307  
|Net cash flows used in operating activities                                   |  |                          | (8,637,933 
|Cash flows from investing activities                                          |  |                          |            
|Acquisition of property and equipment                                         |  |                          | (449,169   
|Loans to third parties                                                        |  |                          | (2,579,165 
|Collection in (increase in) amount due from directors                         |  |                          | 2,028,869  
|Net cash flows used in investing activities                                   |  |                          | (999,465   
|Cash flows from financing activities                                          |  |                          |            
|Increase in restricted deposit                                                |  |                          | (362,987   
|Proceeds from issuance of common stock (net of finance costs)                 |  |                          | 17,073,720 
|Repayment of loans from third parties                                         |  |                          | (147,520   
|Repayment of notes payable                                                    |  |                          | (2,000,000 
|Proceeds from issuance of notes payable                                       |  |                          | —          
|Proceeds from short-term loan                                                 |  |                          | 1,770,238  
|Net cash flows provided by financing activities                               |  |                          | 16,333,451 
|Effect of exchange rate fluctuation on cash and cash
    equivalents          |  |                          | 258,224    
|Net increase in cash and cash equivalents                                     |  |                          | 6,954,277  
|Cash and cash equivalents – beginning
    of the year                         |  |                          | 3,305,473  
|Cash and cash equivalents – end of
    the year                               |  | $                        | 10,259,750 
|Supplemental disclosure of cash flow information                              |  |                          |            
|Cash paid for interest                                                        |  | $                        | 220,668    
|Cash paid for income taxes                                                    |  | $                        | —          
|Supplemental disclosure of noncash financing activities                       |  |                          |            
|Conversion of notes payable to common stock                                   |  | $                        | 3,000,000  



See notes to the consolidated
financial statements



F-5







TRUNKBOW INTERNATIONAL
HOLDINGS LIMITED

CONSOLIDATED STATEMENTS
OF CHANGES IN STOCKHOLDERS’ EQUITY



|                                           |  | Common stock |            |  | Additional
        paid-in |   |        | Appropriated
        retained |  |   | Unappropriated
        retained |   |  | Accumulated
        other
        comprehensive |           |  |               |  
|------------------------------------------ |  | ------------ | ---------- |  | -------------------------- | - | ------ | ----------------------------- |  | - | ------------------------------- | - |  | ----------------------------------------------- | --------- |  | ------------- | -
|                                           |  | Shares       |            |  | Amount                     |   |        | Capital                       |  |   | earnings                        |   |  | earnings                                        |           |  | income/(loss) |  
|                                           |  |              |            |  |                            |   |        |                               |  |   |                                 |   |  |                                                 |           |  |               |  
|Balance at January 1, 2009                 |  |              | 19,562,888 |  |                            | $ | 19,563 |                               |  | $ | 1,323,239                       |   |  | $                                               | 27,518    |  |               | $
|Net income                                 |  |              | -          |  |                            |   | -      |                               |  |   | -                               |   |  |                                                 | -         |  |               |  
|Appropriation of statutory surplus reserve |  |              | -          |  |                            |   | -      |                               |  |   | -                               |   |  |                                                 | 982,968   |  |               |  
|Foreign currency Translation adjustment    |  |              | -          |  |                            |   | -      |                               |  |   | -                               |   |  |                                                 | -         |  |               |  
|Balance at December 31, 2009               |  |              | 19,562,888 |  |                            |   | 19,563 |                               |  |   | 1,323,239                       |   |  |                                                 | 1,010,486 |  |               |  
|                                           |  |              |            |  |                            |   |        |                               |  |   |                                 |   |  |                                                 |           |  |               |  
|Net income                                 |  |              | -          |  |                            |   | -      |                               |  |   | -                               |   |  |                                                 | -         |  |               |  
|Stock issued in recapitalization           |  |              | 1,687,112  |  |                            |   | 1,687  |                               |  |   | (1,687                          | ) |  |                                                 | -         |  |               |  
|Issue of shares                            |  |              | 11,222,075 |  |                            |   | 11,222 |                               |  |   | 20,062,498                      |   |  |                                                 | -         |  |               |  
|Appropriation of statutory surplus reserve |  |              | -          |  |                            |   | -      |                               |  |   | -                               |   |  |                                                 | 1,418,361 |  |               |  
|Foreign currency Translation adjustment    |  |              | -          |  |                            |   | -      |                               |  |   | -                               |   |  |                                                 | -         |  |               |  
|Balance at December 31, 2010               |  |              | 32,472,075 |  |                            | $ | 32,472 |                               |  | $ | 21,384,050                      |   |  | $                                               | 2,428,847 |  |               | $



See
notes to the consolidated financial statements.



