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EX-23.1 - Trunkbow International Holdings Ltdv198876_ex23-1.htm

As filed with the Securities and Exchange Commission on October 14, 2010

Registration No. 333-

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



 

FORM S-1

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933



 

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED

(Exact name of registrant as specified in its charter)

   
Nevada   7370   26-3552213
(State or Other Jurisdiction of
Incorporation or Organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

Unit 1217-1218, 12F of Tower B, Gemdale Plaza,
No. 91 Jianguo Road, Chaoyang District, Beijing,
People’s Republic of China 100022
Tel. No: +86 10 85712518

(Address, including zip code, and telephone number
including area code, of Registrant’s principal executive offices)



 

L and R Service Company of Nevada, LLC
3993 Howard Hughes Pkwy
Suite 600
Las Vegas, NV 89169
Tel. No: (702) 949-8200

(Name, address, including zip code, and telephone number
including area code, of agent for service)



 

Copies to:

 
Mitchell S. Nussbaum, Esq.
Loeb & Loeb LLP
345 Park Avenue
New York, NY 10154
Tel. No.: 212-407-4159 Fax No.: 212-407-4990
  Scott Kline, Esq.
Pillsbury Winthrop Shaw Pittman LLP
Suite 4201, Bund Center
222 Yan An Road East, Huangpu District
Shanghai, 200002, China
Tel. No. +1 415 983-1523 Fax No. +86 21 6137 7900


 

Approximate date of commencement of proposed sale to the public:  From time to time after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

     
Large Accelerated Filer o   Accelerated Filer o   Non-Accelerated Filer o   Smaller Reporting Company x
 

 


 
 

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CALCULATION OF REGISTRATION FEE

       
Title of each class of securities to be registered   Amount to be Registered(1)   Proposed Maximum
Offering Price
Per Share
  Proposed Maximum
Aggregate
Offering Price
  Amount of Registration Fee
Common stock, par value $0.001 per share
                    $ 28,750,000 (2)    $ 2,049.88  
Common stock, par value $0.001 per share
    13,223,162 (3)             $ 79,338,972 (4)    $ 5,656.87  
Common stock, par value $0.001 per share, issuable upon the exercise of warrants
    2,905,419 (3)(4)             $ 17,432,514 (5)    $ 1,242.94  
TOTAL
                    $ 125,521,486     $ 8,949.68  

(1) In accordance with Rule 416(a), promulgated under the Securities Act of 1933, as amended (the “Securities Act”), the Registrant is also registering hereunder an indeterminate number of shares that may be issued and resold pursuant to Rule 416 to prevent dilution resulting from stock splits, stock dividends or similar transactions.
(2) The registration fee for securities to be offered by the Registrant is based on an estimate of the Proposed Maximum Aggregate Offering Price of the securities, and such estimate is solely for the purpose of calculating the registration fee pursuant to Rule 457(o). Includes shares which the underwriters have the option to purchase to cover over-allotments, if any.
(3) This Registration Statement also covers the resale under a separate resale prospectus (the “Resale Prospectus”) by selling stockholders of the Registrant of up to 16,128,581 shares of common stock previously issued to the selling stockholders as named in the Resale Prospectus.
(4) Represents shares of the Registrant’s common stock being registered for resale that have been or may be acquired upon the exercise of warrants that have been previously issued to selling stockholders named in the Resale Prospectus.
(5) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(g) under the Securities Act.


 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said section 8(a), may determine.


 
 

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EXPLANATORY NOTE

This Registration Statement contains two prospectuses, as set forth below.

Public Offering Prospectus. A prospectus to be used for the public offering of    shares of common stock of the Registrant (in addition,      shares of common stock of the Registrant may be sold upon exercise of the underwriters’ over-allotment option) (the “Public Offering Prospectus”) through the underwriter named on the cover page of the Public Offering Prospectus.
Resale Prospectus. A prospectus to be used for the resale by the selling stockholders set forth therein of 16,128,581 shares of common stock of the Registrant (the “Resale Prospectus”).

The Resale Prospectus is substantively identical to the Public Offering Prospectus, except for the following principal points:

they contain different outside and inside front covers and back covers;
they contain different Offering sections in the Prospectus Summary section beginning on page SS-1;
they contain different Use of Proceeds sections on page SS-2;
a Selling Stockholder section is included in the Resale Prospectus;
the Underwriting section from the Public Offering Prospectus on page SS-2 is deleted from the Resale Prospectus and a Plan of Distribution is inserted in its place; and
the Legal Matters section in the Resale Prospectus on page SS-2 deletes the reference to counsel for the underwriters.

The Registrant has included in this Registration Statement a set of alternate pages after the back cover page of the Public Offering Prospectus (the “Alternate Pages”) to reflect the foregoing differences in the Resale Prospectus as compared to the Public Offering Prospectus. The Public Offering Prospectus will exclude the Alternate Pages and will be used for the public offering by the Registrant. The Resale Prospectus will be substantively identical to the Public Offering Prospectus except for the addition or substitution of the Alternate Pages and will be used for the resale offering by the selling stockholders.


 
 

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The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.

 
Preliminary Prospectus   Subject to Completion, Dated October 14, 2010

      Shares

[GRAPHIC MISSING]

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED

Common Stock

$       per share

Trunkbow International Holdings Limited, a Nevada corporation, is offering          shares of common stock, par value $0.001 per share. We are a reporting company under the Securities Exchange Act of 1934, as amended.

Our common stock is presently not traded on any market or securities exchange. We intend to apply to the NASDAQ Global Market for listing under the symbol “TBOW”.

Investing in our common stock involves significant risks. See “Risk Factors” beginning on page 7.

   
  Per Share   Total
Public offering price   $          $       
Underwriting discounts and commissions   $          $       
Proceeds, before expenses, to Trunkbow International Holdings Limited   $          $       

We have granted an over-allotment option to the underwriters. Under this option, the underwriters may elect to purchase a maximum of        additional shares of common stock from us within 45 days following the date of this prospectus to cover over-allotments. If the underwriters exercise this over-allotment option in full, the total underwriting discounts and commissions will be $       , and our total proceeds, before expenses, will be $      .

The underwriters are offering the shares of common stock on a “firm commitment basis.” We expect to deliver the shares of our common stock to purchasers on or about       , 2010.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Roth Capital Partners

Merriman Capital

The date of this prospectus is       , 2010


 
 

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TRUNKBOW INTERNATIONAL HOLDINGS LIMITED

 
PROSPECTUS SUMMARY     1  
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA     5  
RISK FACTORS     7  
RISKS RELATED TO OUR BUSINESS     7  
RISKS ASSOCIATED WITH DOING BUSINESS IN GREATER CHINA     11  
RISKS RELATED TO THE SECURITIES     20  
FORWARD-LOOKING STATEMENTS     22  
USE OF PROCEEDS     22  
DETERMINATION OF OFFERING PRICE     23  
MARKET FOR OUR SECURITIES AND RELATED STOCKHOLDER MATTERS     23  
DILUTION     24  
SELECTED FINANCIAL INFORMATION     25  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS     31  
BUSINESS     43  
DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN SIGNIFICANT EMPLOYEES     56  
EXECUTIVE COMPENSATION     60  
DESCRIPTION OF COMMON STOCK     61  
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT     63  
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS, AND CERTAIN CONTROL PERSONS     65  
UNDERWRITING     66  
SHARES ELIGIBLE FOR FUTURE SALE     70  
TAXATION     71  
TRANSFER AGENT AND REGISTRAR     80  
LEGAL MATTERS     80  
EXPERTS     80  
WHERE YOU CAN FIND MORE INFORMATION     80  

You should rely only on information contained in this prospectus that we may provide to you. We have not, and the underwriters have not, authorized anyone to provide you with additional information or information different from that contained in this prospectus. We are not making an offer of these securities in any state or other jurisdiction where the offer is not permitted. The information in this prospectus may only be accurate as of the date on the front of this prospectus regardless of time of delivery of this prospectus or any sale of our securities.

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PROSPECTUS SUMMARY

This summary highlights selected information appearing elsewhere in this prospectus. While this summary highlights what we consider to be the most important information about us, you should carefully read this prospectus and the registration statement of which this prospectus is a part in their entirety before investing in our securities, especially the risks of investing in our securities, which we discuss later in “Risk Factors,” and our consolidated financial statements and related notes beginning on page F-1. Unless otherwise indicated or the context requires otherwise, the words “we,” “us,” “our” and “Trunkbow” refer to Trunkbow International Holdings Limited, a Nevada corporation, and our wholly owned subsidiaries. References to “China” and the “PRC” refer to the People’s Republic of China. This prospectus assumes the over-allotment option of the underwriters has not been exercised, unless otherwise indicated.

Corporate Overview

We are an innovative mobile application enabler, offering telecom operators in the PRC application platforms on which to offer Mobile Value Added Solutions (“MVAS”) to their subscribers. We sell our technology products primarily to companies who resell them to the three large telecom operators in the PRC, enabling the telecom operators to offer their subscribers access to unique mobile applications, innovative tools, value-added services and an overall superior mobile experience. We develop and implement a range of comprehensive platform solutions for our customers that enable MVAS applications for their subscribers. As a technology enabler, our solutions may be generally classified into two categories: (i) MVAS Technology Platforms, such as Caller Color Ring Back Tone, Number Change Notification and secretarial services, and (ii) Mobile Payment Solutions, which facilitate commerce between mobile users, merchants and payment clearing systems. We provide both hardware and software solutions that are integrated into our clients’ existing IT infrastructure. We also offer additional services including technical support and system maintenance for our clients.

Our Strategy

Our goal is to become a leader in MVAS application platforms and mobile payment systems for the telecom industry in China. We intend to achieve this goal by implementing the following strategies:

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

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

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

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

Attract and retain quality employees.  To enhance our development efforts and to support our growth objectives, we intend to continue to attract additional skilled and experienced R&D personnel. We also intend to hire and retain additional sales and service personnel with client and industry knowledge. We expect to

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continue to build a strong management team with in-house talent and recruit additional management talent, beginning with a CFO with an extensive industry and financial background. We plan to continue to leverage our research centers and external resources to provide training programs for our employees.

Form business relationships with strategic partners to expand our presence in the mobile payment business.  The MVAS application platform and mobile payment markets are immature and somewhat fragmented. This provides us with the opportunity to assert ourselves and form strategic partnerships to shape the direction of the industry. We intend to enter into synergistic business relationships with key domestic and international players in the mobile payment industry. In February 2010 we entered into an engagement agreement with VeriFone, Inc., a global provider of point of sale payment systems and solutions. We hope to leverage our relationship with VeriFone to expand our market for our mobile payment solutions.

Our Competitive Strengths

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

“Approved Vendor” to the leading telecom and payment industry participants in the PRC.  We have passed a rigorous supplier approval process to become an “approved vendor” to each of the three major telecom providers in the PRC: China Mobile, China Telecom and China Unicom, the “Big Three”. Our approved vendor status allows us to be eligible to enter into individual customer contracts with the relevant provincial branch of each respective carrier in each province in which we operate. We have entered into business relationships with the provincial branches of the Big Three in ten provinces in order to better customize their specific application solution needs. Our relationships with these market leaders in the Chinese telecom industry provides us with a favorable reputation, industry knowledge, operational expertise and credibility that we can leverage in marketing to other market participants. As our clients generally prefer to maintain continuity and compatibility among their various systems, we believe our existing relationships favorably position us for selection to address our clients’ future technology needs. We further believe that our continued client relationships allow us to build client trust, anticipate their information technology needs and allow us to better direct our research and development efforts and effectively market to them our solutions and services. Beginning in 2007, we established a business and indirect contractual relationship with China UnionPay in order to develop and commercialize mobile payment solutions. Our relationship with UnionPay and the three telecom operators allows us to provide a comprehensive mobile payment solution that is fully back-end linked, meaning that due to its redundant hardware and communication links, it offers no single point of failure.

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

Strong R&D capabilities.  Our R&D efforts are led by Dr. Hou Wan Chun, Dr. An Chun Ming and Mr. Wang Xin. Dr. Hou is a telecom veteran with numerous telecom application patents. Dr. Hou previously worked for telecom companies like Lucent in the Silicon Valley as an engineer involved in developing new intelligent network applications. Our overall technical direction has been guided by Dr. An Chun Ming, the pioneer of Next Generation Network (“NGN”). Prior to joining Trunkbow, Dr. An led multiple development efforts as a Bell Labs Fellow during his 30 year tenure. Our experienced senior management team leads a group of over 100 R&D professionals with strong telecom and technical backgrounds.

The primary goal of our research efforts is to develop solutions that may be strategically implemented and commercialized. We are currently developing the next generation of mobile payment solutions and 3G applications. Our commitment to research and development and our focus on commercializing our research results will further enhance our competitive edge in the market with the ability to provide a broad range of quality solutions and the potential for sustained long-term growth.

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

Our Executive Offices

Our executive offices are located at Unit 1217-1218, 12F of Tower B, Gemdale Plaza; No. 91 Jianguo Road, Chaoyang District, Beijing; People’s Republic of China. Our telephone number is +86 10 85712518.

Conventions That Apply to This Prospectus

Unless otherwise indicated, references in this prospectus to:

“BP5” are to Bay Peak 5 Acquisition Corp., our predecessor company which was incorporated in Nevada;
“BVI” are to the British Virgin Islands;
“dollars” or “$” are to the legal currency of the United States;
“February 2010 Offering” are to the private placement pursuant to which we issued an aggregate of (i) 8,447,575 shares and (ii) 1,689,515 warrants for aggregate gross proceeds of $16,895,150.
“Investor Shares” are to the 8,447,575 shares we issued in the February 2010 Offering;
“Investor Warrants” are to the 1,689,515 warrants we issued in the February 2010 Offering;
“PRC” or “China” are to the People’s Republic of China, except Hong Kong, Macao and Taiwan;
“Share Exchange Agreement” are to the share exchange agreement dated January 27, 2010 by and among Trunkbow, Trunkbow BVI and the shareholders of Trunkbow BVI named therein, pursuant to which Trunkbow acquired 100% of the issued and outstanding ordinary shares of Trunkbow BVI, and Trunkbow BVI became Trunkbow’s wholly owned subsidiary;
“Share Exchange” are to our acquisition of Trunkbow BVI pursuant to the transactions contemplated by the Share Exchange Agreement, and as further described under the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview — Our History and Corporate Structure”;
“Trunkbow BVI” are to Trunkbow International Holdings Limited, a BVI company and our direct wholly owned subsidiary;
“Trunkbow Hong Kong” are to Trunkbow (Asia Pacific) Investment Holdings Limited, a Hong Kong company and our indirect wholly owned subsidiary;
“Trunkbow Shandong” are to Trunkow Asia Pacific (Shandong) Company, Limited, a PRC company and our indirect wholly owned subsidiary;
“Trunkbow Shenzhen” are to Trunkbow Asia Pacific (Shenzhen) Company, Limited, a PRC company and our indirect wholly owned subsidiary;
“Trunkbow Technologies” are to Trunkbow Technologies (Shenzhen) Company, Limited, a PRC company and our indirect wholly owned subsidiary; and
“VT Dutch Services” are to VT Dutch Services, Inc., our corporate predecessor.

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The Offering

Common stock offered by us:    
             shares
Common stock outstanding before the offering:    
    32,472,075 shares as of October 14, 2010
Common stock to be outstanding after the offering:    
             shares(1)
Offering price:    
    $     per share
Use of proceeds:    
    We intend to use the net proceeds from the offering for the following purposes:
   

•  

approximately $15 million to build out our mobile payment service platforms in Zhejiang Province, Xinjiang Province, Shandong Province, Shanxi Province and Henan Province in the PRC, pursuant to terms presently under negotiation between certain of our resellers and China Unicom; and

   

•  

the remaining balance for working capital and general corporate purposes.

    Each mobile payment service platform will consist of hardware, software and outsourcing of labor.
    See “Use of Proceeds” section on page 22.
Risk factors:    
    Investing in these securities involves a high degree of risk. As an investor you should be able to bear a complete loss of your investment. You should carefully consider the information set forth in the “Risk Factors” section beginning on page 7.
Proposed NASDAQ Symbol:    
    TBOW
Over-allotment Option:    
    The underwriters have a 45-day option to purchase up to         (2) additional shares of common stock from us solely to cover over-allotments, if any.
Lock-up:    
    We, our directors, officers and certain of our significant shareholders have agreed with the underwriters to a lock-up of shares for a period of 180 days after the date of this prospectus. See “Underwriting” section on page 66.

(1) The number of shares of our common stock to be outstanding immediately after this offering is based on 32,472,075 shares of our common stock outstanding as of October 14, 2010.
(2) A number of shares equal to 15% of the common stock offered by us in the offering.

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SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA

The following summary of our consolidated statement of income data for the years ended December 31, 2009 and 2008 and our consolidated balance sheet data as of December 31, 2009 and 2008 presented below is derived from our audited consolidated financial statements and related notes thereto included elsewhere in this prospectus. The audited consolidated financial statements have been prepared in accordance with the standards of the Public Company Accounting Oversight Board (United States), and have been audited by Bernstein & Pinchuk LLP, an independent registered public accounting firm. The following summary of our consolidated statement of income data for the six months ended June 30, 2010 and 2009 and our consolidated balance sheet data as of June 30, 2010 is derived from our unaudited consolidated financial statements and related notes thereto included elsewhere in this prospectus.

The consolidated financial statements are reported in U.S. dollar amounts and are prepared in accordance with the standards of the Public Company Accounting Oversight Board (United States). This data should be read in conjunction with our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and related notes thereto, and our unaudited consolidated financial statements and related notes thereto, included elsewhere in this prospectus.

The as adjusted balance sheet data reflects the balance sheet data as of June 30, 2010, as adjusted to reflect our receipt of the estimated net proceeds from our sale of          shares in this offering at an assumed public offering price of $        per share, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Summary Balance Sheet Data:

     
  As of
June 30,
2010
  As of
December 31,
     2009   2008
     (Unaudited)
Cash and cash equivalents   $ 12,340,718     $ 3,305,473     $ 490,959  
Accounts receivable     11,304,785       10,455,284       656,536  
Total current assets     38,298,284       17,241,762       3,606,167  
Accounts payable     239,199       331,654       415,884  
Total current liabilities     4,470,866       7,520,949       2,310,481  
Total stockholders’ equity   $ 34,855,614     $ 9,760,630     $ 1,460,478  

     
  As of June 30, 2010   As of
December 31,
2009
     Actual   As
Adjusted(1)
     (Unaudited)     
Cash and cash equivalents   $ 12,340,718              $ 3,305,473  
Total assets     39,326,480                17,281,579  
Total liabilities     4,470,866                7,520,949  
Total stockholders’ equity     34,855,614                9,760,630  
Total liabilities and stockholders’ equity     39,326,480                17,281,579  

(1) Reflects the sale of       shares of common stock offered by us at an assumed public offering price of $       per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses to be paid by us. Each $1.00 increase or decrease in the assumed public offering price of $       per share would increase or decrease, respectively, each of cash and cash equivalents, total assets and total stockholders’ equity by approximately $       million, assuming no change in the number of shares offered by us as set forth on the cover page of this prospectus.

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Summary Operating Data:

       
  For the Six Months Ended
June 30,
  For the Years Ended
December 31,
     2010   2009   2009   2008
     (Unaudited)          
Revenue   $ 7,988,343     $ 6,357,631     $ 13,468,581     $ 12,924,255  
Gross margin   $ 7,281,765     $ 5,048,830     $ 11,209,380     $ 8,766,902  
Income from operations   $ 4,989,912     $ 3,954,030     $ 8,362,303     $ 6,128,307  
Net income   $ 4,821,467     $ 3,952,928     $ 8,292,982     $ 5,071,514  
Comprehensive income   $ 5,021,263     $ 3,953,875     $ 8,200,152     $ 4,912,585  
Weighted average number of common shares outstanding Basic and Diluted   $ 32,472,075     $ 19,562,888     $ 10,000     $ 10,000  
Earnings (loss) per share Basic and Diluted   $ 0.15     $ 0.20     $ 829.30     $ 507.15  

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RISK FACTORS

Investing in our securities involves a great deal of risk. Careful consideration should be made of the following factors as well as other information included in this prospectus before deciding to purchase our securities. You should pay particular attention to the fact that we conduct all of our operations in the PRC and are governed by a legal and regulatory environment that in some respects differs significantly from the environment that may prevail in the U.S. and other countries. Our business, financial condition or results of operations could be affected materially and adversely by any or all of these risks.

RISKS RELATED TO OUR BUSINESS

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

Our limited operating history following our separation from Trunkbow Shenzhen Technologies Limited in December 2007 and the early stage of development of the mobile payment industry in which we operate makes it difficult to evaluate our business and future prospects. Although our revenues have grown rapidly, we cannot assure you that we will maintain profitability or that we will not incur net losses in the future. We expect that our operating expenses will increase as we expand. Any significant failure to realize anticipated revenue growth could result in significant operating losses. We will continue to encounter risks and difficulties in implementing our business model, including potential failure to:

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

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

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

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

Revenues from sales to mobile carriers, including revenues generated through the resale of our products to mobile carriers through intermediaries (i.e., direct and indirect sales to these carriers), accounted for approximately 42%, 15% and 42%, and 4%, 95% and nil of our total revenues for the fiscal years ended December 31, 2009 and 2008, and 31%, 40% and 29% and 6%, 4% and 89% for the six months ended June 30, 2010 and 2009. The loss of our status as a approved vendor to any of China Mobile, China Telecom or China Unicom, or our inability to renegotiate our revenue sharing agreements with resellers on terms as favorable as those under which we presently operate, would have a significant negative impact on our business and on our financial results.

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

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

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

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

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

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

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

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

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

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

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

Li Qiang, Chief Executive Officer, Hou Wanchun, Chairman, and Ye Yuanjun, Chief Financial Officer are essential to our ability to continue to grow our business. Messrs. Li, Hou and Ms. Ye have established relationships within the industries in which we operate. If either of them were to leave us, our growth strategy might be hindered, which could limit our ability to increase revenue. We do not maintain key-person insurance coverage.

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In addition, we face competition for attracting skilled personnel. If we fail to attract and retain qualified personnel to meet current and future needs, this could slow our ability to grow our business, which could result in a decrease in market share.

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

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

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

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

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

We believe that our existing cash, including the net proceeds from the February 2010 Offering, will be sufficient to support our current operating plan through June 2011. As of June 30, 2010, we had approximately $12.3 million in cash. We need additional capital to support our future development programs. We expect that our ongoing capital requirements for both working capital and capital expenditures (including R&D) for the remainder of 2010 and for 2011 will be approximately $3 million and $20 – 25 million, respectively. Our capital requirements may be accelerated as a result of many factors, including timing of development activities, underestimates of budget items, unanticipated expenses or capital expenditures, limitation of development of new potential products, future product opportunities with collaborators, future licensing opportunities and future business combinations. Consequently, we may need to seek additional debt or equity financing, which may not be available on favorable terms, if at all, and which may be dilutive to you.

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

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

We operate our business in the PRC, where credit periods vary substantially across industries, segments, types and size of companies. We operate in a niche of the PRC telecommunication industry, specifically in the provision of Mobile Value Added services and Mobile Payment systems. Our customers include the Big Three and resellers that further provide services to the Big Three.

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

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

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2. Evaluation of resellers: in the arrangements that are through resellers to reach the mobile operators, management investigates all aspects of the resellers, including the arrangement between the mobile operators and the resellers, the particular reseller’s credit reputation and payment history, the financial status and customer lists of our resellers. Only reputable resellers with good quality of assets and cash flows can sign up with us.
3. Continuous collection of accounts receivable: we have been able to collect our accounts receivable on a continual basis.
4. In the event accounts receivable are due and the balance remains outstanding, we negotiate repayment plans with our customers. Credit periods will be extended when our customers have a continuous payment history. Constant review of the recoverability of the accounts receivable is performed by management and if there is any indication that a customer may default, allowance for doubtful debts are provided to the accounts receivable.
5. No defaults on historical collection of accounts receivable: we started in 2001 and during the past 10 years, we never had a bad debt on accounts receivable.

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

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

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

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

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

To date, our technology is the subject of 164 filed patent applications with 50 patents issued by the National Intellectual Property Administration of the PRC. We anticipate filing additional patent applications both in the PRC and in other countries, as appropriate. However, we cannot predict the degree and range of protection patents will afford us against competitors, including whether third parties will find ways to invalidate or otherwise circumvent our patents, if and when patents will be issued, whether or not others will obtain patents claiming aspects similar to our patent applications, or if we will need to initiate litigation or administrative proceedings, which may be costly whether we win or lose.

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

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

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

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

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

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

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

Our business and operations have expanded rapidly since our formation. Significant management resources must be expended to develop and implement appropriate structures for internal organization and information flow, an effective internal control environment and risk monitoring and management systems in line with our rapid growth, as well as to hire and integrate qualified employees into our organization. In addition, the disclosure and other ongoing obligations associated with becoming a public company increase the challenges to our finance and accounting team. We estimate that our general and administrative expenses for the fiscal year ending December 31, 2010 will be approximately $3.5 million, as compared to $1,877,732 for the 2009 fiscal year. It is possible that our existing internal control and risk monitoring and management systems could prove to be inadequate. If we fail to appropriately develop and implement structures for internal organization and information flow, an effective internal control environment and a risk monitoring and management system, we may not be able to identify unfavorable business trends, administrative oversights or other risks that could materially adversely affect our business, operating results and financial condition.

RISKS ASSOCIATED WITH DOING BUSINESS IN GREATER CHINA

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

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

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

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

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

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

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

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

On December 20, 2007, Trunkbow Shandong entered into a series of contracts with Trunkbow Technologies and its shareholders. Through these contractual arrangements, Trunkbow Technologies became a variable interest entity (“VIE”) of Trunkbow Shandong.

The Regulation on Mergers and Acquisitions of Domestic Companies by Foreign Investors jointly issued by six PRC regulatory agencies, including the Ministry of Commerce (“MOFCOM”), the State Assets Supervision and Administration Commission, the State Administration for Taxation, the State Administration for Industry and Commerce, China Securities Regulatory Commission (“CSRC”) and the State Administration of Foreign Exchange (“SAFE”) on August 8, 2006, or the New M&A Rule, has a particular provision which requires that MOFCOM’s approval is required if a PRC resident acquires its/his affiliated Chinese company in the name of an offshore enterprise established or controlled by it or him. The New M&A Rule further provides that the aforesaid requirement cannot be circumvented by a foreign invested enterprise’s domestic investment or “by other means” in China. At the time of entering into the contractual arrangements between Trunkbow Shandong and Trunkbow Technologies in December 2007, Trunkbow Hong Kong was an offshore

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enterprise indirectly controlled by Hou Wanchun and Li Qiang who are PRC residents. Trunkbow Shandong is a foreign invested enterprise 100% owned by Trunkbow Hong Kong. Hou Wanchun and Li Qiang are two shareholders of Trunkbow Technologies. According to the New M&A Rule, the approval of MOFCOM would be required if we acquired the beneficiary ownership of Trunkbow Technologies by our Company or its Trunkbow Hong Kong directly, and the adoption of the contractual arrangements might be deemed to be circumvent of such approval requirements “by other means”. As the interpretation and implementation of the New M&A Rule are unclear, if the approval of MOFCOM is required, Trunkbow Hong Kong may need to obtain further approval from MOFCOM.