F-6





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 entity (“VIE”).
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. 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.  As a result of these contractual arrangements,
which assigned all of Trunkbow Technologies’ 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’ operations
and Trunkbow Shandong’s ability to extract the profits from the operation of Trunkbow Technologies, and assume the Trunkbow
Technologies’ 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 consistent with the provisions of FASB Accounting
Standards Codification (“ASC”) 810-10.



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



F-7





2 — SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES



|a) | Change of reporting entity and basis of presentation
|-- | ----------------------------------------------------



As a result of the Share Exchange
on February 10, 2010, the former Trunkbow shareholders owned a majority of the common stock of the Company. The transaction was
regarded as a reverse merger whereby Trunkbow was considered to be the accounting acquirer as its shareholders retained control
of the Company after the Share Exchange, although the Company is the legal parent company. The share exchange was treated as a
recapitalization of the Company. As such, Trunkbow (and its historical financial statements) is the continuing entity for financial
reporting purposes. Pursuant to the terms of the Share Exchange, BP5 was delivered with no assets and no liabilities at time of
closing. Following the Share Exchange, the company changed its name from Bay Peak 5 Acquisition Corp. to Trunkbow International
Holdings Limited. The financial statements have been prepared as if Trunkbow had always been the reporting company and then on
the share exchange date, had changed its name and reorganized its capital stock.



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 VIE, Trunkbow, Trunkbow
Hong Kong, Trunkbow Shandong, Trunkbow Shenzhen and Trunkbow Technologies.



|b) | Principles of Consolidation
|-- | ---------------------------



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



|c) | Reclassification
|-- | ----------------



The comparative 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 is United States dollars (“US$”), and the functional currency of Trunkbow Hong Kong is Hong Kong dollars
(“HK$”). The functional currency of the Company’s PRC subsidiaries and VIE 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 VIE, 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.



F-8





The exchange rates applied
are as follows:



|                           | December 31, | 
|-------------------------- | ------------ | 
|                           | 2010         | 
|Year end RMB exchange rate | 6.6118       | 
|Average RMB exchange rate  | 6.7788       | 



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. As of December 31, 2010 and 2009, management has determined that no allowance
for doubtful accounts is required.



|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                 |  | 5     | 
|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.



F-9





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 years ended December 31, 2010 and 2009, respectively.



|j) | 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 17.



The Group did not have any
nonfinancial assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2010 and 2009, respectively.



|k) | 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.



F-10





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. No Post-Contract Customer Support (PCS) arrangement is included
in system integration. 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:



|(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.
|--- | ---------------------------



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. No PCS arrangement is included in software sales.



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.
|--- | ---------------------------



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.



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: (i) persuasive evidence that an arrangement exists; (ii) delivery having occurred;
(iii) whether the vender’s fee is fixed or determinable; and (iv) collectibility being probable. We recognize revenue under
ASC 985-605-25 because:

F-11





(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 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.



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.



|l) | Cost of revenues
|-- | ----------------



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



|m) | 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.



F-12







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 three
and four customers that accounted for approximately 50.3% and 80.9% of revenues during the years ended December 31, 2010 and 2009,
respectively. These customers accounted for approximately 55.7% and 85.2% of accounts receivable balance as of December 31, 2010
and 2009, respectively.



Major Suppliers



The Group had purchases
from two vendors that accounted for approximately 57.2% and 75.1% of purchases during the years ended December 31, 2010 and 2009,
respectively. These vendors accounted for approximately nil and 79.8% of accounts payable balance as of December 31, 2010
and 2009, respectively.



F-13







|n) | 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.



|o) | 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.



|p) | 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 of the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the
period in which the differences are expected to reverse. The Group records a valuation allowance to offset deferred tax assets
if based 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 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. The Group had no deferred tax assets and liabilities recognized for any of the year ended December
31, 2010 and 2009, respectively.