Our contractual arrangements with Trunkbow Technologies and its shareholders may not be as effective in providing control over Trunkbow Technology as direct ownership of it.

Our contractual arrangements with Trunkbow Technologies and its respective shareholders provide us with effective control over this company. 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 Han Kun, our PRC legal counsel, that each contract under these contractual arrangements is valid and binding under current PRC laws and regulations, these contractual arrangements may not be as effective in providing us with control over Trunkbow Technologies as direct ownership of these companies. If Trunkbow Technologies or its shareholders fail to perform their respective obligations under these contractual arrangements, we may have to incur substantial costs and resources to enforce such arrangements, and rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective.

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

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

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

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

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

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

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

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

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

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

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

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purchased instruments to hedge its exchange rate risks, although it may do so in the future. The availability and effectiveness of any hedging transaction may be limited and we may not be able to successfully hedge its exchange rate risks.

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

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

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

You may have difficulty enforcing judgments against us.

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

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

Following the registration of our common stock under the Securities Exchange Act of 1934, as amended, we, a former shell company, will be required to comply with the United States Foreign Corrupt Practices Act, which prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for

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the purpose of obtaining or retaining business. Foreign companies, including some of our competitors, are not subject to these prohibitions. We are also subject to PRC anti-bribery law, which strictly prohibits bribery of government officials. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in mainland China. If our competitors engage in these practices, they may receive preferential treatment from personnel of some companies, giving our competitors an advantage in securing business or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage. Although we inform our personnel that such practices are illegal, we can not assure you that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties.

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

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

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

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

Finally, if we are determined to be a “resident enterprise” under the EIT Law, or dividends payable to (or gains realized by) our investors that are not tax residents of the PRC (“non-resident investors”) are otherwise treated as income derived from sources within the PRC, this could result in (i) a 10% PRC tax

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being imposed on dividends we pay to our non-resident investors and that are enterprises (but not individuals) and gains derived by them from transferring our common stock and (ii) a potential 20% PRC tax being imposed on dividends we pay to our non-resident investors who are individuals and gains derived by them from transferring our common stock. In such event, we may be required to withhold the applicable PRC tax on any dividends paid to our non-resident investors. Our non-resident investors also may be responsible for paying the applicable PRC tax on any gain realized from the sale or transfer of our common stock in these circumstances. We would not, however, have an obligation to withhold PRC tax with respect to such gain under the PRC tax laws.

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

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

For a further discussion of these issues, see the section of this prospectus captioned “Material PRC Income Tax Considerations” below.

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

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

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

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

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

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

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

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

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

The approval of the China Securities Regulatory Commission may be required in connection with this offering under a regulation adopted in August 2006, and, if required, we cannot predict whether we will be able to obtain such approval.

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

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

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

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

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

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

RISKS RELATED TO THE SECURITIES

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

We were incorporated as a “shell” company with nominal assets under the name Bay Peak 5 Acquisition Corp. (“BP5”). Immediately prior to the closing of the Share Exchange in February 2010, we conducted a due diligence review of BP5’s financial condition and legal status. Notwithstanding such review, BP5 may have material liabilities that we have not yet discovered. Further, although the Share Exchange Agreement contains customary representations and warranties from BP5 concerning its assets, liabilities, financial condition and affairs, we may have limited or no recourse against former owners or principals of BP5 in the event these prove to be untrue. We cannot insure against any loss we might incur as a result of undisclosed liabilities. See the section entitled “Overview — Our History and Corporate Structure” on page 31 for more information about the Share Exchange and our former status as a “shell” company.

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

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

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

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We maintain a system of internal control over financial reporting, which is defined as a process designed by, or under the supervision of, our principal executive officer and principal financial officer, or persons performing similar functions, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

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

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

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

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

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

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

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FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve substantial risks and uncertainties. These include statements about our expectations, beliefs, intentions or strategies for the future, which are indicated by words or phrases such as “anticipate,” “expect,” “intend,” “plan,” “will,” “we believe,” “management believes” and similar words or phrases. The forward-looking statements are based on our current expectations and are subject to certain risks, uncertainties and assumptions. Our actual results could differ materially from results anticipated in these forward-looking statements. All forward-looking statements included in this document are based on information available to us as of the date hereof, and we assume no obligation to update any such forward-looking statements.

USE OF PROCEEDS

We estimate that the net proceeds from the sale of the        shares of common stock in the offering will be approximately $     million, after deducting the underwriting discounts and commissions and estimated offering expenses. Our net proceeds will be approximately $     million if the underwriters exercise their option in full to purchase     additional shares of common stock from us. This calculation is based upon an assumed public offering price of $     per share.

We intend to use the net proceeds from the offering for the following purposes:

approximately $15 million to build out our mobile payment service platforms in Zhejiang Province, Xinjiang Province, Shandong Province, Shanxi Province and Henan Province in the PRC, pursuant to terms presently under negotiation between certain of our resellers and China Unicom; and
the remaining balance for working capital and general corporate purposes.

Each mobile payment service platform will consist of hardware, software and outsourcing of labor.

The amount and timing of our actual expenditures will depend on numerous factors, including the status of our development efforts, sales and marketing activities and the amount of cash generated or used by our operations. We may find it necessary or advisable to use portions of the proceeds for other purposes, and we will have broad discretion in the application of the net proceeds. Additionally, we may choose to expand our current business through the acquisition of other complementary businesses, products or technologies, using cash or shares of our common stock. However, we have not entered into any negotiations, agreements or commitments with respect to any such acquisitions at this time. Pending these uses, the proceeds will be invested in short-term bank deposits.

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DETERMINATION OF OFFERING PRICE

The public offering price of the shares offered by this prospectus has been determined by negotiation between us and the underwriters. Among the factors considered in determining the public offering price of the shares were:

our history and our prospects;
the industry in which we operate;
the status and development prospects for our products and proposed products;
the previous experience of our executive officers; and
the general condition of the securities markets at the time of this offering.

The offering price stated on the cover page of this prospectus should not be considered an indication of the actual value of the shares. That price is subject to change as a result of market conditions and other factors, and we cannot assure you that the shares can be resold at or above the public offering price.

MARKET FOR OUR SECURITIES AND RELATED STOCKHOLDER MATTERS

There has never been a public trading market for our common stock and our common stock is not currently listed or quoted for trading on any national securities exchange or national quotation system. We intend to apply for the listing of our common stock on the NASDAQ Global Market under the symbol “TBOW.”

Holders

As of October 14, 2010, we had approximately 493 record owners of our common stock.

Dividend Policy

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

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

Securities Authorized for Issuance Under Equity Compensation Plans

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

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DILUTION

Our net tangible book value on June 30, 2010 was approximately $34.9 million, or $1.07 per share of common stock. “Net tangible book value” is total assets minus the sum of liabilities and intangible assets. “Net tangible book value per share” is net tangible book value divided by the total number of shares of common stock outstanding on June 30, 2010.

After giving effect to the sale by us of     shares of common stock in this offering at the assumed public offering price of $     per share, and after deducting the underwriting discounts and commissions and estimated expenses related to this offering payable by us, our adjusted net tangible book value as of June 30, 2010 would have been $     million, or $     per share of our common stock. This represents an immediate increase in net tangible book value of $     per share to our existing stockholders and an immediate decrease in the net tangible book value of $     per share to new investors. Dilution in the net tangible book value per share to new investors represents the difference between the offering price per share and the net tangible book value per share of our common stock immediately after this offering. The following table illustrates this per share dilution:

 
Assumed public offering price per share   $       
Net tangible book value per share as of June 30, 2010   $ 1.07  
Increase in net tangible book value per share attributable to this offering   $       
As adjusted net tangible book value per share as of June 30, 2010 after giving effect to this offering   $       
Dilution per share to new investors in this offering   $       

A $1.00 increase in the assumed public offering price of $     per share would increase our adjusted net tangible book value per share after this offering by $     per share and would increase the dilution per share to new investors in this offering by $     per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions and estimated expenses related to this offering payable by us.

If the underwriters exercise their over-allotment option to purchase up to      additional shares of common stock from us in full in this offering at the assumed public offering price of $     per share, the adjusted net tangible book value as of June 30, 2010 after giving effect to this offering would increase to $     per share, and dilution per share to new investors in this offering would be $     per share.

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SELECTED FINANCIAL INFORMATION

The following table summarizes our historical financial results for the years ended December 31, 2009 and 2008, which is derived from our audited financial statements attached hereto as Exhibit F, as well as for the six months ended June 30, 2010 and 2009, which are unaudited. Our auditor is Bernstein & Pinchuk LLP.

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

   
  Years Ended December 31,
     2009   2008
Revenue   $ 13,468,581     $ 12,924,255  
Less: Business tax and surcharges     38,624       511,924  
Net revenue     13,429,957       12,412,331  
Cost of revenue     2,220,577       3,645,429  
Gross Margin     11,209,380       8,766,902  
Operating expenses
                 
Selling and distribution expenses     533,633       429,067  
General and administrative expenses     1,877,732       1,677,055  
Research and development expenses     435,712       532,473  
       2,847,077       2,638,595  
Income from operations     8,362,303       6,128,307  
Other income (expense)
                 
Interest income     350       2,591  
Interest expense     (66,016 )      (4,482 ) 
Other income           122,003  
Other expenses     (3,655 )      (16,768 ) 
       (69,321)       103,344  
Income before income tax expense     8,292,982       6,231,651  
Income tax expense           1,160,137  
Net income     8,292,982       5,071,514  
Other comprehensive loss
                 
Foreign currency translation adjustment     (92,830 )      (158,929 ) 
Comprehensive income   $ 8,200,152     $ 4,912,585  
Weighted average number of common shares outstanding
Basic and diluted
    10,000       10,000  
Earnings per share Basic and diluted   $ 829.30     $ 507.15  

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TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME

       
  Six Months ended June 30,   Three Months ended June 30,
     2010   2009   2010   2009
     Unaudited   Unaudited   Unaudited   Unaudited
Revenues   $ 7,988,343     $ 6,357,631     $ 3,956,591     $ 6,146,693  
Less: Business tax and surcharges     168,051       17,694       39,114       6,738  
Net revenues     7,820,292       6,339,937       3,917,477       6,139,955  
Cost of revenues     538,527       1,291,107       358,979       1,230,908  
Gross margin     7,281,765       5,048,830       3,558,498       4,909,047  
Operating expenses
                                   
Selling and distribution expenses     469,017       335,062       273,361       131,477  
General and administrative expenses     1,316,907       567,374       676,017       362,411  
Research and development expenses     505,929       192,364       394,672       75,194  
       2,291,853       1,094,800       1,344,050       569,082  
Income from operations     4,989,912       3,954,030       2,214,448       4,339,965  
Other expense
                                   
Interest expense     156,547             29,766        
Other expenses     11,898       1,102       6,028       1,201  
       168,445       1,102       35,794       1,201  
Income before income tax expense     4,821,467       3,952,928       2,178,654       4,338,764  
Income tax expense                        
Net income     4,821,467       3,952,928       2,178,654       4,338,764  
Other comprehensive gain
                                   
Foreign currency translation fluctuation     199,796       947       103,596       (692 ) 
Comprehensive income   $ 5,021,263     $ 3,953,875       2,282,250     $ 4,338,072  
Weighted average number of common shares outstanding
                                   
Basic and diluted     32,472,075       19,562,888       32,472,075       19,562,888  
Earnings per share
                                   
Basic and diluted   $ 0.15     $ 0.20     $ 0.07     $ 0.22  

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Historical Balance Sheets

The following table summarizes the audited consolidated balance sheets for Trunkbow International Holdings Limited as of December 31, 2009 and 2008.

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

   
  As at December 31,
     2009   2008
ASSETS
                 
Current assets
                 
Cash and cash equivalents   $ 3,305,473     $ 490,959  
Accounts receivable     10,455,284       656,536  
Loans receivable and other current assets, net     1,085,655       1,251,853  
Due from directors     2,088,168       1,206,819  
Inventories     307,182        
Total current assets     17,241,762       3,606,167  
Property and equipment, net     39,817       56,600  
Long-term receivables           108,192  
     $ 17,281,579     $ 3,770,959  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                 
Current liabilities
                 
Accounts payable   $ 331,654     $ 415,884  
Accrued expenses and other current liabilities     603,266       272,170  
Due to directors     24,430        
Contingently convertible notes     5,000,000        
Taxes payable     1,561,599       1,622,427  
     $ 7,520,949     $ 2,310,481  
Commitments and contingencies
                 
STOCKHOLDERS’ EQUITY
                 
Common Stock: par value USD1.00, authorized 50,000 shares, issued and outstanding 10,000 shares at December 31, 2009     10,000        
Additional paid-in capital     1,332,802       1,242,802  
Appropriated retained earnings     1,010,486       27,518  
Unappropriated retained earnings     8,002,477       692,463  
Accumulated other comprehensive income     (595,135 )      (502,305 ) 
Total stockholders’ equity     9,760,630       1,460,478  
     $ 17,281,579     $ 3,770,959  

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TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

The following table summarizes the consolidated balance sheets for Trunkbow International Holdings Limited as of June 30, 2010 (unaudited) and December 31, 2009.

   
  June 30,
2010
  December 31,
2009
     unaudited     
ASSETS
                 
Current assets
                 
Cash and cash equivalents   $ 12,340,718     $ 3,305,473  
Restricted deposit     352,495        
Accounts receivable     11,304,785       10,455,284  
Loans receivable and other current assets, net     12,550,593       1,085,655  
Due from directors     965,404       2,088,168  
Inventories     784,289       307,182  
Total current assets     38,298,284       17,241,762  
Property and equipment, net     369,743       39,817  
Long-term prepayment     658,453        
     $ 39,326,480     $ 17,281,579  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                 
Current liabilities
                 
Accounts payable   $ 239,199     $ 331,654  
Accrued expenses and other current liabilities     473,781       603,266  
Short-term loan     1,762,477        
Due to directors           24,430  
Contingently convertible notes           5,000,000  
Taxes payable     1,995,409       1,561,599  
       4,470,866       7,520,949  
Commitments and contingencies
                 
STOCKHOLDERS’ EQUITY
                 
Preferred Stock: par value USD0.001, authorized 10,000,000 shares, issued and outstanding nil at June 30, 2010 and December 31, 2009
                 
Common Stock: par value USD0.001, authorized 190,000,000 shares, issued and outstanding 32,472,075 shares at June 30, 2010 and 19,562,888 at December 31, 2009     32,472       19,563  
Additional paid-in capital     21,384,050       1,323,239  
Appropriated retained earnings     1,010,486       1,010,486  
Unappropriated retained earnings     12,823,945       8,002,477  
Accumulated other comprehensive income     (395,339 )      (595,135 ) 
Total stockholders’ equity     34,855,614       9,760,630  
     $ 39,326,480     $ 17,281,579  

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Historical Cash Flow Statements

The following table summarizes the audited consolidated cash flow statements for Trunkbow International Holdings Limited for the years ended December 31, 2009 and 2008.

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

   
  Years Ended December 31,
     2009   2008
Cash flows from operating activities
                 
Net income   $ 8,292,982     $ 5,071,514  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
                 
Depreciation and amortization     20,362       148,934  
Loss on disposal of property and equipment     1,281       2,078  
Reclassification of fixed assets to inventory sold           524,417  
Provision for doubtful debts     366,912        
Changes in operating assets and liabilities:
                 
Accounts receivable     (9,791,845 )      (259,894 ) 
Other receivables and current assets     (146,360 )      1,764,452  
Inventories     (307,017 )       
Accounts payable     (85,218 )      (694,554 ) 
Accrued expenses and other current liabilities     383,859       (6,636,312 ) 
Amount due to directors     24,417        
Taxes payable     (64,827 )      1,182,275  
Net cash flows (used in) provided by operating activities     (1,305,454 )      1,102,910  
Cash flows from investing activities
                 
Acquisition of property and equipment     (4,729 )       
Collection from loans to third parties     57,070       81,890  
Increase in amount due from directors     (877,876 )      (526,824 ) 
Decrease in long term receivables           22,566  
Net cash flows used in investing activities     (825,535 )      (422,368 ) 
Cash flows from financing activities
                 
Proceeds from issuance of common stock     100,000        
Repayment of loans from third parties     (53,618 )      (789,278 ) 
Repayment of long-term payables           (143,632 ) 
Proceeds from issuance of contingently convertible notes     5,000,000        
Net cash flows provided by (used in) financing activities     5,046,382       (932,910 ) 
Effect of exchange rate fluctuation on cash and cash equivalents     (100,879 )      36,220  
Net increase (decrease) in cash and cash equivalents     2,814,514       (216,148 ) 
Cash and cash equivalents – beginning of year     490,959       707,107  
Cash and cash equivalents – end of year     3,305,473       490,959  
Supplemental disclosure of cash flow information
                 
Cash paid for interest   $     $ 4,482  
Cash paid for income taxes   $ 263     $  

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TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

   
  Six Months Ended June 30,
     2010   2009
     Unaudited   Unaudited
Cash flows from operating activities
                 
Net income   $ 4,821,467     $ 3,952,928  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
                 
Depreciation and amortization     23,301       11,745  
Loss on disposal of property and equipment           1,283  
Changes in operating assets and liabilities:
                 
Accounts receivable     (802,502 )      (5,669,959 ) 
Loans receivable and other current assets     (8,258,633 )      781,690  
Inventories     (473,997 )      (14,206 ) 
Long-term prepayment     (655,935 )       
Accounts payable     (93,490 )      906,327  
Accrued expenses and other current liabilities     14,798        
Amount due to directors     (24,439 )      24,497  
Taxes payable     425,616       160,517  
Net cash flows provided by (used in) operating activities     (5,023,814 )      154,822  
Cash flows from investing activities
                 
Acquisition of property and equipment     (351,800 )      (526 ) 
Payment on loans to third parties     (3,157,913 )      (592,706 ) 
Collection in amount due from directors     1,127,209       60,651  
Collection in long-term receivables           108,365  
Net cash flows used in investing activities     (2,382,504 )      (424,216 ) 
Cash flows from financing activities
                 
Increase in restricted deposit     (352,495 )       
Proceeds from issuance of common stock (net of finance costs)     17,073,720        
Repayment of loans from third parties     (146,311 )      (127,133 ) 
Repayment of contingently convertible notes     (2,000,000 )       
Proceeds from short-term loan     1,755,736        
Net cash flows provided by (used in) financing activities     16,330,650       (127,133 ) 
Effect of exchange rate fluctuation on cash and cash equivalents     110,913       612  
Net increase (decrease) in cash and cash equivalents     9,035,245       (395,915 ) 
Cash and cash equivalents – beginning of period     3,305,473       490,959  
Cash and cash equivalents – end of period     12,340,718       95,044  
Supplemental disclosure of cash flow information
                 
Cash paid for interest   $ 156,547     $  
Cash paid for income taxes   $     $  
Supplemental disclosure of noncash financing activities
                 
Conversion of contingently convertible notes to common stock   $ 3,000,000     $  

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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 7 entitled “Risk Factors” and elsewhere in this Prospectus.

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.

Currently 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 China, 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. 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

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name to “Bay Peak 5 Acquisition Corp.” All shares of common stock of BP5 held prior to the consummation of the transactions contemplated by the Plan and Agreement of Merger were cancelled. The sole purpose of the merger was to change the corporate domicile of VT Dutch Services from Arizona to Nevada and to effect a name change of VT Dutch Services.

In February 2010 we entered into the Share Exchange Agreement with Trunkbow BVI and the shareholders of Trunkbow BVI (the “Shareholders”), who together owned shares constituting 100% of the issued and outstanding ordinary shares of Trunkbow BVI (the “Trunkbow BVI Shares”), and Bay Peak, our former principal shareholder. Pursuant to the terms of the Share Exchange Agreement, the Shareholders transferred to us all of the Trunkbow BVI Shares in exchange for the issuance of 19,562,888 (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.

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Our organizational structure is as follows:

[GRAPHIC MISSING]

(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 and VIE 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.

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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 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 RF-SIM and mobile payment functions for their corporate clients; and
Revenue share on the RF-SIM cards that are sold to the telecom providers.

We generate recurring revenues in the following ways:

50% share of the monthly function fee charged by the telecom providers;
A 0.1 – 0.5% share of the transaction fee 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 year.

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.

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 its Caller CRBT and Mobile Payment services, geographic expansion and the introduction of new products and services.

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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 6%, 8% and nil, and 6%, 4% and nil, respectively, for the six months ended June 30, 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 31%, 40% and 29%, and 6%, 4% and 89%, respectively, for the six months ended June 30, 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.

To be accepted as a preferred supplier 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.

Opportunities, Risks and Challenges

As the Big Three telecom carriers compete fiercely for subscriber growth, they are looking for differentiation to attract and retain end users while trying to grow revenue from each subscriber. With over 150 patented mobile applications, we believe Trunkbow is in a perfect position to help these telecom carriers achieve this objective. We have been implementing our Caller CRBT, NCN and Mobile Payment for all three carriers in many provinces across China based on a revenue sharing model as described above. A summary of our current product roll-out, by province, is shown in the table below.

   
APPLICATIONS   2010 PROVINCES   2011 PROVINCES
Caller CRBT   13   16
Mobile Payment   12   16
NCN   10   15

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Management believes it is critical that we roll-out the products with the carriers within the next 12 months and to secure at least 16 provinces for both Caller CRBT and Mobile Payment applications. Although these deployments are capital intensive, the February 2010 Offering provided us with adequate funds to implement these application services across the PRC.

Once the applications are in service, we will expect to see recurring revenue streams and create visible revenue and profits for the next two to three years.

In addition to our current product offerings, we recognize that we must continue to innovate with new applications to build our product pipelines to extend our revenue and profit growth beyond three years. Therefore, we have invested heavily in R&D for new applications, which we believe will result in at least 10 patent applications filed each year for the next five years.

Finally, we also understand that it is imperative for us to manage our cash flow, since we have experienced a significant increase in our accounts receivable balance at December 31, 2009 as compared to December 31, 2008, with increased average periods to collect on such accounts receivable. In order to support the product deployment objective, our long term intention is to shorten the days’ sales outstanding from the current 151 days to between 90 and 120 days.

Results of Operations

Three and Six Months Ended June 30, 2010 and 2009

Net Revenues:  Net revenues decreased $2.22 million, or 36.2%, from $6.14 million for the three months ended June 30, 2009 to $3.92 million for the three months ended June 30, 2010. Net revenues increased $1.48 million, or 23%, from $6.34 million for the six months ended June 30, 2009 to $7.82 million for the six months ended June 30, 2010. Software sales increased $3.42 million, or 100% from nil for the three months ended June 30, 2009 to $3.42 million for the three months ended June 30, 2010 and increased $7.25 million, or 100%, from nil for the six months ended June 30, 2009 to $7.25 million for the six months ended June 30, 2010, due to increase sales in Mobile Payment and MVAS software with our geographic expansion in additional provinces. System integration revenues decreased $5.5 million, or 91%, from $6.02 million for the three months ended June 30, 2009 to $0.52 million for the three months ended June 30, 2010 and decreased $5.50 million, or 91%, from $6.02 million for the six months ended June 30, 2009 to $0.52 million for the six months ended June 30, 2010, due to the seasonal fluctuation and the change of demand of the customers in terms of ways of providing software or system with hardware.

We generated revenues of $5.48 million and $2.51 million from MVAS technology platforms and Mobile Payment System solutions for the six months ended June 30, 2010, and the $6.36 million and nil for the six months ended June 30, 2009, respectively. The gross margin for the two system platforms was $4.99 million and $2.29 million, respectively, for the six months ended June 30, 2010, and $5.05 million and nil, respectively, for the six months ended June 30, 2009.

Gross Margin:  Gross margin decreased $1.35 million, or 28%, from $4.91 million for the three months ended June 30, 2009 to $3.56 million for the three months ended June 30, 2010. The decrease in gross margin was due to revenue deduction associated with the system integration, net by the effect of increase in software sales. However, the gross margin rate increased by 10.8% from 80% to 90.8% due to significantly less hardware costs being allocated during this period. Gross margin increased $2.23 million, or 44%, from $5.05 million for the six months ended June 30, 2009 to $7.28 million for the six months ended June 30, 2010. The increase in gross margin was due to revenue growth associated with the software sales in which significantly less fixed costs and hardware costs were allocated. Gross margin rate increased from 80% for the six months ended June 30, 2009 to 93% for the six months ended June 30, 2010, which was also due to lower allocation of hardware costs. The gross margin for the MVAS technology platforms and Mobile Payment System solutions was $4,989,780 and $2,291,985, respectively, for the six months ended June 30, 2010, and $5,048,830 and nil, respectively, for the six months ended June 30, 2009.

Operating expenses:  Operating expenses including selling, general and administrative expenses and R&D increased $0.77 million, or 136%, from $0.57 million for the three months ended June 30, 2009 to $1.34 million for the three months ended June 30, 2010. Operating expenses increased $1.2 million, or 109%, from $1.09 million for the six months ended June 30, 2009 to $2.29 million for the six months ended June 30,

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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 $0.03 million, or 100% from nil for the three months ended June 30, 2009 to $0.03 million for the three months ended June 30, 2010 due to an increase in short-term loans with an annual interest rate of 6.6375%. Interest expenses increased $0.16 million, or 100% from nil for the six months ended June 30, 2009 to $0.16 million for the six months ended June 30, 2010 due to an increase in interest expenses from the contingently convertible notes with an annual interest rate of 12% and short-term loans with an annual interest rate of 6.6375%.

Research and Development:  For the three months ended June 30, 2010 and 2009, we spent $0.39 million and $0.08 million on research and development expenses, of which $0.2 million and $0.06 million was attributable to MVAS and $0.19 million and $0.02 million was attributable to mobile payment systems. For the six months ended June 30, 2010 and 2009, we spent $0.5 million and $0.19 million on research and development expenses, of which $0.25 million and $0.14 million was attributable to MVAS and $0.25 million and $0.05 million was attributable to mobile payment systems.