Value added taxes



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



|q) | 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, 2010 and 2009, 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.



F-14







The Company’s subsidiaries
and VIE 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, 2010 and 2009 of the Company’s subsidiaries and VIE remain open
in the relevant taxing jurisdictions.



|r) | 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 by the weighted average number of common shares considered to be outstanding during the period. Diluted
earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were
exercised or converted 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.



|s) | Appropriated Retained Earnings
|-- | ------------------------------



The income from the Company’s
subsidiaries and VIE 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
subsidiaries and VIE 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 surplus reserve fund
is 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.



|t) | 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.



|u) | 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.



|v) | Recently enacted accounting standards
|-- | -------------------------------------



The FASB issued ASU 2010-13,
Compensation—Stock Compensation (ACS Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award
in the Currency of the Market in Which the Underlying Equity Security Trades. The ASU codifies the consensus reached in Emerging
Issues Task Force (EITF) Issue No. 09-J. The amendments to the Codification clarify that an employee share-based payment award
with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity shares
trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity
would not classify such an award as a liability if it otherwise qualifies as equity.



The amendments in the ASU are
effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. Earlier adoption
is permitted. The amendments are to be applied by recording a cumulative-effect adjustment to beginning retained earnings. We are
currently evaluating the impact of adopting this update on our consolidated financial statements.



F-15







3 — RESTRICTED
DEPOSIT



|                   |  | December 31, |        
|------------------ |  | ------------ | -------
|                   |  | 2010         |        
|                   |  |              |        
|Restricted deposit |  | $            | 362,987



The restricted deposit as of
December 31, 2010 was security deposit for the short-term loan with balance of $ 1,814,937.



4 — ACCOUNTS
RECEIVABLE



At December 31, 2010 and 2009,
accounts receivable consisted of:



|                    |  | December 31, |           
|------------------- |  | ------------ | ----------
|                    |  | 2010         |           
|                    |  |              |           
|Accounts receivable |  | $            | 25,658,184



The Group has not recognized
an allowance for doubtful receivables because there has not been a significant change in credit quality and the amounts are still
considered recoverable. The Group does not hold any collateral or other credit enhancements over these balances. The Group has
not had any write-off of trade receivables during the period presented. $3,863,588 was subsequently collected by March 31, 2011.



5 — ADVANCE
TO SUPPLIERS



At December 31, 2010 and 2009,
advance to suppliers consisted of:



|                      |  | December 31, |          
|--------------------- |  | ------------ | ---------
|                      |  | 2010         |          
|                      |  |              |          
|Advances to suppliers |  | $            | 6,881,368



Advances 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.



F-16







6 — LOANS
RECEIVABLE AND OTHER CURRENT ASSETS, NET



Loans receivable and other
current assets at December 31, 2010 and 2009 are summarized as follows:



|                                  |  | December 31, |          
|--------------------------------- |  | ------------ | ---------
|                                  |  | 2010         |          
|                                  |  |              |          
|Prepaid advertisement             |  | $            | 483,983  
|Deposits                          |  |              | 49,199   
|Loans to third parties            |  |              | 3,187,190
|Staff advances                    |  |              | 257,974  
|Prepaid expenses                  |  |              | 210,791  
|Others                            |  |              | 77,943   
|                                  |  | $            | 4,267,080
|Less: Allowance for doubtful debt |  |              | 366,912  
|                                  |  | $            | 3,900,168



Prepaid advertisement is amortized
as the expense incurred. Advertising expense for the year ended December 31, 2010 and 2009 were $118,016 and nil, respectively.



Loans to third party represent
loans to the Company’s distributors. As part of the support for our MVAS/MPS deployment, the Company advanced funds in the
form of loan to the distributors for the purchase of third party software and hardware. Once the hardware and software is delivered
to the carriers, the distributors will get paid and repay the loan to us. As of March 31, 2011, $1,527,572 of loans to third parties
were subsequently collected.



7 — AMOUNT
DUE FROM (TO) DIRECTORS



a) As of December 31, 2010 and
2009, amount due from directors consisted of:



|                          |  | December 31, |       
|------------------------- |  | ------------ | ------
|                          |  | 2010         |       
|                          |  |              |       
|Amount due from Directors |  | $            | 79,256



Amount due from directors represented
advance to the directors for expenses to be paid on behalf of the company.



b) At December 31, 2010 and
2009, amount due to directors consisted of:



|                        |  | December 31, |  
|----------------------- |  | ------------ | -
|                        |  | 2010         |  
|                        |  |              |  
|Amount due to Directors |  | $            | —



8 — INVENTORIES



At December 31, 2010 and 2009,
inventories consisted of:



|                            |  | December 31, |          
|--------------------------- |  | ------------ | ---------
|                            |  | 2010         |          
|                            |  |              |          
|System integration hardware |  | $            | 825,818  
|Point of sale systems       |  |              | 2,855,632
|                            |  | $            | 3,681,450



F-17







The point of sale systems were
purchased from Verifone, a related party of the Company.



9 — 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, 2010 and 2009 are summarized as follows:



|                               |  | December 31, |        
|------------------------------ |  | ------------ | -------
|                               |  | 2010         |        
|                               |  |              |        
|Motor vehicles                 |  | $            | 51,386 
|Furniture and office equipment |  |              | 103,242
|Electronic equipment           |  |              | 287,231
|Telecommunication equipment    |  |              | 115,165
|Leasehold improvement          |  |              | 58,250 
|                               |  |              | 615,274
|Less: Accumulated depreciation |  |              | 130,513
|                               |  | $            | 484,761



Depreciation expense for the
years ended December 31, 2010 and 2009 was $93,135 and $20,362, respectively.



10 — LONG-TERM
PREPAYMENT



|                       |  | December 31, |        
|---------------------- |  | ------------ | -------
|                       |  | 2010         |        
|                       |  |              |        
|Office rental          |  | $            | 45,689 
|Prepaid membership fee |  |              | 268,711
|Others                 |  |              | 43,997 
|                       |  | $            | 358,397



11 — ACCRUED
EXPENSES AND OTHER CURRENT LIABILITIES



The breakdowns of accrued expenses
and other current liabilities as of December 31, 2010 and 2009 are as follows:



|                         |  | December 31, |        
|------------------------ |  | ------------ | -------
|                         |  | 2010         |        
|                         |  |              |        
|Accrued payroll          |  | $            | 177,290
|Advance from customers   |  |              | 75,622 
|Loans from third parties |  |              | 37,811 
|Advances to staff        |  |              | 143,341
|Accrued expenses         |  |              | 94,060 
|Others                   |  |              | 65,722 
|                         |  | $            | 593,846



F-18







Loans from third parties are
short-term and non-interest bearing.



12 — SHORT-TERM
LOAN



|                |  | December 31, |          
|--------------- |  | ------------ | ---------
|                |  | 2010         |          
|                |  |              |          
|Short-term loan |  | $            | 1,814,937



The short-term loan as of December
31, 2010 was borrowed from China Bohai Bank, guaranteed by Trunkbow Shandong, Mr. Wanchun Hou and Mr. Qiang Li, and secured by
a restricted deposit of $362,987. The loan is due on May 5, 2011 with floating lending rate, 25% up PBOC benchmark rate. The interest
expense related to the short term loan was $93,118 for the year ended December 31, 2010.



13 — NOTES
PAYABLE



|                                   |  | December 31, |  
|---------------------------------- |  | ------------ | -
|                                   |  | 2010         |  
|                                   |  |              |  
|Bridgeway Asset Management Limited |  | $            | —
|Bay Peak LLC                       |  |              | —
|Mengyuan Song                      |  |              | —
|                                   |  | $            | —



Among the $5,000,000 notes,
$1,000,000 was repaid in cash to Bridgeway in March 2010, $1,000,000 was repaid in cash to Bay Peak LLC in February 2010, and
another $1,000,000 was converted to 500,000 shares at $2.00 per share as a result of the share exchange. The notes of $2,000,000
issued to Mengyuan Song were converted to 1,000,000 shares at $2.00 per share in the February 2010 Offering.



The interest expenses related
to notes were $126,782 and $66,016 for the years ended December 31, 2010 and 2009, respectively.