EBIT:  EBIT decreased $2.2 million, or 50.5%, from $4.34 million for the three months ended June 30, 2009 to $2.18 million for the three months ended June 30, 2010. EBIT margin rate decreased 15.1% from 70.7% for the three months ended June 30, 2009 to 55.6% for the three months ended June 30, 2010, principally due to seasonal fluctuation and the change of demand of customers in terms of ways of providing software or system with hardware. EBIT increased $0.87 million, or 22%, from $3.95 million for the six months ended June 30, 2009 to $4.82 million for the six months ended June 30, 2010. EBIT margin rate decreased 0.7% from 62.35% for the six months ended June 30, 2009 to 61.65% for the six months ended June 30, 2010, principally due to revenue growth associated with our geographic expansion into additional provinces and improved fixed cost allocations associated with the increase in revenues and gross margin, netted against the effect of the increase in interest expenses.

Fiscal Years Ended December 31, 2009 versus 2008

Revenues:  Revenues increased $0.6 million, or 4%, from $12.9 million in 2008 to $13.5 million in 2009. Software sales increased $1.36 million, or 155% from $0.88 million in 2008 to $2.2 million in 2009, due to increased sales in CRBT services, geographic expansion and the introduction of new products and services. System integration decreased $2.5 million, or 22%, from $10.95 million to $8.5 million and patent licensing revenues increased $2 million, or 100%, from nil in 2008 to $2 million in 2009, due to change of customers’ demand. We licensed our CRBT patent to our customers instead of providing the system integration in 2009. Maintenance revenues decreased $0.4 million, or 32%, from $1.1 million 2008 to $0.74 million in 2009 due to reduced demand for technical support.

We generated revenues of $10.21 million and $3.26 million from MVAS technology platforms and Mobile Payment System solutions, respectively, for the year ended December 31, 2009, and $12.92 million and nil, respectively, for the year ended December 31, 2008. The gross margin for the two system platforms was $8.71 million and $2.5 million, respectively, for the year ended December 31, 2009, and $8.77 million and nil, respectively, for the year ended December 31, 2008.

Gross Margin:  Gross margin increased $2.4 million, or 28%, from $8.8 million in 2008 to $11.2 million in 2009. The increase in gross margin was due to revenue growth and improved fixed cost allocations attributable to economies of scale from the increased use of our technologies. Gross margin rate increased from 71% in 2008 to 83% in 2009.

Operating Expenses:  Selling, general and administrative expenses and R&D increased $0.21 million, or 8%, from $2.6 million in 2008 to $2.8 million in 2009. Selling, general and administrative expenses and R&D represented 20% of revenue in 2008 and 21% of revenue in 2009. The increase in selling, general and administrative expenses and R&D were related to the expansion of business activities including travel and meetings.

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Research and Development:   For the years ended December 31, 2008 and 2009, we spent $0.44 million and $0.53 million on research and development expenses, respectively, of which $0.41 million was attributable to MVAS and $0.03 million was attributable to mobile payment systems for the year ended December 31, 2008, and of which $0.4 million to MVAS and $0.13 million to mobile payment systems for the year ended December 31, 2009.

EBIT:  EBIT increased $2 million, or 33%, from $6.2 million in 2008 to $8.3 million in 2009. EBIT margin rate increased from 50% in 2008 to 62% in 2009. The improvement in EBIT was principally due to revenue growth and improved fixed cost allocations associated with the increase in revenues and gross margin, as well as increased sales of our mobile payment solutions.

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 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.

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.

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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.

In May 2010, the FASB issued ASU 2010-19, Foreign Currency (Topic 830): Foreign Currency Issues: Multiple Foreign Currency Exchange Rates. The amendments in this Update are effective as of the announcement date of March 18, 2010. We do not expect the provisions of ASU 2010-19 to have a material effect on our financial position, results of operations or cash flows.

Foreign Currency Translation

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

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

The exchange rates applied are as follows:

   
  As of December 31,
     2009   2008
Year end RMB exchange rate     6.8372       6.8542  
Average RMB exchange rate     6.8409       6.9623  

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

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Liquidity and Capital Resources

In summary, our cash flows were as follows:

Trunkbow International Holdings Limited Summary Cash Flows
($ in thousands)

       
  Year Ended
December 31,
  Six Months Ended
June 30,
     2009   2008   2010   2009
Net cash flows provided by (used in) operating
activities
  $ (1,305 )    $ 1,103     $ (5,024 )    $ 155  
Net cash flows used in investing activities     (826 )      (422 )      (2,382 )      (424 ) 
Net cash flows provided by (used in) financing
activities
    5,046       (933 )      16,331       (127 ) 
Effect of foreign currency fluctuation on cash and cash equivalents     (101 )      36       111        
Net increase (decrease) in cash and cash equivalents   $ 2,814     $ (216 )    $ 9,036       (396 ) 
Cash and cash equivalents – beginning of year   $ 491     $ 707     $ 3,305     $ 491  
Cash and cash equivalents – end of year   $ 3,305     $ 491     $ 12,341     $ 95  

Our cash and cash equivalents include all cash, deposits in banks and other highly liquid investments with initial maturities of three months. Our principal sources of liquidity are cash, short-term investments and cash generated from operations. We believe that our existing cash, short-term investments and cash generated from operations will be sufficient to satisfy our current level of operations through June 2011. Our liquidity could be negatively affected by a decrease in demand for our products and services. In addition, we may need to raise additional capital through future debt or equity financings to fund our growth. We expect that our ongoing capital requirements for both working capital and capital expenditures (including R&D) for the remainder of 2010 and 2011 will be approximately $3 million and $20 – 25 million, respectively.

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.

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

 
  Office Rental
Year ending December 31, 2010   $ 122,302  
Year ending December 31, 2011   $ 204,555  
Year ending December 31, 2012   $ 151,391  
Year ending December 31, 2013   $ 27,215  
Year ending December 31, 2014   $ 1,997  
Total   $ 507,460  

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

Operating Activities

Net cash flows used in operating activities for the six months ended June 30, 2010 was $5,023,814 as compared with $154,822 provided by operating activities for the six months ended June 30, 2009, for a net decrease of $5,178,634. This decrease was mainly due to the significant increase in the change of loans receivable and other current assets, offset by the effect of decrease in changes of accounts receivable during the six months ended June 30, 2010. The change in accounts receivable decreased significantly, from $5,669,959 for the six months ended June 30, 2009 to $802,502 for the six months ended June 30, 2010, due to the significant growth of accounts receivable as of June 30, 2009 when compared to the amount as of December 31, 2008. Subsequent to the balance sheet date, $2,173,562 has been collected on the accounts receivable as of June 30, 2010.

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The decrease in operating cash flows was also attributed to a substantial increase in cash out flows from advance to suppliers of $7,298,933 as of June 30, 2010 when compared to December 31, 2009, due to different demands by the supplier and our commitment with VeriFone for the purchase of point of sale systems. While there was no material change in advance to suppliers as of June 30, 2009 when compared to December 31, 2008, there was no material effect on the cash flow by advance to suppliers for the six months ended June 30, 2009. Net cash flows used in operating activities for the year ended December 31, 2009 was $1,305,454 as compared with $1,102,910 provided by operating activities for the year ended December 31, 2008, for a net decrease of $2,408,364. This decrease was mainly due to the significant increase in accounts receivable, offset by the effect of decrease of advances from customers during the year ended December 31, 2009. Our accounts receivable increased significantly, from $656,536 in 2008 to $10,455,284 in 2009. The days sales outstanding in 2009 also increased significantly, from 14 days in 2008 to 151 days in 2009, due to the recognition of $4.56 million of revenue from customer contracts for our platforms and solutions that were entered into in the third quarter of 2009 and all closed in the fourth quarter of 2009, representing 34% of our total revenues in 2009. Subsequent to the balance sheet date, $5,904,246 has been collected on the accounts receivable as of December 31, 2009.

The decrease in operating cash flows was also attributed to a substantial decrease in cash out flows from advance to suppliers of $1,495,173 at December 31, 2008 when compared to December 31, 2007, due to different demands by the supplier. While there was no material change in advance to suppliers at December 31, 2009 when compared to December 31, 2008, there was no material effect on the cash flow by advance to suppliers.

The significant increase in income tax liability at December 31, 2008 also contributed to the cash flows for the year ended December 31, 2008, due to the large increase in income from operations. While there was no material change in taxes payable including income tax payable at December 31, 2009 when compared to December 31, 2008, there was no material effect on the cash flow by taxes payable.

During the year ended December 31, 2009, we provided for an allowance for doubtful debt of $366,912 resulting from the analysis and conclusion that our existing outstanding debt may be in jeopardy of not being collected. Inventory increased by $307,017 as of December 31, 2009 when compared to December 31, 2008, resulting from obtaining better prices with larger purchase orders. The increase in provision for doubtful debt, net of by the effect of increase in inventory caused net increase of $59,895 in cash flow.

Investing Activities

Our main use of investing activities during the six months ended June 30, 2010 and 2009 were on amount due from directors and loans to third parties. The amount due from directors as of June 30, 2010 was fully collected subsequently.

For the six months ended June 30, 2010, our main use of investing activities was on loans to third parties. The cash payment used in investing activities was netted against the collections from amount due from directors.

Our main use of investing activities during the two years ended December 31, 2009 and 2008 were on amount due from directors. The amount due from directors as of December 31, 2009 was fully collected by May 25, 2010.

Financing Activities

Net cash flows provided by financing activities for the six months ended June 30, 2010 was $16,330,649 as compared with $127,133 used in financing activities for the six months ended June 30, 2009.

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

The cash provided by financing activities for the six months ended June 30, 2010 included the net proceeds from the February 2010 Offering of $17,073,720 and the short-term loan of $1,775,736, offset by the repayment of $2,000,000 contingently convertible notes.

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Net cash flows provided by financing activities for the year ended December 31, 2009 was $5,046,382 as compared with $932,910 used in financing activities for the year ended December 31, 2008. During the year ended December 31, 2009, we received contingently convertible notes of $5,000,000. The year ended December 31, 2008 reflects net payment of $932,910 to third parties and long-term creditors.

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.

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BUSINESS

Company Overview

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

We currently have significant market presence in the Chinese MVAS and Mobile Payment markets, as evidenced by our contracts with local branches of China Mobile, China Telecom and China Unicom, the “Big Three” Chinese cellular carriers, or resellers who themselves have such contracts. Combined, these contracts span 10 of 30 provinces, municipalities and autonomous regions and represent a significant portion of the geographic market based on the location of the mobile subscriber base in the PRC. Our patented platforms provide a comprehensive solution for Chinese telecom operators to deliver and manage the distribution of MVAS applications to their subscribers. We believe that the expansion of our platforms and services deployment to the Big Three over the past ten years shows that the Trunkbow brand is regarded by these major Chinese telecom operators as a well managed, trusted provider of technology solutions. Our R&D-focused business model provides us with a defensible market position as a technology solutions provider to the telecom operators.

Developing innovative technology solutions is at the core of our business model. We work extensively with our customers and technology partners in our R&D process to develop cutting edge technology solutions that are relevant to consumer trends and market demand. We have a team of over 100 R&D professionals led by a seasoned senior management team with extensive experience in the telecom industry. Our technology is the subject of 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 property globally.

Our customers are primarily telecom service providers in the PRC. We have extensive customer relationships with provincial branches of all three of the mobile service providers in China, specifically, China Telecom, China Unicom and China Mobile. The table below shows our revenues generated from direct sales to each of the Big Three, as well as resales of our products to these carriers through intermediaries (i.e., direct and indirect sales to these carriers), for the fiscal years ended December 31, 2009 and 2008 and the six months ended June 30, 2010.

       
  June 30,   December 31,
     2010   2009   2009   2008
Percent of revenues from direct sales to China Telecom     6       6       3       4  
Percent of revenues from direct sales to China Unicom     8       4       6       95  
Percent of revenues from direct sales to China Mobile     0       0       0       0  
Percent of revenues from direct and indirect sales to China Telecom through resellers     31       6       42       4  
Percent of revenues from direct and indirect sales to China Unicom through resellers     40       4       15       95  
Percent of revenues from direct and indirect sales to China Mobile through resellers     29       89       42       0  

The resellers with whom we contract offer value-added services to the carriers, including installation support, hardware sourcing and an established presence and reputation, and they assist us by providing a known quantity aspect to the carrier when doing business with Trunkbow. In addition, once a project is

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completed, Trunkbow may further rely on these resellers for ongoing maintenance support. We have worked with our resellers for periods between one and five years.

The significant increase 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.

We have also entered into a strategic partnership with China UnionPay in order to provide clearing house functions for our Mobile Payment Solutions.

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

We have experienced strong revenue growth and profitability over the last two years driven by customer additions and the introduction of innovative products and services. Our revenues increased to $13.5 million in 2009 from $12.9 million in 2008 and net income to $8.3 million in 2009, from $5.1 million in 2008. Positive macro economic trends, strong consumer demand and our suite of unique platform solutions present us with the opportunity to expand sales rapidly and increase market share.

Our Strategy

Our goal is to become a leader in MVAS application platforms and mobile payment systems for the telecom industry in China. We intend to achieve this goal by implementing the following strategies:

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

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

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

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

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

Form business relationships with strategic partners to expand our presence in the mobile payment business.  The MVAS application platform and mobile payment markets are immature and somewhat fragmented. This provides us with the opportunity to assert ourselves and form strategic partnerships to shape the direction of the industry. We intend to enter into synergistic business relationships with key domestic and international players in the mobile payment industry. In February 2010 we entered into an engagement agreement with VeriFone, Inc., a global provider of point of sale payment systems and solutions. We hope to leverage our relationship with VeriFone to expand our market for our mobile payment solutions.

Our Competitive Strengths

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

“Approved Vendor” to the leading telecom and payment industry participants in the PRC.  We have passed a rigorous supplier approval process to become an “approved vendor” to each of the three major telecom providers in the PRC: China Mobile, China Telecom and China Unicom, the “Big Three”. We have entered into business relationships with the provincial branches of the Big Three in 10 provinces in order to better customize their specific application solution needs. Our relationships with market leaders in the PRC telecom industry provide us with reputation, industry knowledge, operational expertise and credibility that we can leverage in marketing to other market participants. As our clients generally prefer to maintain continuity and compatibility among their various systems, we believe our existing relationships favorably position us for selection to address our clients’ future technology needs. We further believe that our continued client relationships allow us to build client trust, anticipate their information technology needs and allow us to better direct our research and development efforts and effectively market to them our solutions and services. Beginning in 2007, we established a business and indirect contractual relationship with China UnionPay in order to develop and commercialize mobile payment solutions. Our relationship with UnionPay and the three telecom operators allows us to provide a comprehensive mobile payment solution that is fully back-end linked, meaning that due to its redundant hardware and communication links, it offers no single point of failure.

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

Strong R&D capabilities.  Our R&D efforts are led by Dr. Hou Wan Chun, Dr. An Chun Ming and Mr. Wang Xin. Dr. Hou is a telecom veteran with numerous telecom application patents. Dr. Hou previously worked for telecom companies like Lucent in the Silicon Valley as an engineer involved in developing new intelligent network applications. Our overall technical direction has been guided by Dr. An Chun Ming, the pioneer of Next Generation Network (“NGN”). Prior to joining Trunkbow, Dr. An led multiple development efforts as a Bell Labs Fellow during his 30 year tenure. Our experienced senior management team leads a group of over 100 R&D professionals with strong telecom and technical backgrounds.

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The primary goal of our research efforts is to develop solutions that may be strategically implemented and commercialized. We are currently developing the next generation of mobile payment solutions and 3G applications. Our commitment to research and development and our focus on commercializing our research results will further enhance our competitive edge in the market with the ability to provide a broad range of quality solutions and the potential for sustained long-term growth.

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

Our Products and Services

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

Mobile Value Added Service Application Platforms

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

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

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

Mobile Payment System

Our patented technology platform supports mobile phone payment via various NFC or RFID enabled mobile devices, typically using RF-SIM (radio frequency SIM), SIMPass and iSIM. This technology allows NFC or RFID enabled mobile phones worldwide to be utilized as payment tools and authentication devices. Specifically, our solution enables the end-user to consolidate a variety of functions such as credit/debit cards, public transit cards, employee IDs, membership cards into one device and eliminates the need to carry around numerous cards. We provide users with access to real-time account information available to them whenever they have access to mobile service. In addition, the end user can perform a variety of account maintenance functions remotely including refilling prepaid cards and archiving transaction records.

Our technology is based upon the Chinese standard of 2.4Ghz and 13.56MHz frequency for near field communication. We use proprietary technologies to seamlessly transmit secure transaction data between end users and the financial processing infrastructure. Our proprietary software technology platform resides within the telecom operators’ network and as well as the clearing house network in order to seamlessly facilitate mobile payment transactions.

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Diagram I — Mobile Payment Network

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Other Products and Services

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

Recent Developments

Concurrently with the closing of the February 2010 Offering, we entered into a master engagement agreement (“VeriFone Agreement”) with VeriFone, Inc. (“VeriFone”) such that VeriFone is our exclusive provider of point of sale hardware, software and services that are purchased or deployed by us and our affiliates and we have agreed to use our best efforts to ensure that VeriFone will receive at least 80% of the orders for point of sale systems placed by the Company’s mobile operator partners. Pursuant to the terms of the VeriFone Agreement, we submitted a binding, non-cancellable purchase order to VeriFone covering an initial order of $5 million of VeriFone’s point of sale systems for deployment in China as part of its rollout. The full amount of the purchase order was paid upon submission to VeriFone. Additionally, the Master Engagement Agreement contains a non-binding deployment schedule covering a total of 125,000 point of sale systems to be supplied by VeriFone through the end of 2012.

VeriFone invested $5 million in the February 2010 Offering. We have granted VeriFone the ability to name one of the directors on our Board of Directors so long as it beneficially owns at least 4.99% of our outstanding Common Stock.

Our Revenue Model

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

Our current MVAS Application Platform solutions generate revenue through one time sales and recurring revenues. For our Caller CRBT and Color Numbering solution, we have revenue sharing agreements with the

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relevant provincial branch of the telecom providers to receive 50% of the subscription revenues generated for up to 5 years and then renewable upon expiration. For our Number Change Notification solution, we receive revenues from one-time system sales and maintenance fees.

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

System sales to telecom providers which enables the mobile payment function on their network;
System sales to telecom providers that enables various RF-SIM and mobile payment functions for their corporate clients; and
Revenue share on the RF-SIM cards that are sold to the telecom providers.

We generate recurring revenues in the following ways:

50% share of the monthly function fee charged by the telecom providers;
A share of the transaction fee on purchases made through the mobile payment application; and
Monthly rental revenues on POS (Point of Sales) machines deployed by Trunkbow.

Table I — Summary of Our Revenue Model

   
Category   Product   Revenue Model
MVAS Platform   Caller Color Ring Back Tone (CRBT)   Revenue sharing at 50% for 5 years and renewable
     Number Change Notification (NCN)   One time sales and 10% annual maintenance fees
     Color Numbering   Revenue sharing at 50% for 5 years and renewable
Mobile Payment System   Mobile Payment System   One time system sales to carriers and corporate clients, RMB 20 per RF-SIM, revenue sharing on function fee (50%), rental revenue on POS machines and transaction fees

Sales and Marketing

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

Our sales and marketing personnel are based in offices located in six provinces with local coverage responsibilities in Shandong, Hebei, Zhejiang, Henan, Sichuan, Jilin, Xinjiang provinces and in Beijing. Our sales teams have local expertise and relationships to succeed in the fragmented Chinese market. Typically, each sales team includes a general manager, account representatives, business development personnel, sales engineers and customer service representatives with specific product expertise in mobile applications and mobile payment as well as financial transaction operations. Our sales force is supported by our R&D and client support teams in order to provide products and services that are tailored to the specific needs of our customers. We will focus our future sales and marketing efforts on providing mobile payment services platform to the telecom and financial industries.

For the domestic market, our sales team covers the following regions: Shandong, Hebei, Henan, Beijing, Tianjin, Zhejiang, North East China, Inner Mongolia, Xingjiang, Sichun, Yunnan, Anhui, Shanghai, Hunan, Jiangxi, Fujian, Guangdong, and Guangxi. For the international market, we have divided the regions into US, Mexico and the Middle East, although we have made only one sale in the Middle East.

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As of December 31, 2009, we had 50 sales and marketing employees, representing approximately 25% of our total workforce.

Research and Development

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

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

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

As of December 31, 2009, we had 115 research and development employees representing approximately 55% of our total workforce. At such date we had a total of 200 employees, all of which were full-time employees. For the six months ended June 30, 2010, we spent $505,929 on research and development expenses, and for the years ended December 31, 2008 and 2009, we spent $435,712 and $532,473 on research and development expenses, respectively.

Employees

Together with our subsidiaries, as of June 30, 2010 we had approximately 200 employees, all of which are full-time employees.

Competition

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

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

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

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Our Industry

Overview Of The China Telecom Market

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

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

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

Mobile Payment Solutions (“MPS”) allows for the purchase of items with a mobile phone, facilitating both remote mobile payment and point of sale (“POS”) mobile payment. Remote mobile purchases are enabled through SMS, WAP, and WEB interfaces. WAP is a commonly used web browser developed to allow a realistic browsing experience, while WEB usage refers to surfing on the WEB. POS mobile payment allows consumers to pay for items by storing bank, credit, or prepayment card information on a mobile phone.

Key Drivers for MVAS and MPS

The development of the MVAS and MPS markets in China is highly correlated with the growth of the overall mobile phone industry in China. According to MIIT, 747 million people had a mobile phone account at the end of 2009 and according to iResearch, 233 million of the subscribers had used their mobile phone’s browser at least once. Based on figures released by MIIT for January to April 2010, the wireless subscriber base in China could reach an estimated 864 million subscribers by the end of 2010, representing a six year CAGR of 14%. The MIIT data also indicates that total revenue for the telecom sector in the PRC could grow to approximately $425 billion for 2010. Positive mobile phone industry trends in China are largely driven by the increasing affluence of the middle class, a growing subscriber base, and 3G deployment, which officially began in 2009. Moreover, iResearch projects that mobile phone browser users could grow 125% to 524 million users by the end of 2012.

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According to its 2009 Annual Report, China Mobile, which had 70.6% mobile phone user market share at the end of 2009, has experienced dramatic usage growth in its MVAS segment. During 2009, China Mobile’s SMS and MMS volumes, WAP megabyte usage and Color Ring Tone subscriptions have increased by 12.2%, 37.2% 163% and 24.7%, respectively. Total MVAS revenue grew 16.0% in the same time period. As each product matures MVAS product offerings are becoming more affordable for consumers in the PRC.

New MVAS Applications

All of the Big Three are rolling out new MVAS product offerings. For example, China Mobile is offering “Mobile Market”, “Mobile TV”, and “Mobile Reading” MVAS applications. China Unicom is offering mobile office, mobile security, and intelligent public transportation applications. China Telecom is offering “eSurfing reader”, “189 mailbox”, “eSurfing LIVE”, and “eSurfing Video” applications.

China MPS Aggregate Demand Forecasts

Based on China Computer World (“CCW”) research projections, Chinese mobile payment users were expected to have reached 108 million at the end of 2009, and are estimated to nearly double by 2011. Dramatic increases in demand are expected as The Big Three continue their roll-out of MPS networks in each province, in turn, incentivizing third party platforms and vendors.

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3G Rollout in China Driving Remote MPS

Although our MPS technology is not dependent on 3G capability, the roll out of 3G networks in the PRC and an increase in smartphone use will increase data speeds and thus encourage more remote MPS transactions through WEB. On the network front, China Telecom has the most developed 3G footprint in the PRC, while China Unicom has recently announced it will raise $1.8 billion to accelerate its 3G development. China Mobile’s 2009 Annual Report stated that it already operated in 238 cities, providing service to 70% of urban populations in the PRC, and that it would approach urban population coverage of 100% by the end of 2011. China Telecom’s 2009 Annual Report also signaled that it was almost at full coverage, with 98% of urban populations and 93% of rural populations covered at the close of 2009. China Unicom’s 2009 Annual Report pronounced less ambitious service goals with 282 cities by end of 2009 and 75% of the total population by the end of 2011.

2.5G and 3G enabled smartphones are also part of the remote MPS solution, and are expected to become increasingly affordable. At the high-end, China Unicom is offering the iPhone for RMB 3,899. Meanwhile China Telecom, the third largest mobile network provider by market share, is offering 3G handsets around RMB 1,000. Affordable smartphones with higher browser quality may increase WAP and WEB use and thus encourage greater use of remote MPS payments.

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Emergence of POS MPS Market

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

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

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

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

MPS Security

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

Competition Among Third-Party Vendors

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

Financial service solutions companies (Hi Sun Technology and Shanghai Huateng);
Telecom value-added software and system integration companies (Trunkbow, Huawei, ZTE, Fujian Fujitsu, and Digital China Si Tech); and
Recently incorporated JV companies (UMPay is a China Mobile and China UnionPay JV).

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

Real Property

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

Intellectual Property

Our technology is the subject of 164 filed patent applications, of which 50 have been granted by the National Intellectual Property Administration of the People’s Republic of China. All of the patents have a duration period of 20 years starting from submission date. Below is a list of some of granted patents responsible for generating majority of the current revenues.

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Table I: Significant Patents Granted

   
Patent#   Description of use   Expiration Date
ZL 200410009495.0   System and implementation of enabling mobile user to store and search phone book list from network. Provides network phone book store and searching feature from mobile network.   August 30, 2024
ZL 200410009525.8   Equipment and method for realizing hiding calling number in telephone exchange network.   September 8, 2024
ZL 200410009612.3   Device and method for realizing transmitting information to computer network real-time communication terminal by telephone.   September 28, 2024
ZL 200410009830.7   Equipment and method for providing senior secretary service for telephone user.   November 22, 2024
ZL 200410103905.8   Apparatus and method for intelligent communication based on mobile communication network and Internet.   December 31, 2024
ZL 200510011305.3   Device and method for selecting and binding telephone number by mobile communication intelligent card.   February 4, 2025
ZL 200510011343.9   Method for implementing new service of mobile phone based on position renewing operation.   February 23, 2025

   
Patent#   Description of use   Expiration Date
ZL 200510011525.6   System, method and implementation of providing instant communication between mobile phone and computer user. Provides forward function between Instant Message client and mobile phone.   April 4, 2025
ZL 200510011542.X   Apparatus and method for realizing main calling set ring back tone based on personalized ring back tone.   April 8, 2025
ZL 200510012089.4   Device and method for realizing to provide short news to mobile phone user and no interference service.   July 4, 2025
ZL 200510012090.7   Equipment and method for providing virtual facsimile business using mobile telephone number.   July 4, 2025
ZL 200610011449.3   Apparatus and method for automatic network storage of short message receive by mobile telephone.   March 8, 2026
ZL 200610011574.4   Device and method for realizing main call customized ring back tone service.   March 29, 2026
ZL 200610011725.6   Device and method for realizing mobile phone turn-off and short message call transfer.   April 4, 2026
ZL 200610112451.X   System and method for realizing secrecy of mobile phone number.   August 18, 2026
ZL 200710065067.3   Method for realizing caller customized ring back tone compatible with called personalized ring back tone.   April 2, 2027
ZL 200710063737.8   System and method for realizing point-to-point short message encryption and message screening.   February 8, 2027
ZL 200710177629.3   System and method for realizing personal electronic check card.   November 19, 2027
ZL 200810224979.5   System and method for adding fixed telephone number to mobile telephone number.   October 29, 2028

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Table II: Significant Patents Pending

   
Patent#   Description of use   Expiration Date
ZL 200710121396.5   System, method and implementation of enabling communication between mobile client device and mobile client server. Enables communication between mobile client device and mobile client server.   September 5, 2027
ZL 200810089411.7   System, method and implementation of providing multiple phone numbers in one mobile phone and enabling mobile users to control their multiple mobile phone numbers' feature. Provides multiple phone numbers in one mobile phone and enables mobile users to control their multiple mobile phone numbers' features, such as call, MMS and SMS screening, backup MMS and SMS to E-mail format, and enables users to manage their mobile communication functions.   March 28, 2028
ZL 200910091555.0   Method and implementation of integrating different bank cards into one special personal payment device. Provides a method to integrate different bank cards such as gate pass, attendance pass and RFID card into one special personalized payment machine for user to easily control.   August 26, 2029
ZL 200910092196.0   System, method and implementation of providing caller CRBT service based on CRBT service. Provides caller CRBT service based on CRBT service so that callers can receive caller's CRBT when making calls to Non-CRBT users.

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

Government Regulations

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

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 the majority of the businesses in the PRC shut down for a month-long holiday and slow down for a month prior to the New Year celebration. We believe that this fluctuation will gradually subside as we increase our recurring revenue streams.

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Legal Proceedings

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

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DIRECTORS, EXECUTIVE OFFICERS AND
CERTAIN SIGNIFICANT EMPLOYEES

As of the date of this prospectus, our directors, executive officers and significant employees are as follows:

   
Name   Age   Title
Dr. Hou WanChun     44       Chairman of the Board of Directors  
Li Qiang     41       Chief Executive Officer and Director  
Ye Yuan Jun     30       Chief Financial Officer  
Dr. An ChungMing     68       Chief Strategist  
Bao Jihong     45       Chief Marketing Officer and Director  
Wang Xin     31       Chief Technology Officer and Director  
Cory Roberts     45       Director  
Albert Liu     37       Director  
Regis Kwong     47       Independent Director  
Dr. Tan Kok Hui     48       Independent Director  
Iris Geng     46       Independent Director  
Dr. Lv Ting Jie     54       Independent Director  
Huang Zhaoxing     64       Independent Director  
Li Dong     42       Independent Director  
Larry Gilmore     47       Independent Director  

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

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

Ye Yuan Jun, Chief Financial Officer.  Ms. Ye has been our Chief Financial Officer since January 1, 2010. Prior to joining us, Ms. Ye was a senior audit manager in Bernstein & Pinchuk LLP from July 2008 to December 2009. Ms. Ye was with Deloitte Touche Tohmatsu from July 2002 to July 2008 where she worked in the auditing department. Ms. Ye obtained her BA in accounting from Guangdong University of Foreign Studies. Ms. Ye has completed all sections of the Uniform Certified Public Accountants Examination.

Dr. An ChungMing, Chief Strategist.  Dr. An has over 30 years of experience in the telecom industry. From February 2006 to April 2009 he was a VP at CDMA Development Group supporting its operations in the Southeast Asia and the Greater China region. From September 2002 to January 2006, Dr. An was the CEO at Asia Pacific Broadband Wireless where he lead the management team. He was the President at Mobitai Communications, a GSM operator in Taiwan, from April 1998 to September 2002. Dr. An started his professional career with Bell Labs in 1978 and would go on to hold various technical and managerial

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positions until 1998. He was an Associate Professor at Seton Hall from June 1969 to June 1972 and Johns Hopkins University from June 1972 to June 1978. Dr. An obtained his PhD in Mathematics from University of Pennsylvania.

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

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

Cory Roberts, Director.  Mr. Roberts has been a member of our Board of Directors since August 28, 2008 and President since August 28, 2008, and resigned as president on February 10, 2010. Mr. Roberts has an 18 year career in finance that spans investment management and investment banking. In 2004, he established Bay Peak LLC, a privately held investment firm. From August 2004 until now, he has acted as managing director of Bay Peak LLC, responsible for evaluating, negotiating, structuring and executing complex investment transactions. He holds a B.A. in Business Finance from the University of Oklahoma. We believe that Mr. Roberts’s vast experience in finance and investment banking provides him a unique and valuable expertise from which he can draw to help advise the Board of Directors.

Albert Liu, Director.  Mr. Liu has been a member of the Board of Directors since March 1, 2010. Mr. Liu joined VeriFone in October 2008, as Senior Vice President, General Counsel and Corporate Secretary where he is responsible for overseeing all of VeriFone’s legal matters. In this capacity he also serves as Chief Compliance Officer. Prior to joining VeriFone, he was Vice President, Legal and Corporate Development, and Company Secretary for NETGEAR, Inc., a provider of networking solutions, commencing in October 2004. Mr. Liu also previously served as General Counsel, Director of Human Resources and Secretary of Turnstone Systems, Inc., a supplier of digital subscriber line testing equipment and General Counsel and Secretary for Yipes Enterprise Services, a provider of Ethernet connectivity services. Mr. Liu began practicing law with the firm of Sullivan & Cromwell in New York, advising clients on all aspects of corporate and securities law, leading public and private securities offerings, and negotiating and finalizing venture capital investments and contracts. Before entering the legal field, he was a software engineer at Tandem Computers. He holds dual degrees in Computer Science and Political Science from Stanford University and a J.D (magna cum laude) from the University of California, Hastings College of the Law. He is a member of the State Bar of California. We believe that Mr. Liu’s professional background as an attorney in the U.S. and his experience as General Counsel and CCO of VeriFone will enable him to provide the Board of Directors with valuable advice on our corporate governance matters and our SEC compliance.

Regis Kwong, Director and Compensation, Nomination Committee Chair.  Mr. Kwong has been a member of the Board of Directors since March 1, 2010. He has over 25 years experience with leading global telecom services providers. In June 1985 he started his career with GTE (now Verizon) where he became the Head of Operations in China. From May 1997 to May 2000 Mr. Kwong served as Vice President and General Manager for GTS China, managing China operations for GTS. After GTS, in June 2000, Mr. Kwong founded Terremark Asia, a subsidiary of Terremark Worldwide (NASDAQ: TMRK). Mr. Kwong became Chief Executive Officer of Jingwei International, a US public company in February 2005 where he oversaw all of its business operations until June 2009. Mr. Kwong received his B.S. and Masters Degree in Computer Engineering from California Polytechnic University in 1985 and 1987, respectively, and an M.B.A. from Rutgers University in 1999. We believe that Mr. Kwong’s vast experience in the telecom industry and his

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experience with public companies will enable him to provide the Board of Director with valuable advice on industry matters and with our SEC compliance. From April 2007 through July 2009 Mr. Kwong served on the board of directors of Jingwei International Limited. From March 2006 through April 2007 served on the board of directors of CGI Group Inc. Since July 2009, Mr. Kwong has served as managing director of Centric Capital Limited, where he is responsible for the company’s investments in China.

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

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

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

Huang Zhaoxing, Director.  Mr. Huang has been a member of the Board of Directors since February 10, 2010. Mr. Huang has extensive experience in the telecom equipment industry. Since 2005 he has been a general engineer at Hangzhou Telisheng Technology Co., Ltd., where he is responsible for strategic oversight of their R&D team. He was the General Manager of Zhejiang Telecom Equipments Factory from April 1989 to June 2005, the Chairman of Zhejiang Telecom Equipments Factory from February 1991 to July 1997 and UTStarcom Hangzhou Telecom Co., Ltd. from February 1991 to July 1997 and the Deputy Chairman of UTStarcom Hangzhou Telecom Co., Ltd. from August 1997 to December 2002. He also served as the workshop manager and technology officer from 1972 to 1988 and the Vice General Manager of Zhejiang Telecom Equipments Factory from 1988 to 1989. Mr. Huang obtained his BS in radio engineering from Zhejiang University in July of 1970. We believe that Mr. Huang’s telecom hardware engineering background provides him with valuable expertise from which he can draw to help advise the Board of Directors.

Li Dong, Director.  Mr. Li has been a member of the Board of Directors since February 10, 2010. He has over ten years of finance and security investment experience. Mr. Li has been with Beijing Qinchuangxin Tech-trading Co., Ltd. since December 2003. He currently acts as Vice General Manager, where he is responsible for overseeing corporate finance and investing activities. Mr. Li obtained his BS in Industrial and Civil Architecture from Beijing University of Technology in 1993. We believe that Mr. Li’s experience with finance and capital markets provides him with valuable expertise from which he can draw to help advise the Board of Directors.

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Larry Gilmore, Director.  Larry Gilmore has been a member of the Board of Directors since February 10, 2010. Mr. Gilmore is currently VP Corporate Strategy of Yongye International, Inc., where he has served since August 2008, and he is responsible for SEC compliance and investor relations. Prior to joining Yongye, Gilmore was SVP of operations for Asia Standard Energy from June 2005 to November 2007, where he was responsible for raising investment and corporate oversight of finance and accounting activities. Mr. Gilmore served as Managing Director of GC Global from October 2001 to June 2005, assisting large organizations undertake large scale change initiatives. Previously, he was the Manager of Human Resources at Alcatel and a Senior Consultant at Deloitte and Touche. We believe that Mr. Gilmore’s experience as an investor in the US public markets and as a director of Yongye International, a US publicly-traded company, make Mr. Gilmore uniquely qualified to advise the Board on matters related to SEC compliance, listing and continued listing on a national securities exchange, internal controls over financial reporting and other corporate governance matters.

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

No director or executive officer is related to any other director or executive officer.

Certain Legal Proceedings

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

Director Independence

Our board of directors has determined that each of Regis Kwong, Dr. Tan Kok Hui, Iris Geng, Dr. Lv Ting Jie, Huang Zhaoxing, Li Dong, and Larry Gilmore are independent director as defined by Rule 5605(a)(2) of the Listing Rules of The Nasdaq Stock Market, Inc.

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EXECUTIVE COMPENSATION

Compensation of Officers

The following table sets forth all cash compensation paid by Trunkbow, as well as certain other compensation paid or accrued, in 2009, to each of the following named executive officers.

Summary Compensation of Named Executive Officers

           
Name and Principal Position   Fiscal
Year
  Salary
($)
  Bonus
($)
  Option
Awards
($)
  All Other
Compensation
($)
  Total
($)
Li Qiang
Chief Executive Officer
    2009       56,000       8,800       0       0       64,800  

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

We do not have employment agreements with any of our officers. We formed a Compensation Committee consisting of the independent directors on March 1, 2010. In the future, compensation for executive officers will be determined based on the compensation policies, programs and procedures to be established by our Compensation Committee.

Option Grants in Last Fiscal Year

There were no options granted to any of the named executive officers during the fiscal year ended December 31, 2009.

Equity Compensation Plan Information

We currently do not have any equity compensation plans.

Compensation of Directors

Our directors are reimbursed for expenses incurred by them in connection with attending Board of Directors’ meetings, but they do not receive any other compensation for serving on the Board of Directors.

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DESCRIPTION OF COMMON STOCK

General

Our current authorized capital stock consists of 190,000,000 shares of common stock and 10,000,000 shares of preferred stock, each with a par value of $.001 per share, of which 32,472,075 common shares and no preferred shares were issued and outstanding immediately prior to this offering.

Common Stock

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of our stockholders. Each holder of common stock is entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. Cumulative voting for the election of directors is not provided for in our certificate of incorporation. Any action other than the election of directors shall be authorized by a majority of the votes cast, except where the Nevada Revised Statutes prescribes a different percentage of votes and/or exercise of voting power. When a dividend is declared by the Board of Directors, all stockholders are entitled to receive a fixed dividend. To date, no dividends have been declared. All shares of common stock issued by us are of the same class, and have equal liquidation, preference, and adjustment rights.

Holders of our common stock have no conversion, preemptive or other subscription rights, and there are no redemption provisions for our common stock. The rights of the holders of common stock are subject to any rights that may be fixed for holders of preferred stock, when and if any additional preferred stock is authorized and issued. All outstanding shares of our common stock are, and the shares underlying all options and warrants and convertible securities will be, duly authorized, validly issued, fully paid and non-assessable upon our issuance of these shares.

Warrants

We have issued warrants to purchase 3,005,519 shares of common stock at an exercise price of $2.00 which remain outstanding. The warrants have a five year term.

The exercise price and number of shares of Common Stock issuable upon exercise of the Warrants may be adjusted in certain circumstances, including in the event of a stock dividend, or our recapitalization, reorganization, merger or consolidation.

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

Anti-takeover Provisions of our Certificate of Incorporation

Our Certificate of Incorporation grants our board of directors the authority, without any further vote or action by stockholders, to issue preferred stock in one or more series, fix the number of shares constituting the series and establish the preferences, limitations and relative rights, including dividend rights, dividend rate, voting rights, terms of redemption, redemption price or prices, redemption rights and liquidation preferences of the shares of the series. The existence of authorized but unissued preferred stock could reduce our attractiveness as a target for an unsolicited takeover bid, since we could, for example, issue preferred stock to parties who might oppose such a takeover bid, or issue shares with terms the potential acquirer may find unattractive. This may have the effect of delaying or preventing a change in control, discourage bids for the common stock at a premium over the market price, and adversely affect the market price, and voting and other rights of holders of common stock. Our board of directors does not at present intend to seek stockholder approval prior to any issuance of currently authorized preferred stock, unless otherwise required by law.

Anti-takeover Effects of Nevada Law

Business Combinations

The “business combination” provisions of Sections 78.411 to 78.444, inclusive, of the Nevada Revised Statutes, or NRS, prohibit a Nevada corporation with at least 200 stockholders from engaging in various “combination” transactions with any interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the transaction is approved by the

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board of directors prior to the date the interested stockholder obtained such status; or after the expiration of the three-year period, unless:

the transaction is approved by the board of directors or a majority of the voting power held by disinterested stockholders, or
the consideration to be paid by the interested stockholder is at least equal to the highest of (a) the highest price per share paid by the interested stockholder within the three years immediately preceding the date of the announcement of the combination or in the transaction in which it became an interested stockholder, whichever is higher, (b) the market value per share of common stock on the date of announcement of the combination and the date the interested stockholder acquired the shares, whichever is higher, or (c) for holders of preferred stock, the highest liquidation value of the preferred stock, if it is higher.

A “combination” is defined to include mergers or consolidations or any sale, lease exchange, mortgage, pledge, transfer or other disposition, in one transaction or a series of transactions, with an “interested stockholder” having (a) an aggregate market value equal to 5% or more of the aggregate market value of the assets of the corporation, (b) an aggregate market value equal to 5% or more of the aggregate market value of all outstanding shares of the corporation, or (c) 10% or more of the earning power or net income of the corporation.

In general, an “interested stockholder” is a person who, together with affiliates and associates, owns (or within three years, did own) 10% or more of a corporation's voting stock. The statute could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire us even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.

The effect of Nevada’s business combination law is to potentially discourage parties interested in taking control of Trunkbow if they cannot obtain the approval of our Board of Directors.

Control Share Acquisitions

The “control share” provisions of Sections 78.378 to 78.3793, inclusive, of the NRS, which apply only to Nevada corporations with at least 200 stockholders, including at least 100 stockholders of record who are Nevada residents, and which conduct business directly or indirectly in Nevada, prohibit an acquirer, under certain circumstances, from voting its shares of a target corporation's stock after crossing certain ownership threshold percentages, unless the acquirer obtains approval of the target corporation's disinterested stockholders. The statute specifies three thresholds: one-fifth or more but less than one-third, one-third but less than a majority, and a majority or more, of the outstanding voting power. Once an acquirer crosses one of the above thresholds, those shares in an offer or acquisition and acquired within 90 days thereof become “control shares” and such control shares are deprived of the right to vote until disinterested stockholders restore the right. These provisions also provide that if control shares are accorded full voting rights and the acquiring person has acquired a majority or more of all voting power, all other stockholders who do not vote in favor of authorizing voting rights to the control shares are entitled to demand payment for the fair value of their shares in accordance with statutory procedures established for dissenters' rights.

We may be subject to Nevada’s control share provisions after this offering. The effect of the control share law is that the acquiring person, and those acting in association with the acquiring person will obtain only such voting rights in the control shares as are conferred by a resolution of the stockholders at an annual or special meeting of the stockholders. Nevada’s control share law, if applicable, may have the effect of discouraging takeovers of Trunkbow.

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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding beneficial ownership of our common stock as of October 14, 2010 by (i) each person (or group of affiliated persons) who is known by us to own more than five percent of the outstanding shares of our common stock, (ii) each director, executive officer and director nominee, and (iii) all of our directors, executive officers and director nominees as a group. As of October 14, 2010, we had 32,472,075 shares of common stock issued and outstanding.

Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. Unless otherwise noted, the principal address of each of the stockholders, directors and officers listed below is Unit 1217-128, 12F of Tower B, Gemdale Plaza, No. 91 Jianguo Road, Chaoyang District, Beijing, People’s Republic of China.

All share ownership figures include shares of our common stock issuable upon securities convertible or exchangeable into shares of our common stock within sixty (60) days of October 14, 2010, which are deemed outstanding and beneficially owned by such person for purposes of computing his or her percentage ownership, but not for purposes of computing the percentage ownership of any other person.

   
Name and Address of Beneficial Owner   Number of
Shares
  Percentage of
Outstanding
Shares of
Common
Stock
Chief Honour Investments Limited
    8,558,764 (1)      26.36 % 
Capital Melody Limited     7,580,619 (2)      23.35 % 
VeriFone, Inc.
2099 Gateway Place
Suite 600 San Jose, CA 95110
    3,000,000 (3)      9.10 % 
HPCG Trunkbow Holdings, L.P.
21020 North Pima Rd.
Scottsdale, AZ 85255
    2,151,000 (4)      6.55 % 
Bay Peak LLC
169 Bolsa Avenue
Mill Valley, CA 94941
    1,452,332 (5)      4.45 % 
Dr. Hou Wanchun     8,558,764 (1)      26.36 % 
Li Qiang     7,580,619 (2)      23.35 % 
Regis Kwong     833,379       2.57 % 
Ye Yuan Jun     *       *  
Dr. An ChungMing     *       *  
Bao Jihong     *       *  
Wang Xin     *       *  
Dr. Tan Kok Hui     *       *  
Iris Geng     *       *  
Dr. Lv Tingjie     *       *  
Huang Zhaoxing     *       *  
Li Dong     *       *  
Larry Gilmore     *       *  
Albert Liu     *       *  
Cory Roberts     1,452,332 (5)      4.45 % 
All Directors, Executive Officers and Director Nominees, as a group     18,425,094       56.57 % 

* Less than one percent

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(1) Mr. Lao Chi Weng holds 100% common shares of Chief Honour Investments Limited, but he does not have the power to vote or dispose of any of our common stock. Dr. Hou Wanchun is the sole director of Chief Honour Investments Limited and has the sole power to vote and dispose of our common stock held by Chief Honour Investments Limited.

On September 21, 2009, Mr. Lao Chi Weng entered into a share transfer agreement with Dr. Hou Wanchun, pursuant to which Dr. Hou was granted the right to purchase, within 45-days from the end of each period, for $1.00 per share, the shares held by Chief Honour Investments Limited, as follows: (i) one-third of the shares if we generate at least US$2,800,000 in gross revenue for the twelve months from January 1, 2010 to December 31, 2010; (ii) one-third of the shares if we generates at least US$1,500,000 in gross revenue for the six months from January 1, 2011 to June 30, 2011; and (iii) one-third of the shares if we generate at least US$1,500,000 in gross revenue for the six months July 1, 2011 to December 31, 2011. In the event that we do not achieve any one of the performance targets specified above, then Dr. Hou may purchase the shares for $1.10 per share.

On October 1, 2009, Dr. Hou Wanchun also entered into an Entrustment Agreement with Chief Honour, pursuant to which, Chief Honour authorizes Dr. Hou Wanchun to act on behalf of it, as exclusive agents and attorneys in-fact with respect to all matters concerning Chief Honour Investments’ rights as a shareholder.

(2) Mr. Lao Chi Weng holds 100% common shares of Capital Melody Limited, but he does not have the power to vote or dispose of any of our common stock. Mr. Li Qiang is the sole director of Capital Melody and has the sole power to vote and dispose of the common stock held by Capital Melody Limited.

On September 21, 2009, Mr. Lao Chi Weng entered into a share transfer agreement with Mr. Li Qiang, pursuant to which, Mr. Li was granted the right to purchase, within 45-days from the end of each period, for $1.00 per share, the shares held by Capital Melody Limited, as follows: (i) one-third of the shares if we generate at least US$2,800,000 in gross revenue for the twelve months from January 1, 2010 to December 31, 2010; (ii) one-third of the shares if we generates at least US$1,500,000 in gross revenue for the six months from January 1, 2011 to June 30, 2011; and (iii) one-third of the shares if we generate at least US$1,500,000 in gross revenue for the six months July 1, 2011 to December 31, 2011. In the event that we do not achieve any one of the performance targets specified above, then Mr. Li may purchase the shares for $1.10 per share.

On October 1, 2009, Capital Melody also entered into an Entrustment Agreement with Li Qiang, pursuant to which, Capital Melody authorizes Li Qiang to act on behalf of it, as exclusive agents and attorneys in-fact with respect to all matters concerning Capital Melody’s rights as a shareholder.

(3) Includes warrants to purchase 500,000 shares of our common stock.
(4) Includes warrants to purchase 358,500 shares of our common stock. As the manager of HPCG Trunkbow Investment, LLC, the general partner of HPCG Trunkbow Holdings L.P., Christopher Jensen has the power to vote and dispose of the common stock.
(5) Includes a warrant to purchase 100,000 shares of our common stock. Cory Roberts has the power to vote and dispose of the common stock held by Bay Peak LLC.

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TRANSACTIONS WITH RELATED PERSONS, PROMOTERS,
AND CERTAIN CONTROL PERSONS

On February 1, 2010, we entered into a Master Engagement Agreement with VeriFone, Inc. (“VeriFone”). Pursuant to the terms of the agreement, we submitted a binding, non-cancellable purchase order to VeriFone covering an initial order of $5 million, which was paid in full upon execution of the agreement, of VeriFone’s point of sale systems for deployment in China as part of its rollout. VeriFone beneficially owns 2,500,000 shares of our common stock and warrants to purchase up to 500,000 shares of our common stock. As of June 30, 2010, we had advanced $3,158,503 to VeriFone for the purchase of the point of sale systems.

At June 30, 2010 December 31, 2009 and 2008, amounts due from directors consisted of:

     
  June 30,
2010
  December 31,
2009
  December 31,
2008
Amount due from Mr. Qiang Li   $ 434,432     $ 904,581     $ 447,026  
Amount due from Mr. Wan Chun Hou     530,972       1,183,587       737,090  
Amount due from Mr. Yue Lou                    22,703  
     $ 965,404     $ 2,088,168     $ 1,206,819  

Amounts due from directors are non-interest bearing short-term personal loans from the directors made pursuant to a written repayment agreement with a subsidiary of Trunkbow, with fixed repayment terms varying upon the circumstances, generally six to twelve months, without interest. The balance of the amount due from directors was subsequently settled in full.

At December 31, 2009 and 2008, amount due to directors consisted of:

     
  June 30,
2010
  December 31,
2009
  December 31,
2008
Amount due to Mr. Yue Lou   $     $ 24,430     $  

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UNDERWRITING

We have entered into an underwriting agreement with the underwriters named below. Roth Capital Partners is acting as the representative of the underwriters.

The underwriting agreement provides for the purchase of a specific number of shares of common stock by each of the underwriters. The underwriters’ obligations are several, which means that each underwriter is required to purchase a specified number of shares of common stock, but is not responsible for the commitment of any other underwriter to purchase shares. Subject to the terms and conditions of the underwriting agreement, each underwriter has severally agreed to purchase the number of shares of common stock set forth opposite its name below:

 
Underwriter   Number of
Shares of
Common Stock
Roth Capital Partners, LLC           
Merriman Capital, Inc.           
Total           

The underwriters have agreed to purchase all of the shares offered by this prospectus (other than those covered by the over-allotment option described below) if any are purchased. Under the underwriting agreement, if an underwriter defaults in its commitment to purchase shares, the commitments of non-defaulting underwriters may be increased or the underwriting agreement may be terminated, depending on the circumstances.

The shares should be ready for delivery on or about       , 2010 against payment in immediately available funds.         , 2010 is   th business day following the date of this prospectus. The underwriters are offering the shares subject to various conditions and may reject all or part of any order. The representative has advised us that the underwriters propose to offer the shares directly to the public at the public offering price that appears on the cover page of this prospectus. In addition, the representative may offer some of the shares to other securities dealers at such price less a concession of $     per share. The underwriters may also allow, and such dealers may reallow, a concession not in excess of $     per share to other dealers. After the shares are released for sale to the public, the representative may change the offering price and other selling terms at various times.

At the closing of this offering, Roth Capital Partners, LLC will receive 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 will have a term of three years, have an exercise price equal to 120% of the public offering price of the common stock, will 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).

We have also agreed to reimburse Roth Capital Partners, LLC for certain out-of-pocket expenses incurred by them up to an aggregate of $100,000 with respect to this offering.

We have granted the underwriters an over-allotment option. This option, which is exercisable for up to 45 days after the date of this prospectus, permits the underwriters to purchase a maximum of      additional shares from us to cover over-allotments. If the underwriters exercise all or part of this option, they will purchase shares covered by the option at the initial public offering price that appears on the cover page of this prospectus, less the underwriting discount. If this option is exercised in full, the total proceeds to us will be $      . The underwriters have severally agreed that, to the extent the over-allotment option is exercised, they will each purchase a number of additional shares proportionate to the underwriter’s initial amount reflected in the foregoing table.

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The following table provides information regarding the amount of the discount to be paid to the underwriters by us:

     
  Per
Share
  Total Without
Exercise of
Over-Allotment
Option
  Total With Full
Exercise of
Over-Allotment
Option
Discount to be paid by us   $     $     $  

We estimate that our portion of the total expenses of the offering, excluding the underwriting discount, will be approximately $550,000.