14 — TAXES
PAYABLE



|                        |  | December 31, |          
|----------------------- |  | ------------ | ---------
|                        |  | 2010         |          
|                        |  |              |          
|Value Added Tax Payable |  | $            | 2,152,999
|Income Tax Payable      |  |              | 1,290,066
|Others                  |  |              | 275,898  
|                        |  | $            | 3,718,963



15 — OTHER
NON-CURRENT LIABILITIES



|                              |  | December 31, |        
|----------------------------- |  | ------------ | -------
|                              |  | 2010         |        
|                              |  |              |        
|Other non-current liabilities |  | $            | 138,767



F-19







Other non-current liabilities
represented government subsidy. Such subsidy is not treated as taxable income and must be used for funding its software research
and development.



16 — 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, 2010. 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. Trunkbow Hong Kong did not earn any income that was derived in Hong Kong for the year ended December
31, 2010 and therefore was not subject to Hong Kong Profits Tax. The payments of dividends by Hong Kong companies are not subject
to any Hong Kong withholding tax.



(ii)           PRC
subsidiaries and VIE



The subsidiaries and VIE incorporated
in the PRC are generally subject to a corporate income tax rate of 25% commencing January 1, 2008 except for those subsidiaries
and VIE 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.



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%. Trunkbow Shenzhen was
in net operation loss for the year ended December 31, 2010 and no income tax provision was recorded.



F-20







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. Trunkbow Technologies was
not recording a current year tax provision because it was utilizing prior year net operation carryforward.



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,
2010 and 2009 respectively:



|                                                           |  | Years Ended December 31, |           
|---------------------------------------------------------- |  | ------------------------ | ----------
|                                                           |  | 2010                     |           
|                                                           |  |                          |           
|PRC statutory tax rate                                     |  |                          | 25        
|Accounting income before tax                               |  | $                        | 14,256,065
|Computed expected income tax expenses                      |  |                          | 3,564,016 
|Loss from subsidiaries and contractually controlled entity |  |                          | 18,452    
|Less: tax exemption                                        |  |                          | 3,458,473 
|Less: net operation loss carryforward                      |  |                          | 123,895   
|Income tax expenses                                        |  | $                        | —         



17— STOCKHOLDERS’
EQUITY



In a reverse acquisition the
historical stockholders’ equity of the accounting acquirer prior to the merger is retroactively reclassified (a recapitalization)
for the equivalent number of shares received in the merger after giving effect to any difference in par value of the registrant’s
and the accounting acquirer’s stock by an offset in paid in capital.



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.



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, 2010.



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.



Net proceeds were approximately
$20,100,000 (including the conversion of $3,000,000 notes to common stock), net of issuance costs of $2,370,431, including (1)
placement agent fees of $1,568,091 to Merriman Curhan Ford & Co.; (2) legal and professional fees of $555,510 and (3) other
fees directly related to the financing of $246,830.



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.



F-21







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, 2010, no
outstanding warrants had been exercised.



In connection with our IPO
in February 2011, Roth Capital Partners, LLC received warrants to purchase a number of shares of our common stock equal to 5% of
the shares of common stock issued in the offering. The warrants have a term of three years, have an exercise price equal to 120%
of the public offering price of the common stock, 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 for a period of 180
days immediately following the effective date of the registration statement, except as provided in FINRA Rule 5110(g)(2).



Escrow shares



In connection with the 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,
2010 (the “Actual 2010 EPS”) is not at least $0.37 on a fully diluted basis then the Controlling 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.



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.



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.



F-22







For the years ended December
31, 2010 and 2009, revenues and cost of revenues consisted of:



|                            |  | Years Ended December 31, |           
|--------------------------- |  | ------------------------ | ----------
|                            |  | 2010                     |           
|                            |  |                          |           
|Gross Revenues              |  |                          |           
|System integration          |  | $                        | 9,368,839 
|Software sales              |  |                          | 14,916,350
|Maintenance service         |  |                          | 404,513   
|Shared revenue              |  |                          | 154,134   
|                            |  |                          | 24,843,836
|Less:                       |  |                          |           
|Business tax and surcharges |  |                          | 455,919   
|Cost of Revenues            |  |                          |           
|Equipment costs             |  |                          | 4,182,148 
|Labor Costs                 |  |                          | 747,826   
|                            |  |                          | 4,929,974 
|Gross margin                |  | $                        | 19,457,943