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933.

We, our directors, officers and certain of our significant shareholders have agreed to a 180-day “lock up” with respect to their shares of common stock and other of our securities that they beneficially own, including securities that are convertible into shares of common stock and securities that are exchangeable or exercisable for shares of common stock. This means that, subject to certain exceptions, for a period of 180 days following the date of this prospectus, we and such persons may not offer, sell, pledge or otherwise dispose of these securities without the prior written consent of Roth Capital Partners. However, in the event that either (1) during the last 17 days of the “lock up” period, we release earnings results or material news or a material event relating to us occurs or (2) prior to the expiration of the “lock up” period, we announce that we will release earnings results during the 16-day period beginning on the last day of the “lock up” period, then in either case the expiration of the “lock up” will be extended until the expiration of the 18-day period beginning on the date of the release of the earnings results or the occurrence of the material news or event, as applicable.

Rules of the SEC may limit the ability of the underwriters to bid for or purchase shares before the distribution of the shares is completed. However, the underwriters may engage in the following activities in accordance with the rules:

Stabilizing transactions — The representative may make bids or purchases for the purpose of pegging, fixing or maintaining the price of the shares, so long as stabilizing bids do not exceed a specified maximum.
Over-allotments and syndicate covering transactions — The underwriters may sell more shares of common stock in connection with this offering than the number of shares that they have committed to purchase. This over-allotment creates a short position for the underwriters. This short sales position may involve either “covered” short sales or “naked” short sales. Covered short sales are short sales made in an amount not greater than the underwriters’ over-allotment option to purchase additional shares in this offering described above. The underwriters may close out any covered short position either by exercising their over-allotment option or by purchasing shares in the open market. To determine how they will close the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market, as compared to the price at which they may purchase shares through the over-allotment option. Naked short sales are short sales in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that, in the open market after pricing, there may be downward pressure on the price of the shares that could adversely affect investors who purchase shares in this offering.
Penalty bids — If the representative purchases the shares in the open market in a stabilizing transaction or syndicate covering transaction, it may reclaim a selling concession from the underwriters and selling group members who sold those shares as part of this offering.
Passive market making — Market makers in the shares who are underwriters or prospective underwriters may make bids for or purchase the shares, subject to limitations, until the time, if ever, at which a stabilizing bid is made.

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Similar to other purchase transactions, the underwriters’ purchases to cover the syndicate short sales or to stabilize the market price of our common stock may have the effect of raising or maintaining the market price of our common stock or preventing or mitigating a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. The imposition of a penalty bid might also have an effect on the price of our common stock if it discourages resales of the shares.

Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price of our common stock. If such transactions are commenced, they may be discontinued without notice at any time.

Electronic Delivery of Preliminary Prospectus:  A prospectus in electronic format may be delivered to potential investors by one or more of the underwriters participating in this offering. The prospectus in electronic format will be identical to the paper version of such preliminary prospectus. Other than the prospectus in electronic format, the information on any underwriter’s website and any information contained in any other website maintained by an underwriter is not part of the prospectus or the registration statement of which this prospectus forms a part.

Notice to Non-US Investors

UNITED KINGDOM/GERMANY/NORWAY/THE NETHERLANDS

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), an offer to the public of any common stock which is the subject of the offering contemplated by this prospectus may not be made in that Relevant Member State prior to the publication of a prospectus in relation to the common stock which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that an offer to the public in that Relevant Member State of any common stock may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

(a) to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;
(b) to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts;
(c) by the managers to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive); or
(d) in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of common stock shall result in a requirement for the publication by us of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer to the public” in relation to any common stock in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any common stock to be offered so as to enable an investor to decide to purchase any common stock, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

Each underwriter has represented, warranted and agreed that:

(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (FSMA)) received by it in connection with the issue or sale of any common stock in circumstances in which section 21(1) of the FSMA does not apply to us; and

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(b) it has complied with and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the common stock in, from or otherwise involving the United Kingdom.

HONG KONG

The common stock may not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance, or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the common stock may be issued, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the common stock which are or are intended to be disposed of only to persons outside of Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.

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SHARES ELIGIBLE FOR FUTURE SALE

After the date of this prospectus we will have       shares of common stock, issued and outstanding.

 
Approximate
Number of
Shares Eligible
for Future Sale
  Date
    (1)   After the date of this prospectus, freely tradable shares sold in this offering.
     Shares owned by and other affiliates. These shares are subject to the lock-up described below and may be sold under Rule 144.
0   Shares issuable upon exercise of warrants which may be sold under Rule 144.
     Other shares which may be sold under Rule 144.

(1) Assumes the underwriters’ over-allotment option to purchase additional shares is not exercised.

Rule 144

Rule 144 is unavailable for the resale of restricted securities initially issued by a “blank-check” or “shell” company, or an issuer that has been at any time previously a “blank-check” or “shell” company, despite technical compliance with the requirements of Rule 144. Accordingly, such restricted securities can be resold only through a registered offering or pursuant to another exemption from registration. Notwithstanding the foregoing, a person who beneficially owns restricted securities of a company which:

has ceased to qualify as a “blank-check” or “shell” company;
is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
has filed all reports and other materials required to be filed by Section 13 or 15(d), as applicable, during the preceding 12 months (or such shorter period that the company is required to file such reports and materials) other than Form 8-K reports; and
has filed “Form 10 information” reflecting that it is no longer a “blank-check” or “shell” company,

may sell such shares, after one year has elapsed from the filing of the “Form 10” information. Sales by affiliates may be made provided that, within any three-month period such affiliate may resell a number of such restricted securities that does not, with respect to the shares of common stock, exceed the greater of either of the following:

1.0% of the total number of shares of common stock outstanding as shown by the most recent report or statement filed by the us, which will equal      shares immediately after this offering (or      if the underwriters’ exercise their over-allotment option in full); or
the average weekly reported volume of trading in the shares of common stock on NASDAQ, or any other national securities exchange and/or reported through the automated quotation system of a registered securities association where our common stock is trading at such time, during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale, or if no such notice is required, the date of receipt of the order to execute the transaction by the broker or the date of execution of the transaction directly with a market maker.

Sales under Rule 144 are also limited based on the availability of current public information about us, and, in the case of sales by affiliates, by manner of sale provisions and notice requirements.

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TAXATION

Material United States Federal Income Tax Considerations

General

The following is a summary of the material U.S. federal income tax considerations relating to the acquisition, ownership and disposition of our common stock. As used in this discussion, references to “we,” “our” and “us” refer only to Trunkbow International Holdings Limited, a Nevada corporation.

The discussion below of the U.S. federal income tax consequences to “U.S. Holders” will apply to a beneficial owner of our common stock that is for U.S. federal income tax purposes:

an individual citizen or resident of the United States;
a corporation (or other entity treated as a corporation) that is created or organized (or treated as created or organized) in or under the laws of the United States, any state thereof or the District of Columbia;
an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or
a trust if (i) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons are authorized to control all substantial decisions of the trust, or (ii) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

If a beneficial owner of our common stock is not described as a U.S. Holder and is not an entity treated as a partnership or other pass-through entity for U.S. federal income tax purposes, such owner will be considered a “Non-U.S. Holder.” The material U.S. federal income tax consequences applicable specifically to Non-U.S. Holders is described below under the heading “Non-U.S. Holders.”

This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), its legislative history, Treasury regulations promulgated thereunder, published rulings and court decisions, all as currently in effect. These authorities are subject to change or differing interpretations, possibly on a retroactive basis.

This discussion does not address all aspects of U.S. federal income taxation that may be relevant to any particular holder based on such holder’s individual circumstances. In particular, this discussion considers only holders that will own our common stock as capital assets within the meaning of Section 1221 of the Code, and does not address the potential application of the alternative minimum tax or the U.S. federal income tax consequences to holders that are subject to special rules, including:

financial institutions or financial services entities;
broker-dealers;
taxpayers that are subject to the mark-to-market accounting rules under Section 475 of the Code;
tax-exempt entities;
governments or agencies or instrumentalities thereof;
insurance companies;
regulated investment companies;
real estate investment trusts;
certain expatriates or former long-term residents of the United States;
persons that actually or constructively own 5% or more of our voting stock;
persons that acquired our common stock pursuant to an exercise of employee stock options, in connection with employee stock incentive plans or otherwise as compensation;

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persons that hold our common stock as part of a straddle, constructive sale, hedging, conversion or other integrated transaction; or
persons whose functional currency is not the U.S. dollar.

This discussion does not address any aspect of U.S. federal non-income tax laws, such as gift or estate tax laws, state, local or non-U.S. tax laws or, except as discussed herein, any tax reporting obligations of a holder of our common stock. Additionally, this discussion does not consider the tax treatment of partnerships or other pass-through entities or persons who hold our common stock through such entities. If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our common stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. This discussion also assumes that any distribution made (or deemed made) by us in respect of our common stock and any consideration received (or deemed received) by a holder in consideration for the sale or other disposition of our common stock will be in U.S. dollars.

We have not sought, and will not seek, a ruling from the Internal Revenue Service (“IRS”) or an opinion of counsel as to any U.S. federal income tax consequence described herein. The IRS may disagree with the description herein, and its determination may be upheld by a court. Moreover, there can be no assurance that future legislation, regulations, administrative rulings or court decisions will not adversely affect the accuracy of the statements in this discussion.

THIS DISCUSSION IS ONLY A SUMMARY OF CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK. IT IS NOT TAX ADVICE. EACH PROSPECTIVE INVESTOR IN OUR COMMON STOCK IS URGED TO CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO SUCH INVESTOR OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, AND NON-U.S. TAX LAWS, AS WELL AS U.S. FEDERAL TAX LAWS AND ANY APPLICABLE TAX TREATIES.

U.S. Holders

Taxation of Distributions

A U.S. Holder generally will be required to include in gross income as ordinary income the amount of any cash dividend paid on the shares of our common stock. A cash distribution on such shares generally will be treated as a dividend for U.S. federal income tax purposes to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). The portion of such cash distribution in excess of such earnings and profits generally will constitute a return of capital that will be applied against and reduce (but not below zero) the U.S. Holder’s adjusted tax basis in our common stock. Any remaining excess generally will be treated as gain from the sale or other disposition of the common stock and will be treated as described under “— Taxation on the Disposition of Common Stock” below.

Any cash dividends we pay to a U.S. Holder that is treated as a taxable corporation for U.S. federal income tax purposes generally will qualify for the dividends received deduction if the applicable holding period and other requirements are satisfied. With certain exceptions, if the applicable holding period and other requirements are satisfied, cash dividends we pay to a non-corporate U.S. Holder generally will constitute “qualified dividends” that will be subject to tax at the maximum regular tax rate accorded to long-term capital gains for tax years beginning on or before December 31, 2010, after which the regular U.S. federal income tax rate applicable to dividends is scheduled to return to the tax rate generally applicable to ordinary income.

If a PRC tax applies to any cash dividends paid to a U.S. Holder on our common stock, such tax should be treated as a foreign tax eligible for a deduction from such holder’s U.S. federal taxable income or a foreign tax credit against such holder’s U.S. federal income tax liability (subject to applicable conditions and limitations). In addition, such U.S. Holder should be entitled to certain benefits under the Agreement between the Government of the United States of America and the Government of the People’s Republic of China for the Avoidance of Double Taxation and the Prevention of Tax Evasion with Respect to Taxes on Income (the

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“U.S.-PRC Tax Treaty”), if such holder is considered a resident of the United States for purposes of the U.S.-PRC Tax Treaty. U.S. Holders should consult their own tax advisors regarding the deduction or credit for any such PRC tax and their eligibility for the benefits of the U.S.-PRC Tax Treaty.

Taxation on the Disposition of Common Stock

Upon a sale or other taxable disposition of our common stock, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized and the U.S. Holder’s adjusted tax basis in the common stock.

The regular U.S. federal income tax rate on capital gains recognized by U.S. Holders generally is the same as the regular U.S. federal income tax rate on ordinary income, except that long-term capital gains recognized by non-corporate U.S. Holders generally are subject to U.S. federal income tax at a maximum regular rate of 15% for taxable years beginning before January 1, 2011 (and 20% thereafter). Capital gain or loss will constitute long-term capital gain or loss if the U.S. Holder’s holding period for the common stock exceeds one year. The deductibility of capital losses is subject to various limitations.

If a PRC tax applies to any gain from the disposition of our common stock by a U.S. Holder, such tax should be treated as a foreign tax eligible for a deduction from such holder’s U.S. federal taxable income or a foreign tax credit against such holder’s U.S. federal income tax liability (subject to applicable conditions and limitations). In addition, such U.S. Holder should be entitled to certain benefits under the U.S.-PRC Tax Treaty, if such holder is considered a resident of the United States for purposes of the U.S.-PRC Tax Treaty. U.S. Holders should consult their own tax advisors regarding the deduction or credit for any such PRC tax and their eligibility for the benefits of the U.S.-PRC Tax Treaty.

Additional Taxes After 2012

For taxable years beginning after December 31, 2012, U.S. Holders that are individuals, estates or trusts and whose income exceeds certain thresholds generally will be subject to a 3.8% Medicare contribution tax on unearned income, including, among other things, dividends on, and capital gains from the sale or other taxable disposition of, our common stock, subject to certain limitations and exceptions. U.S. Holders should consult their own tax advisors regarding the effect, if any, of such tax on their ownership and disposition of our common stock.

Non-U.S. Holders

Taxation of Distributions

Any cash distribution we make to a Non-U.S. Holder of shares of our common stock, to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles), generally will constitute a dividend for U.S. federal income tax purposes. Unless we are treated as an “80/20 company” for U.S. federal income tax purposes, as described below, any such dividend paid to a Non-U.S. Holder with respect to shares of our common stock that is not effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States, as described below, generally will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividend, unless such Non-U.S. Holder is eligible for a reduced rate of withholding tax under an applicable income tax treaty and provides proper certification of its eligibility for such reduced rate (usually on an IRS Form W-8BEN). In satisfying the foregoing withholding obligation with respect to a cash distribution, we may withhold up to 30% of either (i) the gross amount of the entire distribution, even if the amount of the distribution is greater than the amount constituting a dividend, as described above, or (ii) the amount of the distribution we project will be a dividend, based upon a reasonable estimate of both our current and our accumulated earnings and profits for the taxable year in which the distribution is made. If U.S. federal income tax is withheld on the amount of a distribution in excess of the amount constituting a dividend, the Non-U.S. Holder may obtain a refund of all or a portion of the excess amount withheld by timely filing a claim for refund with the IRS. Any such distribution not constituting a dividend generally will be treated, for U.S. federal income tax purposes, first as reducing the Non-U.S. Holder’s adjusted tax basis in its shares of our common stock (but not below zero) and, to the extent such distribution exceeds the Non-U.S. Holder’s adjusted tax basis, as gain from the sale or other disposition of the common stock, which will be treated as described under “— Taxation on the Disposition of Common Stock” below.

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In general, a U.S. corporation is an “80/20 company” if at least 80% of its gross income earned directly or from subsidiaries during an applicable testing period is “active foreign business income.” A percentage of any dividend paid by an 80/20 company generally will not be subject to U.S. federal withholding tax. However, the current 80/20 company rules generally have been repealed for tax years beginning on or after January 1, 2011. A Non-U.S. Holder should consult with its own tax advisors regarding the amount of any such dividend subject to withholding tax in this circumstance.

Cash dividends we pay to a Non-U.S. Holder that are effectively connected with such Non-U.S. Holder’s conduct of a trade or business within the United States (and, if certain income tax treaties apply, are attributable to a U.S. permanent establishment or fixed base maintained by the Non-U.S. Holder) generally will not be subject to U.S. withholding tax, provided such Non-U.S. Holder complies with certain certification and disclosure requirements (usually by providing an IRS Form W-8ECI). Instead, such dividends generally will be subject to U.S. federal income tax (but not the Medicare contribution tax), net of certain deductions, at the same regular U.S. federal income tax rates applicable to a comparable U.S. Holder. If the Non-U.S. Holder is a corporation, such dividends that are effectively connected income may also be subject to a “branch profits tax” at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty).

Taxation on the Disposition of Common Stock

A Non-U.S. Holder generally will not be subject to U.S. federal income tax in respect of gain recognized on a sale, exchange or other disposition of our common stock unless:

the gain is effectively connected with the conduct of a trade or business by the Non-U.S. Holder within the United States (and, under certain income tax treaties, is attributable to a U.S. permanent establishment or fixed base maintained by the Non-U.S. Holder);
the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are met; or
we are or have been a “United States real property holding corporation” (“USRPHC”) for U.S. federal income tax purposes at any time during the shorter of the five year period ending on the date of disposition or the Non-U.S. Holder’s holding period for the common stock disposed of, and, generally, in the case where our common stock is regularly traded on an established securities market, the Non-U.S. Holder has owned, directly or indirectly, more than 5% of our common stock at any time during the shorter of the five year period ending on the date of disposition or the Non-U.S. Holder’s holding period for the common stock disposed of. There can be no assurance that our common stock will be treated as regularly traded on an established securities market for this purpose.

Unless an applicable tax treaty provides otherwise, gain described in the first and third bullet points above generally will be subject to U.S. federal income tax (but not the Medicare contribution tax), net of certain deductions, at the same regular U.S. federal income tax rates applicable to a comparable U.S. Holder. Any gains described in the first bullet point above of a Non-U.S. Holder that is a foreign corporation may also be subject to an additional “branch profits tax” at a 30% rate (or a lower applicable tax treaty rate). Any U.S. source capital gain of a Non-U.S. Holder described in the second bullet point above (which may be offset by U.S. source capital losses during the taxable year of the disposition) generally will be subject to a flat 30% U.S. federal income tax rate (or a lower applicable tax treaty rate).

In connection with the third bullet point above, we generally will be classified as a USRPHC if (looking through certain subsidiaries) the fair market value of our “United States real property interests” equals or exceeds 50% of the sum of the fair market value of our worldwide real property interests plus our other assets used or held for use in a trade or business, as determined for U.S. federal income tax purposes. Based on the current composition of the assets of us and our subsidiaries, we believe that we currently are not a USRPHC, and we do not anticipate becoming a USRPHC (although no assurance can be given that we will not become a USRPHC in the future). Non-U.S. Holders, particularly those Non-U.S. Holders that could be treated as actually or constructively holding more than 5% of our common stock, should consult their own tax advisors regarding the U.S. federal income tax consequences of owning and disposing of our common stock.

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Payments After 2012

Effective generally for payments made after December 31, 2012, a Non-U.S. Holder may be subject to a U.S. federal withholding tax at a 30% rate with respect to dividends on, and the gross proceeds from the sale or other disposition of, our common stock if certain disclosure requirements related to the U.S. accounts maintained by, or the U.S. ownership of, the Non-U.S. Holder are not satisfied. If payment of such withholding taxes is required, a Non-U.S. Holder that is otherwise eligible for an exemption from, or a reduction of, U.S. withholding taxes with respect to such dividends and proceeds generally will be required to seek a refund from the IRS to obtain the benefit of such exemption or reduction. Non-U.S. Holders should consult their own tax advisors regarding the effect, if any, of such withholding taxes on their ownership and disposition of our common stock.

Information Reporting and Backup Withholding

We generally must report annually to the IRS and to each holder the amount of dividends and certain other distributions we pay to such holder on our common stock and the amount of tax, if any, withheld with respect to those distributions. In the case of a Non-U.S. Holder, copies of the information returns reporting those distributions and withholding may also be made available to the tax authorities in the country in which the Non-U.S. Holder is a resident under the provisions of an applicable income tax treaty or agreement. Information reporting is also generally required with respect to proceeds from the sales and other dispositions of our common stock to or through the U.S. office (and in certain cases, the foreign office) of a broker.

In addition, backup withholding of U.S. federal income tax, currently at a rate of 28%, generally will apply to distributions made on our common stock to, and the proceeds from sales and other dispositions of our common stock by, a non-corporate U.S. Holder who:

fails to provide an accurate taxpayer identification number;
is notified by the IRS that backup withholding is required; or
in certain circumstances, fails to comply with applicable certification requirements.

A Non-U.S. Holder generally may eliminate the requirement for information reporting (other than with respect to distributions, as described above) and backup withholding by providing certification of its foreign status, under penalties of perjury, on a duly executed applicable IRS Form W-8 or by otherwise establishing an exemption.

Backup withholding is not an additional tax. Rather, the amount of any backup withholding will be allowed as a credit against a U.S. Holder’s or a Non-U.S. Holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that certain required information is timely furnished to the IRS. Holders are urged to consult their own tax advisors regarding the application of backup withholding and the availability of and procedure for obtaining an exemption from backup withholding in their particular circumstances.

Material PRC Income Tax Considerations

The following is a summary of the material PRC income tax considerations relating to the acquisition, ownership and disposition of our common stock. As used in this discussion, references to “we,” “our” and “us” refer only to Trunkbow International Holdings Limited, a Nevada corporation.

Resident Enterprise Treatment

On March 16, 2007, the Fifth Session of the Tenth National People’s Congress passed the Enterprise Income Tax Law of the PRC (“EIT Law”), which became effective on January 1, 2008. Under the EIT Law, enterprises are classified as “resident enterprises” and “non-resident enterprises.” Pursuant to the EIT Law and its implementing rules, enterprises established outside the PRC whose “de facto management bodies” are located in the PRC are considered “resident enterprises” and subject to the uniform 25% enterprise income tax rate on their worldwide taxable income. According to the implementing rules of the EIT Law, “de facto management body” refers to a managing body that in practice exercises overall management control over the production and business, personnel, accounting and assets of an enterprise.

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On April 22, 2009, the State Administration of Taxation (“SAT”) issued the Notice on the Issues Regarding Recognition of Enterprises that are Domestically Controlled as PRC Resident Enterprises Based on the De Facto Management Body Criteria, which was retroactively effective as of January 1, 2008. This notice provides that an overseas incorporated enterprise that is controlled by a PRC domestic enterprise or enterprise groups will be recognized as a “tax-resident enterprise” if it satisfies all of the following conditions: (i) the senior management responsible for daily production/business operations are primarily located in the PRC, and the location(s) where such senior management execute their responsibilities are primarily in the PRC; (ii) strategic financial and personnel decisions are made or approved by organizations or personnel located in the PRC; (iii) major properties, accounting ledgers, company seals and minutes of board meetings and stockholder meetings, etc., are maintained in the PRC; and (iv) 50% or more of the board members with voting rights or senior management habitually reside in the PRC.

Given the short history of the EIT Law and lack of applicable legal precedent, it remains unclear how the PRC tax authorities will determine the resident enterprise status of a company organized under the laws of a foreign (non-PRC) jurisdiction, such as us, Trunkbow BVI and Trunkbow Hong Kong. If the PRC tax authorities determine that we, Trunkbow BVI and/or Trunkbow Hong Kong is a “resident enterprise” under the EIT Law, a number of PRC tax consequences could follow. First, we, Trunkbow BVI and/or Trunkbow Hong Kong may be subject to the PRC enterprise income tax at a rate of 25% on our, Trunkbow BVI’s and/or Trunkbow Hong Kong’s worldwide taxable income, as well as PRC enterprise income tax reporting obligations. Second, the EIT Law provides that dividend income between “qualified resident enterprises” is exempt from the PRC enterprise income tax. As a result, if we, Trunkbow BVI and Trunkbow Hong Kong are each treated as a “qualified resident enterprise,” all dividends paid from Trunkbow Shenzhen and Trunkbow Shandong to us, through Trunkbow BVI and Trunkbow Hong Kong, should be exempt from the PRC enterprise income tax.

As of the date of this prospectus, there has not been a definitive determination by us, Trunkbow BVI, Trunkbow Hong Kong or the PRC tax authorities as to the “resident enterprise” or “non-resident enterprise” status of us, Trunkbow BVI and/or Trunkbow Hong Kong. However, because it is not anticipated that we, Trunkbow BVI and/or Trunkbow Hong Kong would receive dividends or generate other income in the near future, we, Trunkbow BVI and Trunkbow Hong Kong are not expected to have any income that would be subject to the 25% PRC enterprise income tax on worldwide taxable income in the near future. We, Trunkbow BVI and Trunkbow Hong Kong will make any necessary tax payment if we, Trunkbow BVI or Trunkbow Hong Kong (based on future clarifying guidance issued by the PRC), or the PRC tax authorities, determine that we, Trunkbow BVI or Trunkbow Hong Kong is a “resident enterprise” under the EIT Law, and if we, Trunkbow BVI or Trunkbow Hong Kong were to have income in the future.

Dividends From Trunkbow Shenzhen and Trunkbow Shandong

If Trunkbow Hong Kong is not treated as a “resident enterprise” under the EIT Law, then dividends that Trunkbow Hong Kong receives from Trunkbow Shenzhen and Trunkbow Shandong may be subject to PRC withholding tax. The EIT Law and the implementing rules of the EIT Law provide that (A) an enterprise income tax rate of 25% normally will apply to investors that are “non-resident enterprises” that (i) have an establishment or place of business inside the PRC, and (ii) have income in connection with their establishment or place of business that is sourced from the PRC or is earned outside the PRC but has an actual connection with their establishment or place of business inside the PRC, and (B) a PRC withholding tax at a rate of 10% normally will apply to dividends payable to “non-resident enterprises” that (i) do not have an establishment or place of business in the PRC or (ii) have an establishment or place of business in the PRC, but the relevant income is not effectively connected with such establishment or place of business, to the extent such dividends are derived from sources within the PRC.

As described above, the PRC tax authorities may determine the “resident enterprise” status of entities organized under the laws of foreign jurisdictions on a case-by-case basis. We, Trunkbow BVI and Trunkbow Hong Kong are holding companies and substantially all of our income and that of Trunkbow BVI and Trunkbow Hong Kong may be derived from dividends. Thus, if we, Trunkbow BVI and/or Trunkbow Hong Kong is considered a “non-resident enterprise” under the EIT Law and the dividends paid to us, Trunkbow BVI and/or Trunkbow Hong Kong are considered income sourced within the PRC, such dividends received may be subject to PRC withholding tax as described in the foregoing paragraph.

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The State Council of the PRC or a tax treaty between the PRC and the jurisdiction in which the non-resident enterprise resides may reduce such income or withholding tax, with respect to a non-resident enterprise. Pursuant to the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the “PRC-Hong Kong Tax Treaty”) and relevant circulars issued by the SAT, if the Hong Kong resident enterprise that is not deemed to be a conduit by the PRC tax authorities owns more than 25% of the equity interests in a PRC resident enterprise, the 10% PRC withholding tax on the dividends the Hong Kong resident enterprise receives from the PRC resident enterprise canbe reduced to 5%, subject to the approval of the PRC tax authorities.

We are a U.S. holding company that owns a 100% equity interest in a subsidiary in the BVI (Trunkbow BVI), which owns a 100% equity interest in a subsidiary in Hong Kong (Trunkbow Hong Kong), which in turn owns a 100% equity interest in both Trunkbow Shenzhen and Trunkbow Shandong, which are PRC companies. As a result, if Trunkbow Hong Kong were treated as a “non-resident enterprise” under the EIT Law, then dividends that Trunkbow Hong Kong receives from Trunkbow Shenzhen and Trunkbow Shandong (assuming such dividends were considered sourced within the PRC) (i) may be subject to a 5% PRC withholding tax, provided that Trunkbow Hong Kong owns more than 25% of the registered capital of Trunkbow Shenzhen or Trunkbow Shandong, as applicable, continuously within 12 months immediately prior to obtaining such dividends, and the PRC-Hong Kong Tax Treaty were otherwise applicable, or (ii) if such treaty does not apply (i.e., because the PRC tax authorities may deem Trunkbow Hong Kong to be a conduit that is not entitled to treaty benefits), should be subject to a 10% PRC withholding tax. Similarly, if Trunkbow BVI were treated as a “non-resident enterprise” under the EIT Law and Trunkbow Hong Kong were treated as a “resident enterprise” under the EIT Law, then dividends Trunkbow BVI receives from Trunkbow Hong Kong (assuming such dividends were considered sourced within the PRC) should be subject to a 10% PRC withholding tax. A similar situation may arise if we were treated as a “non-resident enterprise” under the EIT Law and Trunkbow BVI were treated as a “resident enterprise” under the EIT Law. Any such taxes on dividends could materially reduce the amount of dividends, if any, we could pay to our stockholders.

As of the date of this prospectus, there has not been a definitive determination as to the “resident enterprise” or “non-resident enterprise” status of us, Trunkbow BVI or Trunkbow Hong Kong. As described above, however, Trunkbow Shenzhen, Trunkbow Shandong, Trunkbow Hong Kong and Trunkbow BVI are not expected to pay any dividends in the near future. Trunkbow Shenzhen, Trunkbow Shandong, Trunkbow Hong Kong and Trunkbow BVI will make any necessary tax withholding if, in the future, Trunkbow Shenzhen, Trunkbow Shandong, Trunkbow Hong Kong or Trunkbow BVI were to pay any dividends and Trunkbow Shenzhen, Trunkbow Shandong, Trunkbow Hong Kong or Trunkbow BVI (based on future clarifying guidance issued by the PRC), or the PRC tax authorities, determine that Trunkbow Hong Kong, Trunkbow BVI or we are a non-resident enterprise under the EIT Law.

Dividends that Non-PRC Resident Investors Receive From Us; Gain on the Sale or Transfer of Our Common Stock

If we are determined to be a resident enterprise under the EIT Law or dividends payable to (or gains realized by) our investors that are not tax residents of the PRC (“non-resident investors”) are otherwise treated as income derived from sources within the PRC, then the dividends that the non-resident investors receive from us and any such gain derived by such investors on the sale or transfer of our common stock may be subject to income tax under the PRC tax laws. As indicated below, under the PRC tax laws, we would not have an obligation to withhold PRC income tax in respect of gains that non-resident investors may realize from the sale or transfer of our common stock (regardless of whether such gains would be regarded as income from sources within the PRC), but we would have an obligation to withhold PRC income tax at the applicable rate described below (subject to reduction by applicable tax treaties) on dividends that non-resident investors receive from us if such dividends are regarded as income derived from sources within the PRC.

Under the EIT Law and its implementing rules, PRC withholding tax at the rate of 10% is applicable to dividends payable to non-resident investors that are enterprises (but not individuals) and that (i) do not have an establishment or place of business in the PRC or (ii) have an establishment or place of business in the PRC but the relevant income is not effectively connected with the establishment or place of business, to the extent

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that such dividends are deemed to be sourced within the PRC. Similarly, any gain realized on the transfer of our common stock by such investors is subject to 10% PRC income tax if such gain is regarded as income derived from sources within the PRC.

Under the PRC Individual Income Tax Law and its implementing rules, a potential 20% PRC withholding tax may be applicable to dividends payable to non-resident investors who are individuals and who (i) are not domiciled in the PRC and do not reside in the PRC or (ii) are not domiciled in the PRC and have resided in the PRC for less than one year, to the extent that such dividends are deemed to be sourced within the PRC. Similarly, any gain realized on the transfer of our common stock by such investors may be subject to 20% PRC income tax if such gain is regarded as income derived from sources within the PRC.

The dividends paid by us to non-resident investors with respect to our common stock, or the gain non-resident investors may realize from the sale or transfer of our common stock, may be treated as PRC-sourced income and, as a result, may be subject to PRC income tax. In such event, we may be required to withhold the applicable PRC income tax on any dividends paid to non-resident investors. In addition, non-resident investors in our common stock may be responsible for paying the applicable PRC income tax on any gain realized from the sale or transfer of our common stock if such non-resident investors and the gain satisfy the requirements under the PRC tax laws. However, under the PRC tax laws, we would not have an obligation to withhold PRC income tax in respect of the gains that non-resident investors (including U.S. investors) may realize from the sale or transfer of our common stock.

If we were to pay any dividends in the future, and if we (based on future clarifying guidance issued by the PRC), or the PRC tax authorities, determine that we must withhold PRC tax on any dividends payable by us under the PRC tax laws, we will make any necessary tax withholding on dividends payable to our non-resident investors. If non-resident investors as described under the PRC tax laws (including U.S. investors) realize any gain from the sale or transfer of our common stock and if such gain were considered as PRC-sourced income, such non-resident investors would be responsible for paying the applicable PRC income tax on the gain from the sale or transfer of our common stock. As indicated above, under the PRC tax laws, we would not have an obligation to withhold PRC income tax in respect of the gains that non-resident investors (including U.S. investors) may realize from the sale or transfer of our common stock.

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

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Penalties for Failure to Pay Applicable PRC Income Tax

A non-resident investor in us may be responsible for paying PRC income tax on any gain realized from the sale or transfer of our common stock if such non-resident investor and the gain satisfy the requirements under the PRC tax laws, as described above.

According to the EIT Law and its implementing rules, the PRC Tax Administration Law (the “Tax Administration Law”) and its implementing rules, the Provisional Measures for the Administration of Withholding of Enterprise Income Tax for Non-Resident Enterprises (the “Administration Measures”) and other applicable PRC laws or regulations (collectively the “Tax Related Laws”), where any gain derived by a non-resident investor from the sale or transfer of our common stock is subject to any income tax in the PRC, and such non-resident investor fails to file any tax return or pay tax in this regard pursuant to the Tax Related Laws, such investor may be subject to certain fines, penalties or punishments, including without limitation: (1) if the non-resident investor fails to file a tax return and present the relevant information in connection with tax payments, the competent PRC tax authorities may order it to do so within the prescribed time limit and may impose a fine up to RMB 2,000, and in egregious cases, may impose a fine ranging from RMB 2,000 to RMB 10,000; (2) if the non-resident investor fails to file a tax return or fails to pay all or part of the amount of tax payable, the non-resident investor may be required to pay the unpaid tax amount payable, a surcharge on overdue tax payments (the daily surcharge is 0.05% of the overdue amount, beginning from the day the deferral begins) and a fine ranging from 50% to 500% of the unpaid amount of the tax payable; (3) if the non-resident investor fails to file a tax return and to pay the tax within the prescribed time limit according to the order by the PRC tax authorities, the PRC tax authorities may collect and check information about the income receivable by the non-resident investor in the PRC from other payers (the “Other Payers”) who will pay amounts to such non-resident investor, and send a “Notice of Tax Issues” to the Other Payers to collect and recover the tax payable and overdue fines imposed on such non-resident investor from the amounts otherwise payable to such non-resident investor by the Other Payers; (4) if the non-resident investor fails to pay the tax payable within the prescribed time limit as ordered by the PRC tax authorities, a fine may be imposed on the non-resident investor ranging from 50% to 500% of the unpaid tax payable, and the PRC tax authorities may, upon approval by the director of the tax bureau (or sub-bureau) of, or higher than, the county level, take the following compulsory measures: (i) notify in writing the non-resident investor’s bank or other financial institution to withhold from the account thereof for payment of the amount of tax payable, and (ii) detain, seal off, or sell by auction or on the market the non-resident investor’s commodities, goods or other property in a value equivalent to the amount of tax payable; or (5) if the non-resident investor fails to pay all or part of the amount of tax payable or the surcharge for the overdue tax payment, and can not provide a guarantee to the PRC tax authorities, the tax authorities may notify the frontier authorities to prevent the non-resident investor or its legal representative from leaving the PRC.

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TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, 59 Maiden Lane, Plaza Level, New York, NY 10038, telephone number (800) 937-5449.

LEGAL MATTERS

The validity of the securities offered hereby has been passed upon for us by Loeb & Loeb LLP, New York, New York. Certain matters relating to Nevada law in connection with this offering have been passed upon us by Lewis and Roca LLP. In addition, certain legal matters relating to the PRC in connection with this offering have been passed upon for us by Han Kun Law Offices, China. Certain legal matters in connection with this offering have been passed upon for the underwriters by Pillsbury Winthrop Shaw Pittman LLP. Certain legal matters relating to the PRC in connection with this offering have been passed upon for the underwriters by Jun He Law Offices.

EXPERTS

The consolidated balance sheets of Trunkbow and subsidiaries as of December 31, 2009 and December 31, 2008, and the related consolidated statements of income and comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2009 and December 31, 2008 by Bernstein & Pinchuk LLP, an independent registered public accounting firm, as set forth in its reports appearing herein and are included in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act of 1933 with respect to the shares offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information in the registration statement and the exhibits of the registration statement. For further information with respect to us and the securities being offered under this prospectus, we refer you to the registration statement, including the exhibits and schedules thereto.

You may read and copy the registration statement of which this prospectus is a part at the SEC’s Public Reference Room, which is located at 100 F Street, N.E., Washington, D.C. 20549. You can request copies of the registration statement by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the SEC’s Public Reference Room. In addition, the SEC maintains an Internet web site, which is located at www.sec.gov, which contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. You may access the registration statement of which this prospectus is a part at the SEC’s Internet web site. We are subject to the information reporting requirements of the Securities Exchange Act of 1934, and we will file reports, proxy statements and other information with the SEC.

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TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2010

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[GRAPHIC MISSING]

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Trunkbow International Holdings Limited and Subsidiaries

We have audited the accompanying consolidated balance sheets of Trunkbow International Holdings Limited and Subsidiaries (“the Company”) as of December 31, 2009 and December 31, 2008, and the related consolidated statements of income and comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2009 and December 31, 2008. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

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, bur not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statement referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2009 and December 31, 2008, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2009 and December 31, 2008, in conformity with accounting principles generally accepted in the Unites States of America.

[GRAPHIC MISSING]

New York, New York
March 31, 2010

[GRAPHIC MISSING]

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TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

   
  As at December 31
     2009   2008
ASSETS
                 
Current assets
                 
Cash and cash equivalents   $ 3,305,473     $ 490,959  
Accounts receivable     10,455,284       656,536  
Loans receivable and other current assets, net     1,085,655       1,251,853  
Due from directors     2,088,168       1,206,819  
Inventories     307,182        
Total current assets     17,241,762       3,606,167  
Property and equipment, net     39,817       56,600  
Long-term receivables           108,192  
     $ 17,281,579     $ 3,770,959  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                 
Current liabilities
                 
Accounts payable   $ 331,654     $ 415,884  
Accrued expenses and other current liabilities     603,266       272,170  
Due to directors     24,430        
Contingently convertible notes     5,000,000        
Taxes payable     1,561,599       1,622,427  
       7,520,949       2,310,481  
Commitments and contingencies (Note 18)            
STOCKHOLDERS’ EQUITY
                 
Common Stock: par value USD1.00, authorized 50,000 shares, issued and outstanding 10,000 shares at December 31, 2009     10,000        
Additional paid-in capital     1,332,802       1,242,802  
Appropriated retained earnings     1,010,486       27,518  
Unappropriated retained earnings     8,002,477       692,463  
Accumulated other comprehensive income     (595,135 )      (502,305 ) 
Total stockholders’ equity     9,760,630       1,460,478  
     $ 17,281,579     $ 3,770,959  

 
 
See notes to the consolidated financial statements

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TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

   
  Years ended December 31,
     2009   2008
Revenue   $ 13,468,581     $ 12,924,255  
Less: Business tax and surcharges     38,624       511,924  
Net revenue     13,429,957       12,412,331  
Cost of revenue     2,220,577       3,645,429  
Gross Margin     11,209,380       8,766,902  
Operating expenses
                 
Selling and distribution expenses     533,633       429,067  
General and administrative expenses     1,877,732       1,677,055  
Research and development expenses     435,712       532,473  
       2,847,077       2,638,595  
Income from operations     8,362,303       6,128,307  
Other income (expense)
                 
Interest income     350       2,591  
Interest expense     (66,016 )      (4,482 ) 
Other income           122,003  
Other expenses     (3,655 )      (16,768 ) 
       (69,321 )      103,344  
Income before income tax expense
    8,292,982       6,231,651  
Income tax expense           1,160,137  
Net income
    8,292,982       5,071,514  
Other comprehensive loss
                 
Foreign currency translation adjustment     (92,830 )      (158,929 ) 
Comprehensive income
  $ 8,200,152     $ 4,912,585  
Weighted average number of common shares outstanding
                 
Basic and diluted     10,000       10,000  
Earnings per share
                 
Basic and diluted     829.30       507.15  

 
 
See notes to the consolidated financial statements

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TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

   
  Years Ended December 31,
     2009   2008
Cash flows from operating activities
                 
Net income   $ 8,292,982     $ 5,071,514  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:                  
Depreciation and amortization     20,362       148,934  
Loss on disposal of property and equipment     1,281       2,078  
Reclassification of fixed assets to inventory sold           524,417  
Provision for doubtful debts     366,912        
Changes in operating assets and liabilities:
                 
Accounts receivable     (9,791,845 )      (259,894 ) 
Other receivables and current assets     (146,360 )      1,764,452  
Inventories     (307,017 )       
Accounts payable     (85,218 )      (694,554 ) 
Accrued expenses and other current liabilities     383,859       (6,636,312 ) 
Amount due to directors     24,417           
Taxes payable     (64,827 )      1,182,275  
Net cash flows (used in) provided by operating activities     (1,305,454 )      1,102,910  
Cash flows from investing activities
                 
Acquisition of property and equipment     (4,729 )       
Collection from loans to third parties     57,070       81,890  
Increase in amount due from directors     (877,876 )      (526,824 ) 
Decrease in long term receivables           22,566  
Net cash flows used in investing activities     (825,535 )      (422,368 ) 
Cash flows from financing activities
                 
Proceeds from issuance of common stock     100,000        
Repayment of loans from third parties     (53,618 )      (789,278 ) 
Repayment of long-term payables           (143,632 ) 
Proceeds from issuance of contingently convertible notes     5,000,000        
Net cash flows provided by (used in) financing activities     5,046,382       (932,910 ) 
Effect of exchange rate fluctuation on cash and cash equivalents     (100,879 )      36,220  
Net increase (decrease) in cash and cash equivalents     2,814,514       (216,148 ) 
Cash and cash equivalents – beginning of year     490,959       707,107  
Cash and cash equivalents – end of year     3,305,473       490,959  
Supplemental disclosure of cash flow information
                 
Cash paid for interest   $     $ 4,482  
Cash paid for income taxes   $ 263     $  

 
 
See notes to the consolidated financial statements

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TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

             
  Common stock   Additional
paid-in
Capital
  Appropriated
retained
earnings
  Unappropriated
retained
earnings
  Accumulated
other
comprehensive
loss
  Total
  Shares   Amount
Balance at January 1, 2008     5,000,000     $ 640,885     $ 601,917     $     $ (4,351,533 )    $ (343,376 )    $ (3,452,107 ) 
Net income                                   5,071,514             5,071,514  
Reorganization     (5,000,000 )      (640,885 )      640,885                          
Appropriation of statutory surplus reserve                             27,518       (27,518 )             
Foreign currency Translation adjustment                                         (158,929 )      (158,929 ) 
Balance at December 31, 2008               $ 1,242,802     $ 27,518     $ 692,463     $ (502,305 )    $ 1,460,478  
Net income                                   8,292,982             8,292,982  
Issue of shares     10,000     $ 10,000       90,000                         100,000  
Appropriation of statutory surplus reserve                             982,968       (982,968 )             
Foreign currency Translation adjustment                                         (92,830 )      (92,830 ) 
Balance at December 31, 2009     10,000     $ 10,000     $ 1,332,802     $ 1,010,486     $ 8,002,477     $ (595,135 )    $ 9,760,630  

 
 
See notes to the consolidated financial statements

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TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES
  
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 — ORGANIZATION AND PRINCIPAL ACTIVITIES

The accompanying consolidated financial statements include the financial statements of Trunkbow International Holdings Limited (the “Company”), and its subsidiaries and Variable Interest Entity (“VIEs”), Trunkbow (Asia Pacific) Investment Holdings Limited (“Trunkbow Hong Kong”), Trunkbow Asia Pacific (Shandong) Limited (“Trunkbow Shandong”), Trunkbow Asia Pacific (Shenzhen) Limited (“Trunkbow Shenzhen”) and Trunkbow Technologies (Shenzhen) Company Limited (“Trunkbow Technologies”). The Company and its subsidiaries and VIE are collectively referred to as the “Group”. Details of the Company’s subsidiaries and VIE are as follows:

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

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 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. The registered capital of Trunkbow Shandong is HK$20,000,000 (equivalent to US$2,866,965) and fully invested by December 31, 2009. The registered capital of Trunkbow Shandong was subsequently increased to HK$100,000,000 by board resolution dated November 11,2009. As at February 24, 2010, HK$46,591,679 (equivalent to US$6,000,000) was invested. The remaining registered capital shall be invested before December 4, 2011. Trunkbow Shandong is principally engaged in research and development of application platforms for mobile operators in China.

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. The registered capital of Trunkbow Shenzhen is HK$1,000,000 (equivalent to US$128,304) and was fully invested in 2007. Trunkbow Shandong is 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. The registered capital of Trunkbow Technologies is RMB5,000,000 (equivalent to US$601,917) and was fully invested in 2004. Trunkbow Technologies is principally 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 was controlled by the three shareholders, with ownership of 40% by Mr. Wanchun Hou, 30% by Mr. Qiang Li (collectively “the Control Group”), and 30% by Mr. Liangyao Xie (“Mr. Xie”), respectively prior to a reorganization (“the Reorganization”) in December 2007.

Trunkbow International Holdings Limited (the “Company”) has an authorized share capital of 50,000 shares with par value of US$1 each. On September 16, 2009. 10,000 shares of the company was issued to certain investors at a subscription price US$10 each share.

As part of the reorganization, on September 16, 2009, the entire issued share capital of Trunkbow Hong Kong, comprising 5,000,000 shares with par value of HK$1 each, was transferred to the company at a total consideration of HK$2. The Company itself has no significant business operations and assets other than holding of equity interests in its subsidiaries and VIE after the whole series of reorganization activities mentioned above.

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TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES
  
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 — ORGANIZATION AND PRINCIPAL ACTIVITIES  – (continued)

Effective control over Trunkbow Technologies was transferred to Trunkbow Shandong (the wholly-owned subsidiary of the Company) through a series of contractual arrangements without transferring legal ownership in Trunkbow Technologies (see Note 2). As a result of these contractual arrangements, Trunkbow Shandong maintained the ability to approve decision made by Trunkbow Technologies and was entitled to substantially all of the economic benefits of Trunkbow Technologies. Therefore, the Company consolidates Trunkbow Technologies in accordance with ASC 810-10. The Control Group controlled Trunkbow Technologies during all periods presented; therefore the Reorganization is accounted for as a transaction between entities under common control in a manner similar to pooling of interests. Accordingly, the accompanying consolidated financial statements have been prepared as if the current corporate structure had been in existence throughout the periods presented.

2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Basis of presentation

The accompanying consolidated financial statements have been presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

b) Principles of Consolidation

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

In December 2007, a series of agreements were entered into amongst Trunkbow Shandong (a wholly-owned subsidiary of the Company), Trunkbow Technologies and the Control Group, providing Trunkbow Shandong the ability to control Trunkbow Technologies, including its financial interest as described below.

Trunkbow Technologies entered into a ten year “Exclusive Business Cooperation Agreement” with Trunkbow Shandong to appoint Trunkbow Shandong as its exclusive services provider to provide comprehensive technical support, business support and related consulting services. Trunkbow Technologies pays the consulting and service fees which equal to 100% of the net profit, respectively to Trunkbow Shandong within the effective period of the “Exclusive Business Cooperation Agreement”.

To ensure Trunkbow Technologies to fully fulfill their obligations under the “Exclusive Business Cooperation Agreement”, the Control Group and Mr. Xie signed the “Share Pledge Agreement” and the “Power of Attorney” with Trunkbow Shandong to pledge all of its interests in Trunkbow Technologies to Trunkbow Shandong respectively, and irrevocably authorized Trunkbow Shandong as sole exclusive agent to act on their behalf to exercise the rights relating to its shareholding, including but not limited to voting rights, within the effective period of the “Exclusive Business Cooperation Agreement”. Trunkbow Technologies as party of this agreement agreed to the grant by the Control Group and Mr. Xie of the Equity Interest Pledge and exercising shareholding rights to Trunkbow Shandong.

The Control Group and Mr. Xie also signed an “Exclusive Option Agreement” with Trunkbow Shandong to ensure that the Control Group irrevocably agreed that, on the condition that it is permitted by the PRC laws, Trunkbow Shandong has the right to purchase, or designate one or more persons to purchase the Control Group’s equity interests in Trunkbow Technologies once or at multiple times at any time in part or in whole at Trunkbow Shandong’s sole and absolute discretion and at the agreed price stipulated in the agreement. Trunkbow Technologies as a party of this agreement agreed to the grant by the Control Group and Mr. Xie of the Exclusive Equity Interest Purchase Option to Trunkbow Shandong.

The Control Group and Mr. Xie have also signed “Loan Agreements” with Trunkbow Shandong. Under these loan agreements, Trunkbow Shandong has made interest-free loans in aggregate of RMB5,000,000 to the Control Group solely for them to fund the capitalization of Trunkbow Technologies. The loans can only be

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repaid upon the transfers of the equity interests in Trunkbow Technologies from the Control Group and Mr. Xie to Trunkbow Shandong and the use of the proceeds from such transfers to repay the loans. These agreements are for a ten year term, subject to acceleration and extension in accordance with the terms therein.

With the above agreements, the Company demonstrated its ability to control Trunkbow Technologies, which is under the common control and management of the Control Group after the Reorganization.

Share Transfer Agreements

On September 21, 2009, the controlling shareholders of the Company are Capital Melody Limited, a company registered in BVI, (“Capital Melody”), who holds 38.75% of the Company’s common stock, and Chief Honour Investments Limited, a company registered in BVI, (“Chief Honour”), who holds 43.75% of the Company’s common stock. The sole registered shareholder of both Capital Melody and Chief Honour is Mr. Chi Weng Lao, who owns 10,000 common stock of Capital Melody and Chief Honour, entered into share transfer agreements with the Control Group individuals respectively, pursuant to which, upon the satisfaction of certain conditions, the Control Group individuals have the option to purchase up the 10,000 shares of Capital Melody and Chief Honour owned by Mr. Chi Weng Lao, at a purchase price of US$1 per share (the par value of both companies’ common stock). Under the terms of the share transfer agreement, Mr. Qiang Li will have the right to purchase the shares of Captial Melody and Mr. Wan Chun Hou will have the right to purchase the shares of Chief Honour as follows: (1) one-third of the shares when the Group will generate at least US$2,800,000 of the gross revenue for twelve months commencing from January 1, 2010 to December 31, 2010 (the “Performance Period I”); (2) one-third of the shares when the Group will generate at least US$1,500,000 of the gross revenue for six months commencing from January 1, 2011 to June 30, 2011 (the “Performance Period II”); (3) one-third of the shares when the Group generates at least US$1,500,000 of the gross revenue for six months commencing from July 1, 2011 to December 31, 2011 (the “Performance Period III”). In the event that the Group does not achieve the performance targets specified above, then the Control Group individuals may exercise the Option at the Alternative Exercise Price (which is US$1.10 per share), on the date that the Acquisition has been completed or abandoned. Each Control Group individual may purchase one-third of the total number of shares that he or she is eligible to purchase under the share transfer agreement upon the satisfaction of each condition described above. If the Control Group individuals purchase all shares eligible for purchase under the share transfer agreement, the Control Group will become the Company’s controlling shareholders.

Entrustment Agreement

On October 1, 2009, the Control Group individuals also entered an Entrustment Agreement with Cheif Honour and Capital Melody collectively, pursuant to which, based on the 82.5% equity interest held in the Group directly or indirectly, Cheif Honour and Capital Melody entrusts the Control Group to manage the Group companies to the extent provided below:

Cheif Honour and Capital Melody irrevocably authorizes the Control Group to act on behalf of them, as exclusive agents and attorneys in-fact with respect to all matters concerning Cheif Honour’s and Capital Melody’s shareholding, during the life of this Agreement, including the rights as follows:

Attending the shareholders’ meetings;
Exercising all shareholder’s rights and shareholder’s voting rights enjoyed by Cheif Honour and Capital Melody under the laws and the articles of associations of the Company and each Group Companies, (collectively “the Group”) including without limitation voting for and making decisions on the increase or reduction of the authorized capital/registered capital, issuing company bonds, merger, division, dissolution, liquidation of the Group or change of Group’ type, amendment to the articles of association of the Group.

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Designating and appointing the legal representatives (the chairman of the Board), directors, supervisors, general managers and other senior officers of the Group.

The Control Group also agrees and confirms that they shall act in concert with one another when exercising all of their rights (including but not limited to the voting rights) authorized to them in this Agreement.

The Entrustment Period commences on the execution date of this agreement and shall be effective within a period of 10 years. During the Entrustment period, this agreement shall not be rescinded or terminated by any party unless unanimously agreed by all parties.

With the above agreements, the Company demonstrated its ability to control Trunkbow Shandong and Trunkbow Shenzhen, which are under the common control and management of the Control Group after the Reorganization.

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 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 (“U.S. 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.