19 — 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, 2010, 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 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, |           
|--------------------------- |  | ------------------------ | ----------
|                            |  | 2010                     |           
|                            |  |                          |           
|MVAS Technology Platforms   |  |                          |           
|Gross Revenues              |  | $                        | 12,660,109
|Business tax and surcharges |  |                          | 345,628   
|Cost of Revenues            |  |                          | 1,124,594 
|                            |  | $                        | 11,189,887
|Mobile Payment Solutions    |  |                          |           
|Gross Revenues              |  | $                        | 12,183,727
|Business tax and surcharges |  |                          | 110,291   
|Cost of Revenues            |  |                          | 3,805,380 
|                            |  | $                        | 8,268,056 



F-23







20 — EMPLOYEE
DEFINED CONTRIBUTION PLAN



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, were  $255,909 and $212,182 for years ended December 31, 2010 and 2009, respectively.



21 — COMMITMENTS
AND CONTINGENCIES



Commitments



Leasing Arrangements



The Group has entered into
commercial leases for offices with a term expiring in April 2014. 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, 2011 |  | $             | 227,946
|Year ending December 31, 2012 |  |               | 155,897
|Year ending December 31, 2013 |  |               | 28,025 
|Year ending December 31, 2014 |  |               | 6,171  
|Total                         |  | $             | 418,039



Contingencies



Contingencies through March
31, 2011 have been considered by the Company and none were noted which were required to be disclosed.



22 — EARNINGS
PER SHARE



|                                                     |  | Years Ended December 31, |           
|---------------------------------------------------- |  | ------------------------ | ----------
|                                                     |  | 2010                     |           
|                                                     |  |                          |           
|Numerator:                                           |  |                          |           
|Net income                                           |  | $                        | 13,540,885
|Denominator:                                         |  |                          |           
|Weighted average number of common shares outstanding |  |                          |           
|-Basic and diluted                                   |  |                          | 31,022,002
|Earnings per share                                   |  |                          |           
|-Basic and diluted                                   |  | $                        | 0.44      



F-24







All share and per share data
have been retroactively adjusted to reflect the recapitalization of the Company after the share exchange agreement. As of December
31, 2010, the Company has not traded in the public market, the Company considered the fair value of the warrants per share at date
of issuance by using Binominal Option Pricing Model as the market price per share of the common stock which was $1.18, and because
this market price is lower than the exercise price per share of the warrants which is $2, there is no dilutive effective on the
earnings per share.



23 — RELATED
PARTY TRANSACTIONS



1) Purchase from related parties

|                                        |  | Years Ended December 31, |          
|--------------------------------------- |  | ------------------------ | ---------
|                                        |  | 2010                     |          
|                                        |  |                          |          
|VeriFone Electronic (Beijing) Co., Ltd. |  | $                        | 5,035,589



VeriFone invested $5 million
in the February 2010 Offering and owns 7.7% of our common stock as of December 31, 2010. 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.



Verifone Electronic (Beijing)
Co., Ltd is the subsidiary of Verifone in China.



24 — 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.

F-25







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.



As a result of these contractual
arrangements, we are considered to be the primary beneficiary of Trunkbow Technologies; we consolidate the results of operations,
assets and liabilities of Trunkbow Technologies 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 may not be as effective in providing us with control over the Trunkbow Technologies as
direct ownership. We rely on these contractual rights to effect control and management of the VIE, which exposes us to the
risk of potential breach of contract by the shareholders of Trunkbow Technologies for a number of reasons. For example, their interests
as shareholders of Trunkbow Technologies 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.



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 VIE, 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 VIE resulting in its deconsolidation in financial reporting and loss in our market valuation.



In addition, if our VIE 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 VIE 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 VIE 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.