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.

c) Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 period. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ from those estimates.

d) 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.

e) 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

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credit exposure relating to its customers, suppliers or others. As of December 31, 2009 and December 31, 2008, management has determined that no allowance for doubtful accounts is required.

f) Inventory

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

g) Property and equipment, net

Furniture and office equipment, electronic equipment and telecommunication equipment 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
Furniture and office equipment     5  
Electronic equipment     5  

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

Impairment of long-lived assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of the asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount of the asset and its fair value. There were no impairment losses in the period/year ended December 31, 2009 and 2008.

h) Fair value of financial instruments

The carrying amounts of cash and cash equivalents, accounts receivables from third and related parties, other receivables, other current assets, accounts payable, other payables and amount due to related parties, approximate their fair values due to their short term nature.

The fair value is estimated by discounting the future cash flow using an interest rate which approximated the rate for which the financial institution would charge borrowers with similar credit ratings and remaining maturities.

i) Revenue recognition

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

System integration

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

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Deliverables of system integration include: software, hardware, integration, installation, training. No 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) Collectibility is probable.

Sales of software

The Group sells software relating to mobile payment and value-added service for its customers.

The Group recognize revenue in accordance with ASC 985-605, 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:

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

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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:

(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) Collectibility 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 years’ contractural 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 collectibility is resonably assured, based upon the receipt of reports from mobile carriers.

j) Cost of revenues

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

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k) Concentration of credit risk

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

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

Details of the customers accounting for 10% or more of total revenues are as follows:

   
  Years ended December 31,
Customer   2009   2008
     %   %
A     23.14           
B     21.81           
C     20.13           
D     15.83           
E              59.82  
F              21.55  

Details of the customers accounting for 10% or more of accounts receivable are as follows:

   
  Years ended December 31,
Customer   2009   2008
     %   %
A     30.72           
B     19.16           
C     15.53           
D     19.76           
G     10.85           
E              26.66  
H              39.41  
I              14.74  
l) 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 ASC 985-20 “Costs of 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.

m) Operating leases

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor 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.

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n) 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 income statement in the period that includes the enactment date. The Group had no deferred tax assets and liabilities recognized for any of the nine months ended September 30, 2009 and for the year ended December 31, 2008.

Value added taxes

The Company’s PRC subsidiaries and VIE are subject to value-added tax (“VAT”) on sales. In Trunkbow Technologies, 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 Shandong and Trunkbow Shenzhen are small scale tax payers and the VAT is calculated at a rate of 3% on revenues.

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.

o) Uncertain tax positions

ASC 740-10-25, Accounting for Uncertainty in Income Taxes, 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 years ended December 31, 2009 and 2008, the Group did not have any interest and penalties associated with tax positions and the Group did not have any significant unrecognized uncertain tax positions.

The Company’s subsidiaries and 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 2001 and 2009 of the Company’s subsidiaries and VIE remain open in the relevant taxing jurisdictions.

p) Earnings per share

Earning 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.

q) 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 is 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.

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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.

r) 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.

s) 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, 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.

t) Recently issued accounting pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued FASB Accounting Standards Codification (“ASC”) as the sources of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under federal securities laws are also sources of authoritative GAAP for SEC registrants. All nongrandfathered non-SEC accounting literature not included in ASC is deemed nonauthoritative. ASC is effective for financial statements issued for interim and annual financial periods ending after September 15, 2009. On July 1, 2009, the Group adopted the new guidelines and numbering system prescribed by ASC when referring to U.S. GAAP. As ASC was not intended to change or alter existing U.S. GAAP, there was no material impact on the Group’s consolidated financial position or results of operations upon the adoption of ASC.

In April, 2009, the FASB issued ASC 320, which amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. The ASC 320 does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. The adoption of ASC 320 has no material effect on the Company’s consolidated results of operations and financial condition.

In April 2009, the FASB issued ASC 820-10-65-4, which clarifies when markets are illiquid or that market pricing may not actually reflect the “real” value of an asset. If a market is determined to be inactive and market price is reflective of a distressed price then an alternative method of pricing can be used, such as a present value technique to estimate fair value. The guidance identifies factors to be considered when determining whether or not a market is inactive, and would be effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009 and shall be applied prospectively. The adoption of ASC 820-10-65-4 has no material effect on the Company’s financial statements.

In June 2009, the FASB issued amendments to various sections of ASC 810 to address the elimination of the concept of a qualifying special purpose entity. Such amendments to ASC 810 also replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity and the obligation to absorb losses of the entity or the right to receive benefits from the entity. Additionally, such amendments to ASC 810 provide more timely and useful

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information about an enterprise’s involvement with a variable interest entity. These amendments to ASC 810 shall be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. The Company is currently evaluating the impact of the adoption of ASC 810 on its financial statements and does not expect a significant impact.

In June 2009, the FASB issued amendments to various sections of ASC 810 (formerly referred to as SFAS No. 167 Amendments to FASB Interpretation No. 46(R)”, which amends FASB Interpretation No. 46 (revised December 2003)) to address the elimination of the concept of a qualifying special purpose entity. Such amendments to ASC 810 also replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity and the obligation to absorb losses of the entity or the right to receive benefits from the entity. Additionally, such amendments to ASC 810 provide more timely and useful information about an enterprise’s involvement with a variable interest entity. These amendments to ASC 810 shall be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. The Company is currently evaluating the impact of the adoption of ASC 810 on its financial statements and does not expect a significant impact.

In September 2009, the FASB reached a consensus on ASU 2009-13, Revenue Recognition (ASC 605) —  Multiple — Deliverable Revenue Arrangements. This pronouncement was issued in response to practice concerns related to accounting for revenue arrangements with multiple deliverables under the existing pronouncement. The pronouncement modifies the requirements that must be met for an entity to recognize revenue from the sale of a delivered item that is part of a multiple-element arrangement when other items have not yet been delivered. It eliminates the requirement that all undelivered elements must have either: i) vendor-specific objective evidence (“VSOE”) or ii) third-party evidence (“TPE”), before an entity can recognize the portion of an overall arrangement consideration that is attributable to items that already have been delivered. In the absence of VSOE or TPE of the standalone selling price for one or more delivered or undelivered elements in a multiple-element arrangement, entities will be required to estimate the selling prices of those elements. Overall arrangement consideration will be allocated to each element (both delivered and undelivered items) based on their relative selling prices, regardless of whether those selling prices are evidenced by VSOE or TPE or are based on the entity’s estimated selling price. The residual method of allocating arrangement consideration has been eliminated. The pronouncement is effective for fiscal years beginning on or after June 15, 2010. Entities can elect to apply this pronouncement (1) prospectively to new or materially modified arrangements after the pronouncement’s effective date or (2) retrospectively for all periods presented. Early application is permitted; however, if the entity elects prospective application and early adopts this pronouncement after its first interim reporting period, it must also do the following in the period of adoption: (1) retrospectively apply this pronouncement as of the beginning of that fiscal year and (2) disclose the effect of the retrospective adjustments on the prior interim periods’ revenue, income before taxes, net income, and earnings per share. The Group is in the process of assessing the potential impact of the adoption of the pronouncement may have on its consolidated financial position or results of operations.

In September 2009, the FASB reached a consensus on ASU 2009-14, Software (ASC 985) — Certain Revenue Arrangements That Include Software Elements. This pronouncement would amend the existing pronouncement to exclude from their scope all tangible products containing both software and non-software components that function together to deliver the product’s essential functionality. That is, the entire product (including the software deliverables and non-software deliverables) would be outside the scope of ASC 985-605 and would be accounted for under other accounting literature (e.g., ASC 605-25). The new pronouncement includes factors that entities should consider when determining whether the software and non-software components function together to deliver the product’s essential functionality and are thus outside the revised scope of

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ASC 985-605. In addition, the new pronouncement includes examples illustrating how entities would apply the revised scope provisions. The pronouncement is effective for fiscal years beginning on or after June 15, 2010. Entities can elect to apply this pronouncement (1) prospectively to new or materially modified arrangements after the pronouncement’s effective date or (2) retrospectively for all periods presented. Early application is permitted; however, if the entity elects prospective application and early adopts this pronouncement after its first interim reporting period, it must also do the following in the period of adoption: (1) retrospectively apply this pronouncement as of the beginning of that fiscal year and (2) disclose the effect of the retrospective adjustments on the prior interim periods’ revenue, income before taxes, net income, and earnings per share. The Group is in the process of assessing the potential impact of the adoption of the pronouncement may have on its consolidated financial position or results of operations.

In January 2010, the FASB reached a consensus on ASU 2010-02, Consolidation (ASC 810) — Accounting and Reporting for Decreases in Ownership of a Subsidiary — a Scope Clarification. This pronouncement clarifies certain conditions which need to apply to this pronouncement, and it also expands disclosure requirements for the deconsolidation of a subsidiary or derecognition of a group of assets. This pronouncement is effective in the period in which an entity adopts the authoritative guidance on noncontrolling interests in consolidated financial statements. If an entity has previously adopted the guidance on noncontrolling interests in consolidated financial statements, the amendments in this update are effective beginning in the first interim or annual reporting period ending on or after December 15, 2009. Retrospective application to the first period that an entity adopted the guidance on noncontrolling interests in consolidated financial statements is required. The Group adopted the pronouncement on January 1, 2009, and there was no material impact on the Group’s consolidated financial position or results of operations upon the adoption of this pronouncement.

In January 2010, the FASB reached a consensus on ASU 2010-06, Fair Value Measurements and Disclosures (ASC 820) — Improving Disclosures about Fair Value Measurements. This pronouncement would amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The pronouncement requires new disclosures on the transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement hierarchy, including the reasons and the timing of the transfers. Additionally, the pronouncement requires a roll forward of activities on purchases, sales, issuances, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The pronouncement is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosure about purchases, sales, issuances, and settlements in the roll forward activities for Level 3 fair value measurements, which is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Group is in the process of assessing the potential impact of the adoption of the pronouncement may have on its consolidated financial position or results of operations.

3 — CASH AND CASH EQUIVALENTS

At December 31, 2009 and 2008, cash and cash equivalents consisted of:

   
  December 31,
2009
  December 31,
2008
Cash   $ 503     $ 11,196  
Bank Deposits     3,304,970       479,763  
     $ 3,305,473     $ 490,959  

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4 — ACCOUNTS RECEIVABLE

At December 31, 2009 and 2008, accounts receivable consisted of:

   
  December 31,
2009
  December 31,
2008
Accounts receivable   $ 10,455,284     $ 656,536  

Up to March 30, $5,904,246 was collected. Management has determined that no allowance for doubtful accounts is required.

5 — LOANS RECEIVABLE AND OTHER CURRENT ASSETS

Loans receivable and other current assets at December 31, 2009 and 2008 are summarized as follows:

   
  December 31,
2009
  December 31,
2008
Advances to suppliers   $ 7,580     $ 4,668  
Deposits     18,320       21,006  
Loans to third parties (net of $366,912 allowance for doubtful debt in December 31, 2009 and nil in December 31, 2008)     796,688       1,151,091  
Staff advances     10,243       73,527  
Prepaid expenses     241,713        
Others     11,111       1,561  
     $ 1,085,655     $ 1,251,853  

Loans to third parties are non-interest bearing and mature within one year. The loans are extended to maintain good working relationship with those third parties who previously provided support with working capital in prior years.

Movement of allowance for doubtful debt:

 
  US$
December 31, 2008      
Provision     366,912  
Reverse      
December 31, 2009     366,912  

No allowance for doubtful debt was provided for the year ended December 31, 2008.

We identified the amount due from Shanghai Yiren was uncollectable and full provision of $366,912 was provided at December 31, 2009.

6 — AMOUNT DUE FROM DIRECTORS

a) At December 31, 2009 and 2008, amount due from directors consisted of:

   
  December 31,
2009
  December 31,
2008
Amount due from Mr. Qiang Li   $ 904,581     $ 447,026  
Amount due from Mr. Wan Chun Hou     1,183,587       737,090  
Amount due from Mr. Yue Lou           22,703  
     $ 2,088,168     $ 1,206,819  

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6 — AMOUNT DUE FROM DIRECTORS  – (continued)

Amount due from directors are short-term, non-interest bearing. Up to March 30, $999,971 was paid back by the directors and the rest outstanding balance will be settled before April 10, 2010.

b) At December 31, 2009 and 2008, amount due to directors consisted of:

   
  December 31,
2009
  December 31,
2008
Amount due to Mr. Yue Lou   $ 24,430     $  

7 — INVENTORIES

At December 31, 2009 and 2008, inventories consisted of:

   
  December 31,
2009
  December 31,
2008
System integration hardware   $ 307,182     $  
     $ 307,182     $  

8 — 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, 2009 and 2008 are summarized as follows:

   
  December 31,
2009
  December 31,
2008
Furniture and office equipment   $ 47,637     $ 47,033  
Electronic equipment     63,868       79,539  
     $ 111,505     $ 126,572  
Less: Accumulated depreciation   $ 71,688     $ 69,972  
     $ 39,817     $ 56,600  

Depreciation expense for the years ended December 31, 2009 and 2008 were USD20,362 and USD148,934, respectively.

9 — LONG-TERM RECEIVABLE

   
  December 31,
2009
  December 31,
2008
Long-term receivable   $     $ 108,192  

Long-term receivable was a non-interest bearing loan to a third party.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

10 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

The breakdowns of accrued expenses and other current liabilities as of December 31, 2009 and 2008 are as follows:

   
  December 31,
2009
  December 31,
2008
Accrued payroll   $ 56,719     $ 17,814  
Advance from customers     48,265       7,584  
Loans from third parties     146,259       199,877  
Prepayment by staff     93,772        
Accrued expenses     166,016        
Others     92,235       46,895  
     $ 603,266     $ 272,170  

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

11 — CONTINGENTLY CONVERTIBLE NOTES

   
  December 31,
2009
  December 31,
2008
Bridgeway Asset Management Limited   $ 1,000,000     $  
Bay Peak LLC     2,000,000        
Mengyuan Song     2,000,000        
     $ 5,000,000     $  

The contingently convertible notes are convertible into the common stocks issued by BP5, the subsequent parent company, upon the consummation of the public listing or the share exchange (note 19(1)) and are due within two to six months with 12% annual interest rate. The balance is fully settled subsequently either by payment in cash or by conversion into the common stocks of BP5 (note 19(4)).

12 — TAXES PAYABLE

   
  December 31,
2009
  December 31,
2008
Value Added Tax Payable   $ 314,326     $ 352,657  
Income Tax Payable     1,247,273       1,248,316  
Others           21,454  
     $ 1,561,599     $ 1,622,427  

13 — INCOME TAXES

(a) Corporation Income Tax (“CIT”)
(i) the Company and Trunkbow Hong Kong

Under the current laws of the BVI and Hong Kong, the Company and Trunkbow Hong Kong are not subject to income taxes. Additionally, upon payments of dividends by the Company to its shareholders, no BVI or Hong Kong withholding tax will be imposed.

(ii) PRC subsidiaries and VIE

The subsidiaries and VIE incorporated in the PRC are generally subject to a corporate income tax rate of 33% prior to January 1, 2008 or 25% post that date except for those subsidiaries and VIE that enjoy tax holidays or preferential tax treatment, as discussed below.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

13 — INCOME TAXES  – (continued)

Effective from January 1, 2008, a new Enterprise Income Tax Law, or the New EIT Law combines the previous income tax laws for foreign invested and domestic invested enterprises in China by adopting a unified tax rate of 25% for most enterprises.

Trunkbow Shandong (“WFOE”)

Trunkbow Shandong, being incorporated in the PRC, is governed by the income tax law of the PRC and is subject to PRC enterprise income tax. The statutory income tax rate for the year ended December 31, 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 (“WFOE”)

Trunkbow Shenzhen, being 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 June 7, 2007, the income tax rate from year 2008 on will be 25%.

Trunkbow Technologies

Trunkbow Technologies is 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.

The following is a reconciliation of tax computed by applying the statutory income tax rate to PRC operations to income tax expenses for the year ended December 31, 2009 and 2008 respectively:

   
  2009   2008
PRC statutory tax rate     25 %      25 % 
Accounting income before tax   $ 8,553,059     $ 6,231,651  
Computed expected income tax expense     2,138,265       1,557,913  
Tax rate difference*           (451,165 ) 
Non-deductible expenses           11,650  
Loss from subsidiaries     349,627       41,739  
Tax exemption     (2,487,892 )       
Income tax expenses   $     $ 1,160,137  

* The statutory income tax rate of Trunkbow Technologies for the two years ended December 31, 2008 was 18%. Therefore, the reconciliation was for the difference between the PRC statutory tax rate and the statutory tax rate of Shenzhen city.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

14 — RESTRICTED NET ASSETS

The Company’s ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its PRC subsidiaries and VIE. Relevant PRC statutory laws and regulations permit payments of dividends by the Company’s PRC subsidiaries only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of the Company’s PRC subsidiaries and VIE.

In accordance with the Regulations on Enterprises with Foreign Investment of China and their articles of association, a foreign invested enterprise established in the PRC is required to provide certain statutory reserves, namely general reserve fund, the enterprise expansion fund and staff welfare and bonus fund which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts. A wholly-owned foreign invested enterprise is required to allocate at least 10% of its annual after-tax profit to the general reserve until such reserve has reached 50% of its respective registered capital based on the enterprise’s PRC statutory accounts. Appropriations to the enterprise expansion fund and staff welfare and bonus fund are at the discretion of the board of directors for all foreign invested enterprises. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends.

Additionally, in accordance with the Company Law of the PRC, a domestic enterprise is required to provide statutory common reserve at least 10% of its annual after-tax profit until such reserve has reached 50% of its respective registered capital based on the enterprise’s PRC statutory accounts. A domestic enterprise is also required to provide for discretionary surplus reserve, at the discretion of the board of directors, from the profits determined in accordance with the enterprise’s PRC statutory accounts. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends.

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, the Company’s PRC subsidiaries and VIE are restricted in their ability to transfer a portion of their net assets to the Company.

Amounts restricted include paid-in capital and statutory reserve funds of the Company’s PRC operating entities as determined pursuant to PRC generally accepted accounting principles, totaling approximately US$4,607,672 as of December 31, 2009.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

15 — REVENUES AND COST OF REVENUES

For the years ended December 31, 2009 and 2008, revenues and cost of revenues consisted of:

   
  Years Ended December 31,
     2009   2008
Gross Revenues
                 
System integration   $ 8,496,191     $ 10,951,741  
Software sales     2,243,537       878,853  
Patent licensing     1,986,913        
Maintenance service     683,590       956,160  
Shared revenue     58,350       137,501  
       13,468,581       12,924,255  
Less:
                 
Business tax and surcharges     38,624       511,924  
Cost of Revenues
                 
Equipment costs     2,040,591       3,411,233  
Labor Costs     179,986       234,196  
       2,220,577       3,645,429  
Gross margin   $ 11,209,380     $ 8,766,902  

16 — FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of cash and cash equivalents, trade accounts receivable, prepayments and other receivables, amounts due from related parties, amounts due to related parties, and accrued liabilities and other payables, approximate their fair values because of the short maturity of these instruments.

17 — 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 approximately US$124,324 and US$101,830 for the years ended December 31, 2009 and 2008 respectively.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

18 — COMMITMENTS AND CONTINGENCIES

1) Leasing Arrangements

The Company leases office space under a lease agreement with a term expiring in June 2012. 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, 2010     221,064  
Year ending December 31, 2011     189,235  
Year ending December 31, 2012     122,145  
Year ending December 31, 2013     31,342  
Total   $ 563,786  

The office rental commitments include a rental agreement signed on January 7, 2010.

2) Contingently convertible notes

The notes shall be convertible only following consummation of the next qualified financing, IPO, or sale of the Company into a number of shares of common stock of BP5, the subsequent parent company (Note 19(1)), therefore, the beneficial conversion feature is measured at issuance of the notes but not recorded until the contingency is resolved. Since the conversion feature was contingent on a non-market event and the value of the conversion shares was not fixed, the embedded conversion feature was not recorded as a liability as of December 31, 2009.

19 — SUBSEQUENT EVENTS

1) Share Exchange Agreement

On February 10, 2010, the Company entered into a Share Exchange Agreement (the “Exchange Agreement”) with Bay Peak 5 Acquisition Corp. (“BP5”), a company incorporated in the State of Nevada, the shareholders of the Company (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 BP5(“Principal Shareholder”). Pursuant to the terms of the Exchange Agreement, the Shareholders transferred to BP5 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, the Company became BP5’s wholly-owned subsidiary.

2) Purchase Agreement

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 “Offering”) and (ii) 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, 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”).

Merriman Curhan Ford & Co. acted as the exclusive financial advisor and placement agent in the Offering and received warrants to purchase 561,104 at an exercise price of $2.00 per share, along with a cash fee and expense reimbursement equal to $1,568,090.50.

After giving effect to the Share Exchange and Purchase Agreements, the sale of common stock in the Offering and the BP5 Warrant Financing, the Company has 32,472,075 shares outstanding at a par value of $0.001 per

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

19 — SUBSEQUENT EVENTS  – (continued)

share. (i) existing shareholders of Trunkbow owned approximately 60.25% of the Company’s outstanding Common Stock, (ii) Investors of Common Stock in the Offering owned approximately 26.01% of the Company’s outstanding Common Stock, (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.

3) Capital injection in Trunkbow Shandong

In accordance with the board resolution dated November 11, 2009, the registered capital of Trunkbow Shandong was increased from HKD20,000,000 to HKD100,000,000. As of Feb 24, 2010, HK$46,591,679 (equivalent to US$6,000,000) was invested and verified by Shandong Tianyuan Tongtai CPA Ltd.

4) Repayment of $5,000,000 Contingently convertible notes

Among the $5,000,000 contingently convertible notes (note 11), $1,000,000 was repaid in cash to Bridgeway in March 2010, $1,000,000 was repaid in cash to Bay Peak LLC in Feb 2010, and another $1,000,000 was converted to 500,000 shares at $2.00 per share as a result of the share exchange. And the convertible notes of $2,000,000 issued to Mengyuan Song were convertible to 1,000,000 shares at $2.00 per share as a result of the private placement.

5) Master Engagement Agreement

On February 1, 2010, the Company entered into a Master Engagement Agreement with VeriFone, Inc. (“VeriFone”). Pursuant to the terms of the agreement, the Company has submitted a binding, non-cancellable purchase order to VeriFone covering an initial order of $5 million of VeriFone’s point of sale systems for deployment in China as part of its rollout. VeriFone beneficially owns 2,500,000 shares of our common stock and warrants to purchase up to 500,000 shares of our common stock.

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UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

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CONSOLIDATED BALANCE SHEETS

   
  June 30,
2010
  December 31,
2009
       Unaudited           
ASSETS
                 
Current assets
                 
Cash and cash equivalents   $ 12,340,718     $ 3,305,473  
Restricted deposit     352,495        
Accounts receivable     11,304,785       10,455,284  
Loans receivable and other current assets, net     12,550,593       1,085,655  
Due from directors     965,404       2,088,168  
Inventories     784,289       307,182  
Total current assets     38,298,284       17,241,762  
Property and equipment, net     369,743       39,817  
Long-term prepayment     658,453        
     $ 39,326,480     $ 17,281,579  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                 
Current liabilities
                 
Accounts payable   $ 239,199     $ 331,654  
Accrued expenses and other current liabilities     473,781       603,266  
Short-term loan     1,762,477        
Due to directors           24,430  
Contingently convertible notes           5,000,000  
Taxes payable     1,995,409       1,561,599  
       4,470,866       7,520,949  
COMMITMENTS AND CONTINGENCIES
                 
STOCKHOLDERS’ EQUITY
                 
Preferred Stock: par value USD0.001, authorized 10,000,000 shares, issued and outstanding nil at June 30, 2010 and December 31, 2009            
Common Stock: par value USD0.001, authorized 190,000,000 shares, issued and outstanding 32,472,075 shares at June 30, 2010 and 19,562,888 at December 31, 2009     32,472       19,563  
Additional paid-in capital     21,384,050       1,323,239  
Appropriated retained earnings     1,010,486       1,010,486  
Unappropriated retained earnings     12,823,945       8,002,477  
Accumulated other comprehensive loss     (395,339 )      (595,135 ) 
Total stockholders’ equity     34,855,614       9,760,630  
     $ 39,326,480     $ 17,281,579  

 
 
The accompanying notes are an integral part of these consolidated financial statements

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CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

       
  Six Months ended June 30,   Three Months ended June 30,
     2010   2009   2010   2009
     Unaudited   Unaudited   Unaudited   Unaudited
Revenues   $ 7,988,343     $ 6,357,631     $ 3,956,591     $ 6,146,693  
Less: Business tax and surcharges     168,051       17,694       39,114       6,738  
Net revenues     7,820,292       6,339,937       3,917,477       6,139,955  
Cost of revenues     538,527       1,291,107       358,979       1,230,908  
Gross margin     7,281,765       5,048,830       3,558,498       4,909,047  
Operating expenses
                                   
Selling and distribution expenses     469,017       335,062       273,361       131,477  
General and administrative expenses     1,316,907       567,374       676,017       362,411  
Research and development expenses     505,929       192,364       394,672       75,194  
       2,291,853       1,094,800       1,344,050       569,082  
Income from operations     4,989,912       3,954,030       2,214,448       4,339,965  
Other expenses
                                   
Interest expense     156,547             29,766        
Other expenses     11,898       1,102       6,028       1,201  
       168,445       1,102       35,794       1,201  
Income before income tax expense     4,821,467       3,952,928       2,178,654       4,338,764  
Income tax expense                        
Net income     4,821,467       3,952,928       2,178,654       4,338,764  
Other comprehensive gain
                                   
Foreign currency translation fluctuation     199,796       947       103,596       (692 ) 
Comprehensive income   $ 5,021,263     $ 3,953,875       2,282,250     $ 4,338,072  
Weighted average number of common shares outstanding
                          
Basic and diluted     32,472,075       19,562,888       32,472,075       19,562,888  
Earnings per share
                                   
Basic and diluted   $ 0.15     $ 0.20     $ 0.07     $ 0.22  

 
 
The accompanying notes are an integral part of these consolidated financial statements

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CONSOLIDATED STATEMENTS OF CASH FLOWS

   
  Six Months Ended June 30,
     2010   2009
     Unaudited   Unaudited
Cash flows from operating activities
                 
Net income   $ 4,821,467     $ 3,952,928  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
                 
Depreciation and amortization     23,301       11,745  
Loss on disposal of property and equipment           1,283  
Changes in operating assets and liabilities:
                 
Accounts receivable     (802,502 )      (5,669,959 ) 
Loans receivable and other current assets     (8,258,633 )      781,690  
Inventories     (473,997 )      (14,206 ) 
Long-term prepayment     (655,935 )       
Accounts payable     (93,490 )      906,327  
Accrued expenses and other current liabilities     14,798        
Amount due to directors     (24,439 )      24,497  
Taxes payable     425,616       160,517  
Net cash flows provided by (used in) operating activities     (5,023,814 )      154,822  
Cash flows from investing activities
                 
Acquisition of property and equipment     (351,800 )      (526 ) 
Payment on loans to third parties     (3,157,913 )      (592,706 ) 
Collection in amount due from directors     1,127,209       60,651  
Collection in long-term receivables           108,365  
Net cash flows used in investing activities     (2,382,504 )      (424,216 ) 
Cash flows from financing activities
                 
Increase in restricted deposit     (352,495 )       
Proceeds from issuance of common stock (net of finance costs)     17,073,720        
Repayment of loans from third parties     (146,311 )      (127,133 ) 
Repayment of contingently convertible notes     (2,000,000 )       
Proceeds from short-term loan     1,755,736        
Net cash flows provided by (used in) financing activities     16,330,650       (127,133 ) 
Effect of exchange rate fluctuation on cash and cash equivalents     110,913       612  
Net increase (decrease) in cash and cash equivalents     9,035,245       (395,915 ) 
Cash and cash equivalents – beginning of period     3,305,473       490,959  
Cash and cash equivalents – end of period     12,340,718       95,044  
Supplemental disclosure of cash flow information
                 
Cash paid for interest   $ 156,547     $  
Cash paid for income taxes   $     $  
Supplemental disclosure of noncash financing activities
        
Conversion of contingently convertible notes to common stock   $ 3,000,000     $  

 
 
The accompanying notes are an integral part of these consolidated financial statements

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 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, Trunkbow Asia Pacific (Shandong) Company, Limited (“Trunkbow Shandong”) and Trunkbow Asia Pacific (Shenzhen) Company, Limited (“Trunkbow Shenzhen”) in the PRC. Trunkbow Technologies (Shenzhen) Company, Limited (“Trunkbow Technologies”) became a Variable Interest Entity (“VIE”) of Trunkbow Shandong through a series of contractual arrangements. Both subsidiaries and the VIE are principally engaged in research and development of application platforms for mobile operators in China.