F-26







Summary information regarding
consolidated VIE is as follows:



|                                               | December 31, |   | December 31, | 
|---------------------------------------------- | ------------ | - | ------------ | 
|                                               | 2010         |   | 2009         | 
|                                               |              |   |              | 
|Assets:                                        |              |   |              | 
|Cash and cash equivalents                      |              | $ | 904,614      | 
|Accounts receivable                            |              |   | 2,740,005    | 
|Loans receivable and other current assets, net |              |   | 243,449      | 
|Inventories                                    |              |   | 67,202       | 
|Due from directors                             |              |   | 4,611        | 
|Property and equipment, net                    |              |   | 24,980       | 
|Total Assets                                   |              | $ | 3,984,861    | 
|                                               |              |   |              | 
|Liabilities:                                   |              |   |              | 
|Accounts payable                               |              | $ | 5,276        | 
|Accrued expenses and other current liabilities |              |   | 215,064      | 
|Due to directors                               |              |   | 15,970       | 
|Short-term loan                                |              |   | 1,814,937    | 
|Taxes payable                                  |              |   | 1,758,905    | 
|Total Liabilities                              |              | $ | 3,810,152    | 



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



For the fiscal year ended December
31, 2010, the financial performance of VIE reported in the consolidated statements of income and comprehensive income includes
revenues of $2,879,686, cost of revenues of $1,781,515, operating expenses of $480,184 and net income of $495,580.



For the fiscal year ended December
31, 2009, the financial performance of VIE reported in the consolidated statements of income and comprehensive income includes
revenues of $1,216,120, cost of revenues of $470,844, operating expenses of $2,082,623 and net loss of $1,371,227.



25 —  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:



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 are $18,109,988 after deduction
of $1,400,000 of underwriter’s commission, and $490,012 of legal and professional fees.



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.





F-27







26 —  EVENTS OCCURRING
SUBSEQUENT TO THE ISSUANCE OF THE ORIGINAL 2010 FORM 10-K





1) Bank
facility from China Minsheng Banking corporation



On November 9, 2011, Trunkbow
Shandong obtained total loan facility from China Minsheng Banking Corporation Limited of RMB50,000,000 (approximately $7,913,271)
with 8.856% of annual interest rate. The loan is guaranteed by Mr. Wanchun Hou and his spouse, Mr. Qiang Li and his spouse, and
also pledged by Mr. Qiang Li’s personal properties, Trunkbow Shandong’s land use rights and Trunkbow Shandong’s
accounts receivable.







2) Bank facility from Agriculture Bank of China



On March 2, 2012, Trunkbow
Shandong obtained a RMB 70,000,000 (approximately $11,078,579) total bank facility from Agriculture Bank of China. RMB43,800,000
(approximately $6,940,923) of the total facility was received as of July 2, 2012. The loan is secured by a transfer with full
recourse of certain amounts of its accounts receivable. Interest on the bank facility is a floating lending rate, 25% over the
PBOC benchmark rate. Details of the loans are as follows:





|Amount |            | Received date |           | Due date |            | Accounts receivable
    secured |     | Guaranteed by
|------ | ---------- | ------------- | --------- | -------- | ---------- | ------------------------------- | --- | -------------
|RMB    | 17,800,000 |               | 3/2/2012  |          | 9/1/2012   |                                 | RMB | 19,979,595   
|       | 18,000,000 |               | 4/26/2012 |          | 10/25/2012 |                                 |     | 20,155,000   
|       | 2,750,000  |               | 6/15/2012 |          | 10/12/2012 |                                 |     | 3,155,220    
|       | 5,250,000  |               | 6/19/2012 |          | 12/18/2012 |                                 |     | 5,845,000    
|RMB    | 43,800,000 |               |           |          |            |                                 | RMB | 49,134,815   



Proceeds from the bank
facility are restricted to use on projects signed directly with:









|Amount |            | Bank facility are restricted to
    use on projects signed directly with
|------ | ---------- | ------------------------------------------------------------------------
|RMB    | 17,800,000 |                                                                         
|       | 18,000,000 |                                                                         
|       | 2,750,000  |                                                                         
|       | 5,250,000  |                                                                         
|RMB    | 43,800,000 |                                                                         



3)
Acquisition of land use right



During
the year ended December 31, 2011, Trunkbow Shandong acquired a land use right for the construction of the R&D center in Jinan.
The land use right expires in June 2061. 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 completed
by the first half of 2013, and the overall budget for the construction is between $23 – $30 million.



4) Construction
of R&D center



We
paid out the first phase payment 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 completed by the first half of 2013, and the
overall budget for the construction is between $23 – $30 million.







F-28