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

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 unaudited consolidated financial statements include the accounts of the Company, and its subsidiaries and VIE, Trunkbow, Trunkbow Hong Kong, Trunkbow Shandong, Trunkbow Shenzhen and Trunkbow Technologies.

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X, as promulgated by the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and notes required by US GAAP for annual financial statements. However, management believes that the disclosures are adequate to ensure the information presented is not misleading.

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair presentation of consolidated financial position as of June 30, 2010 and consolidated results of operations, and cash flows for interim periods presented, have been made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.

b) Principles of Consolidation

The unaudited consolidated financial statements include the financial statements of all the subsidiaries and VIEs of the Company. All transactions and balances among the Company, its subsidiaries and VIE have been eliminated upon consolidation.

c) Use of estimates

The preparation of financial statements in conformity with US 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.

d) 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 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

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2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

translated at historical exchange rates. Adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive income in shareholders’ equity.

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.

e) 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.

f) 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 June 30, 2010 and December 31, 2009, management has determined that no allowance for doubtful accounts is required.

g) Inventory

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

h) 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.

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2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

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 three and six months ended June 30, 2010 and 2009 and the year ended December 31, 2009.

i) 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 15.

The Group did not have any nonfinancial assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2010 and December 31, 2009.

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2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

j) Revenue recognition

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

System integration

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

Deliverables of system integration include: software, hardware, integration, installation, training. No 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 sells software relating to mobile payment and value-added service for its customers.

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:

(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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

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:

(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 years 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.

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2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

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.

k) Cost of revenues

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

l) Concentration of credit risk

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

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

Details of the customers accounting for 10% or more of total revenues are as follows:

   
  Six months ended June 30,
Customer   2010   2009
     %   %
A     25.83        
B     29.30        
C     18.67        
D     12.05  
E           42.62  
F           46.19  

Details of the customers accounting for 10% or more of accounts receivable are as follows:

   
  As at
June 30,
  As at
December 31,
Customer   2010   2009
     %   %
A     19.29        
B     18.72        
C     8.14        
D     10.05        
E     14.42       15.53  
F     11.43       19.16  
m) 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

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2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

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.

n) 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.

o) 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 income statement in the period that includes the enactment date. The Group had no deferred tax assets and liabilities recognized for any of the three and six months ended June 30, 2010 and 2009.

Value added taxes

The Company’s PRC subsidiaries and VIE are subject to value-added tax (“VAT”) on sales. In 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 payers and the VAT is calculated at a rate of 3% on revenues.

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.

p) 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 three and six months ended June 30, 2010 and 2009 and the year ended December 31, 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.

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 three and six months ended June 30, 2010 and 2009 and the year ended December 31, 2009 of the Company’s subsidiaries and VIE remain open in the relevant taxing jurisdictions.

q) Earnings per share

Earning 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

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2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

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.

r) 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 is 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.

s) 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.

t) 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.

u) 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.

In May 2010, the FASB issued ASU 2010-19, Foreign Currency (Topic 830): Foreign Currency Issues: Multiple Foreign Currency Exchange Rates. The amendments in this Update are effective as of the announcement date of March 18, 2010. The Company does not expect the provisions of ASU 2010-19 to have a material effect on its financial position, results of operations or cash flows.

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2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

Since the filing of 2009 Form 10-K, the FASB issued ASU No. 2010-1 through No. 2010-21. These ASUs entail technical corrections to existing guidance or affect guidance related to specialized industries or entities and therefore have minimal, if any, impact on the Company.

3 — RESTRICTED DEPOSIT

   
  June 30,
2010
  December 31,
2009
     Unaudited     
Restricted deposit   $ 352,495     $  

The restricted deposit as of June 30, 2010 was security deposit for the short-term loan with balance of $1,762,477.

4 — ACCOUNTS RECEIVABLE

At June 30, 2010 and December 31, 2009, accounts receivable consisted of:

   
  June 30,
2010
  December 31,
2009
     Unaudited     
Accounts receivable   $ 11,304,785     $ 10,455,284  

Management has determined that no allowance for doubtful accounts is required. $2,173,562 was subsequently collected by September 16, 2010.

5 — LOANS RECEIVABLE AND OTHER CURRENT ASSETS, NET

Loans receivable and other current assets at June 30, 2010 and December 31, 2009 are summarized as follows:

   
  June 30,
2010
  December 31, 2009
     Unaudited
Advances to suppliers (including advance to VeriFone of $3,158,503 as of June 30, 2010)   $ 7,298,933     $ 7,580  
Deposits     1,519,352       18,320  
Loans to third parties     3,707,850       1,163,600  
Staff advances     300,065       10,243  
Prepaid expenses     37,111       241,713  
Others     54,194       11,111  
     $ 12,917,505     $ 1,452,567  
Less: Allowance for doubtful debt     366,912       366,912  
     $ 12,550,593     $ 1,085,655  

Loans to third parties are non-interest bearing and mature prior to December 31, 2010. The loans are extended to maintain good working relationship with those third parties who previously provided support with working capital in prior years. $749,053 was subsequently collected for the balance as of June 30, 2010 by September 16, 2010.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6 — AMOUNT DUE FROM (TO) DIRECTORS

a) At June 30, 2010 and December 31, 2009, amount due from directors consisted of:

   
  June 30,
2010
  December 31,
2009
     Unaudited
Amount due from Directors   $ 965,404     $ 2,088,168  

Amount due from directors including Mr. Wanchun Hou and Mr. Qiang Li, are short-term, non-interest bearing, and mature at December 31, 2010. The balance was fully repaid subsequently.

b) At June 30, 2010 and December 31, 2009, amount due to directors consisted of:

   
  June 30,
2010
  December 31,
2009
     Unaudited     
Amount due to directors   $     $ 24,430  

7 — INVENTORIES

At June 30, 2010 and December 31, 2009, inventories consisted of:

   
  June 30,
2010
  December 31,
2009
     Unaudited     
System integration hardware   $ 784,289     $ 307,182  

8 — 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 June 30, 2010 and December 31, 2009 are summarized as follows:

   
  June 30,
2010
  December 31,
2009
     Unaudited     
Motor vehicles   $ 49,900     $  
Furniture and office equipment     93,406       47,637  
Electronic equipment     152,246       63,868  
Telecommunication equipment     111,836        
Leasehold improvement     57,742        
       465,130       111,505  
Less: Accumulated depreciation     95,387       71,688  
     $ 369,743     $ 39,817  

Depreciation expense for the three months ended June 30, 2010 and 2009 was $17,327 and $5,880, respectively.

Depreciation expense for the six months ended June 30, 2010 and 2009 was $23,301 and $11,745, respectively.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

9 — LONG-TERM PREPAYMENT

   
  June 30,
2010
  December 31,
2009
     Unaudited     
Advertisement     587,492        
Office rental     62,727        
Others     8,234        
Long-term prepayment   $ 658,453     $  

Long-term prepayment represented prepayment to an advertising company for advertisement within year 2010 and 2011, prepayment for office rental from March 2010 until March 2012.

10 — SHORT-TERM LOAN

   
  June 30,
2010
  December 31,
2009
     Unaudited     
 
Short-term loan   $ 1,762,477     $  

The short-term loan as of June 30, 2010 was borrowed from China Bohai Bank, guaranteed by Trunkbow Shandong, Mr. Wanchun Hou and Mr. Qiang Li, and secured by restricted deposit of $352,495. The loan is due on May 5, 2011 with an annual interest rate of 6.6375%.

11 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

The breakdowns of accrued expenses and other current liabilities as of June 30, 2010 and December 31, 2009 are as follows:

   
  June 30,
2010
  December 31,
2009
     Unaudited     
Accrued payroll   $ 118,452     $ 56,719  
Advance from customers     119,029       48,265  
Loans from third parties     36,718       146,259  
Prepayment to staff     48,875       93,772  
Accrued expenses     15,000       166,016  
Others     135,707       92,235  
     $ 437,781     $ 603,266  

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

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

12 — CONTINGENTLY CONVERTIBLE NOTES

   
  June 30,
2010
  December 31, 2009
     Unaudited     
Bridgeway Asset Management Limited   $     $ 1,000,000  
Bay Peak LLC           2,000,000  
Mengyuan Song           2,000,000  
     $     $ 5,000,000  

Among the $5,000,000 contingently convertible 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 Feb 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 convertible 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.

13 — TAXES PAYABLE

   
  June 30,
2010
  December 31,
2009
     Unaudited     
Value Added Tax Payable   $ 742,897     $ 314,326  
Income Tax Payable     1,252,512       1,247,273  
     $ 1,995,409     $ 1,561,599  

14 — INCOME TAXES

Corporation Income Tax (“CIT”)

(i) Under the current laws of the BVI and Hong Kong, the Company and Trunkbow Hong Kong are not subject to income taxes. Additionally, upon payments of dividends by the Company to its shareholders, no BVI or Hong Kong withholding tax will be imposed.

(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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

14 — INCOME TAXES  – (continued)

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 June 7, 2007, the income tax rate from year 2008 on will be 25%.

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.

The following is a reconciliation of tax computed by applying the statutory income tax rate to PRC operations to income tax expenses for the three and six months ended June 30, 2010 and 2009 respectively:

       
  Three Months Ended June 30,   Six months ended June 30,
     2010   2009   2010   2009
     Unaudited   Unaudited   Unaudited   Unaudited
PRC statutory tax rate     25 %       25 %       25 %       25 %  
Accounting income before tax   $ 2,178,653     $ 4,338,764     $ 4,821,467     $ 3,952,720  
Computed expected income tax expenses     544,663       1,084,691       1,205,367       988,180  
Loss from subsidiaries     275,726       150,821       338,284       536,657  
Less: tax exemption     820,389       1,235,512       1,543,651       1,524,837  
Income tax expenses   $     $     $     $  

15 — COMMON STOCK

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 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 June 30, 2010.

Pursuant to the Purchase Agreement concurrent 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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

15 — COMMON STOCK  – (continued)

Net proceeds were approximately $20,073,720 (including the conversion of $3,000,000 from contingently convertible notes to common stock), net of issuance costs of approximately $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 have warrants issued to purchase 2,805,519 shares of common stock at an exercise price of $2.00. The warrants have a five year term starting from the issuance date of February 10, 2010 and are excisable on the same date. The exercise price and number of shares of Common Stock issuable upon exercise of the warrants may be adjusted in certain circumstance, including in the event of a stock dividend, or our recapitalization, reorganization, merger or consolidation.

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

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

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

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

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

As of June 30, 2010, zero warrants were exercised.

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 Company achieved the 2009 performance threshold.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

15 — COMMON STOCK  – (continued)

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.

16 — REVENUES AND COST OF REVENUES

For the three and six months ended June 30, 2010 and 2009, revenues and cost of revenues consisted of:

       
  Three Months Ended
June 30,
  Six Months Ended
June 30,
     2010   2009   2010   2009
     Unaudited   Unaudited   Unaudited   Unaudited
Gross Revenues
                                   
System integration   $ 516,078     $ 6,018,607     $ 516,078     $ 6,018,607  
Software sales     3,420,988             7,252,769        
Maintenance service     930       83,306       190,218       294,243  
Shared revenue     18,595       44,780       29,278       44,781  
       3,956,591       6,146,693       7,988,343       6,357,631  
Less:
                                   
Business tax and surcharges     39,114       6,738       168,051       17,694  
Cost of Revenues
                                   
Equipment costs     220,343       1,194,378       220,343       1,217,102  
Labor Costs     138,636       36,530       318,184       74,005  
       358,979       1,230,908       538,527       1,291,107  
Gross margin   $ 3,558,498     $ 4,909,047     $ 7,281,765     $ 5,048,830  

17 — 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 June 30, 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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

17 — SEGMENT INFORMATION  – (continued)

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

       
  Three Months Ended
June 30,
  Six Months Ended
June 30,
     2010   2009   2010   2009
     Unaudited   Unaudited   Unaudited   Unaudited
MVAS Technology Platforms
                                   
Gross Revenues   $ 1,504,789     $ 6,146,693     $ 5,475,102     $ 6,357,631  
Business tax and surcharges     27,447       6,738       153,312       17,694  
Cost of Revenues     161,797       1,230,908       332,010       1,291,107  
     $ 1,315,545     $ 4,909,047     $ 4,989,780     $ 5,048,830  
Mobile Payment Solutions
                                   
Gross Revenues   $ 2,451,802     $     $ 2,513,241     $  
Business tax and surcharges     11,667             14,739        
Cost of Revenues     197,182             206,517        
     $ 2,242,953     $     $ 2,291,985     $  

18 — 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 approximately $57,009 and $46,777, and $112,533 and $100,684 for the three and six months ended June 30, 2010 and 2009, respectively.

19 — COMMITMENTS AND CONTINGENCIES

Commitments

Leasing Arrangements

The Group has entered into commercial leases for offices. Future minimum rental payments under this operating lease are as follows:

 
  Office Rental
Nine months ending December 31, 2010     122,302  
Year ending December 31, 2011     204,555  
Year ending December 31, 2012     151,391  
Year ending December 31, 2013     27,215  
Year ending December 31, 2014     1,997  
Total   $ 507,460  

Contingencies

Contingencies through September 16, 2010 have been considered by the Company and none were noted which were required to be disclosed.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

20 — EARNINGS PER SHARE

       
  Three Months Ended
June 30,
  Six Months Ended
June 30,
     2010   2009   2010   2009
     Unaudited   Unaudited   Unaudited   Unaudited
Numerator:
                                   
Net income   $ 2,178,654     $ 4,338,764     $ 4,821,467     $ 3,952,928  
Denominator:
                                   
Weighted average number of common shares outstanding
                                   
Basic and diluted     32,472,075       19,562,888       32,472,075       19,562,888  
Earnings per share
                                   
Basic and diluted   $ 0.07     $ 0.22     $ 0.15     $ 0.20  

All share and per share data have been retroactively adjusted to reflect the recapitalization of the Company after the share exchange agreement. On the date of the financial statements issuance, 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.

21 — SUBSEQUENT EVENTS

Management has considered all events occurring through September 16, 2010, the date the financial statements have been issued, and has determined that there are no such events that are material to the financial statements, or all such material events have been fully disclosed.

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        Shares

[GRAPHIC MISSING]

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED

  
  
Common Stock
  
  



 

  
PROSPECTUS
  



 

  
  
      , 2010

  
  
  
  
Roth Capital Partners

Merriman Capital
  
  
  
  

You should rely only on the information contained in this prospectus. No dealer, salesperson or other person is authorized to give information that is not contained in this prospectus. This prospectus is not an offer to sell nor is it seeking an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is correct only as of the date of this prospectus, regardless of the time of the delivery of this prospectus or any sale of these securities.

Until     , 2010 (40 days after the commencement of the offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 

 


 
 

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The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.

 
Preliminary Prospectus   Subject to Completion, Dated October 14, 2010


  
  
16,128,581 Shares

[GRAPHIC MISSING]

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED

Common Stock

This prospectus relates to the resale of 13,223,162 shares of our common stock and 2,905,419 shares of our common stock underlying warrants by the selling stockholders named in this prospectus. Our common stock is presently not traded on any market or securities exchange. We intend to apply for listing on the NASDAQ stock market.

See “Risk Factors” beginning on page 7 to read about risks you should consider before buying our common stock.



 

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this registration statement. Any representation to the contrary is a criminal offense.

Prospectus dated         , 2010.


 
 

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TRUNKBOW INTERNATIONAL HOLDINGS LIMITED

 
PROSPECTUS SUMMARY     1  
RISK FACTORS     7  
RISKS RELATED TO OUR BUSINESS     7  
RISKS ASSOCIATED WITH DOING BUSINESS IN GREATER CHINA     11  
RISKS RELATED TO THE SECURITIES     20  
FORWARD-LOOKING STATEMENTS     22  
USE OF PROCEEDS     22  
DETERMINATION OF OFFERING PRICE     23  
MARKET FOR OUR SECURITIES AND RELATED STOCKHOLDER MATTERS     23  
DILUTION     24  
SELECTED FINANCIAL INFORMATION     25  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS     31  
BUSINESS     43  
DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN SIGNIFICANT EMPLOYEES     56  
EXECUTIVE COMPENSATION     60  
DESCRIPTION OF COMMON STOCK     61  
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT     63  
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS, AND CERTAIN CONTROL PERSONS     65  
SELLING STOCKHOLDERS     69  
PLAN OF DISTRIBUTION     78  
SHARES ELIGIBLE FOR FUTURE SALE     78  
TAXATION     79  
TRANSFER AGENT AND REGISTRAR     88  
LEGAL MATTERS     88  
EXPERTS     88  
WHERE YOU CAN FIND MORE INFORMATION     88  

You should rely only on information contained in this prospectus that we may provide to you. We have not, and the underwriters have not, authorized anyone to provide you with additional information or information different from that contained in this prospectus. We are not making an offer of these securities in any state or other jurisdiction where the offer is not permitted. The information in this prospectus may only be accurate as of the date on the front of this prospectus regardless of time of delivery of this prospectus or any sale of our securities.

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THE OFFERING

Common stock offered by us:    
    None
Common Stock offered by the selling stockholders:    
    16,128,581 shares
Common stock outstanding before the offering:    
    32,472,075 shares as of October 14, 2010(1)
Common stock to be outstanding after the offering:    
    32,472,075 shares(1)
Use of proceeds:    
    We will not receive any of the proceeds from the sale of the common stock by the selling stockholders, but we will receive approximately $5,810,838 in proceeds if the selling stockholders were to exercise all 2,905,419 warrants to purchase shares of our common stock to be sold hereunder.

(1) Assumes no issuance by us of shares of our common stock pursuant to the public offering prospectus filed contemporaneously herewith.

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USE OF PROCEEDS

We will not receive any of the proceeds from the sale of the shares of common stock by the selling stockholders. We will receive approximately $5,810,838 in proceeds if the selling stockholders were to exercise all 2,905,419 warrants to purchase shares of our common stock to be sold hereunder.

SELLING STOCKHOLDERS

We are registering for resale certain shares of our common stock issued in a private placement in February 2010, as described elsewhere in this prospectus. We are registering the shares to permit the selling stockholders and their pledgees, donees, transferees and other successors-in-interest that receive their shares from a selling stockholder as a gift, partnership distribution or other non-sale related transfer after the date of this prospectus to resell the shares when and as they deem appropriate in the manner described in the “Plan of Distribution”.

The following table sets forth:

the name of the selling stockholder,
the nature of any position, office or other material relationship which the selling stockholder has had within the past three years with us,
the number of shares of our common stock that the selling stockholder beneficially owned prior to the offering for resale of the shares under this prospectus,
the maximum number of shares of our common stock that may be offered for resale for the account of the selling stockholder under this prospectus, and
the number and percentage of shares of our common stock to be beneficially owned by the selling stockholder after the offering of the shares (assuming all of the offered shares are sold by the selling stockholder).

The selling stockholders may offer for sale all or part of the shares of commons stock from time to time. The table below assumes that the selling stockholders will sell all of the shares of common stock offered for sale. The selling stockholder are under no obligation, however, to sell any shares of common stock pursuant to this prospectus.

           
  Shares of Common Stock
Beneficially Owned Before
the Offering(1)
  Total
Number of
Shares to be
Sold
  Number of
Warrants
Included in
Total
Number of
Shares to be
Sold
  Shares of Common Stock
Beneficially Owned After
the Offering(1)
Name   Total   Warrants
Included in
Total
  Number   Percent
Aiguo Liu     6,000       1,000       6,000       1,000       0       0  
Aihua Qi     6,000       1,000       6,000       1,000       0       0  
Andrea Pearmain     1,500       250       1,500       250       0       0  
Angui Dong     2,400       400       2,400       400       0       0  
Bay Peak, LLC(3)     1,452,332       100,000       1,452,332       100,000       0       0  
Bin Li     2,250       375       2,250       375       0       0  
Bing Jiang     79,500       13,250       79,500       13,250       0       0  
Bing Liu     150,000       25,000       150,000       25,000       0       0  
Bingxin Wang     1,500       250       1,500       250       0       0  
Bo Yang     23,760       3,960       23,760       3,960       0       0  
Brock Ganeles     15,000       2,500       15,000       2,500       0       0  
Calco Capital Corporation(4)     600       100       600       100       0       0  
Canwen Zhang     1,200       200       1,200       200       0       0  
Changjie Liu     1,500       250       1,500       250       0       0  
Cheryl K. Hahn     1,200       200       1,200       200       0       0  

SS-2


 
 

TABLE OF CONTENTS

           
  Shares of Common Stock
Beneficially Owned Before
the Offering(1)
  Total
Number of
Shares to be
Sold
  Number of
Warrants
Included in
Total
Number of
Shares to be
Sold
  Shares of Common Stock
Beneficially Owned After
the Offering(1)
Name   Total   Warrants
Included in
Total
  Number   Percent
Chiweng Lao     30,000       5,000       30,000       5,000       0       0  
Chris Glassel     300       50       300       50       0       0  
Chuangeng Xu     7,200       1,200       7,200       1,200       0       0  
Chuanyu Zheng     15,000       2,500       15,000       2,500       0       0  
Chunchao Ma     2,400       400       2,400       400       0       0  
Chunhua Zheng     3,300       550       3,300       550       0       0  
Chunling Xue     1,500       250       1,500       250       0       0  
Chunsheng Ma     7,200       1,200       7,200       1,200       0       0  
Chunxia Ma     2,400       400       2,400       400       0       0  
Chunxiang Zheng     1,200       200       1,200       200       0       0  
CJMJ LLC(2)     55,000       55,000       55,000       55,000       0       0  
Dana Krabbe     6,410       1,000       1,000       1,000       5,410       *  
Danmei Liu     1,200       200       1,200       200       0       0  
Dayi Wang     12,000       2,000       12,000       2,000       0       0  
Dong Li     75,000       12,500       75,000       12,500       0       0  
Dongyang Wang     12,000       2,000       12,000       2,000       0       0  
Eddy Chow     805,991                805,991                0       0  
Edward Wong     300       50       300       50       0       0  
Elizabeth Benton Johnson TTEE/William Benton Johnson(5)     15,600       2,600       15,600       2,600       0       0  
Equitunity China Fund I, LLC (Zener)(6)     36,000       6,000       6,000       6,000       30,000       *  
Eric Wold     15,000       2,500       15,000       2,500       0       0  
Fan He     15,000       2,500       15,000       2,500       0       0  
Fang Li     6,000       1,000       6,000       1,000       0       0  
Fang Lu     2,400       400       2,400       400       0       0  
Fangchun Cai     12,000       2,000       12,000       2,000       0       0  
Fanmei Hu     1,500       250       1,500       250       0       0  
Faxiao Cheng     12,000       2,000       12,000       2,000       0       0  
Feng Rong     1,200       200       1,200       200       0       0  
Feng Wang     12,000       2,000       12,000       2,000       0       0  
Fengling Luo     6,000       1,000       6,000       1,000       0       0  
Gary Yurkovich     1,500       250       1,500       250       0       0  
Gong Chen     30,000       5,000       30,000       5,000       0       0  
Guanghua Yang     5,100       850       5,100       850       0       0  
Guisheng Huang     75,000       12,500       75,000       12,500       0       0  
Guodong Xu     21,000       3,500       21,000       3,500       0       0  
Hai Guan     1,500       250       1,500       250       0       0  
Haibo Liu     150,000       25,000       150,000       25,000       0       0  
Haibo Xu     30,000       5,000       30,000       5,000       0       0  
Hailing Lin     1,500       250       1,500       250       0       0  
Hairong Ren     3,000       500       3,000       500       0       0  
Haitao Hou     150,000       25,000       150,000       25,000       0       0  
Hao Huang     9,000       1,500       9,000       1,500       0       0  

SS-3


 
 

TABLE OF CONTENTS

           
  Shares of Common Stock
Beneficially Owned Before
the Offering(1)
  Total
Number of
Shares to be
Sold
  Number of
Warrants
Included in
Total
Number of
Shares to be
Sold
  Shares of Common Stock
Beneficially Owned After
the Offering(1)
Name   Total   Warrants
Included in
Total
  Number   Percent
Hena Sun     75,000       12,500       75,000       12,500       0       0  
Hengjiang Liu     1,500       250       1,500       250       0       0  
Hengxing Zhang     1,500       250       1,500       250       0       0  
Hongxia Gao     750       125       750       125       0       0  
HPCG Trunkbow Investments, LLC(7)     2,151,000       358,500       358,500       358,500       1,792,500       5.5 % 
Hua Feng     6,000       1,000       6,000       1,000       0       0  
Huaichao Zhao     5,100       850       5,100       850       0       0  
Huide Chuang     2,250       375       2,250       375       0       0  
Jaime Stutheit     1,200       200       1,200       200       0       0  
Jamie Akins     300       50       300       50       0       0  
Janet Wallace     1,440       240       1,440       240       0       0  
Jason Merritt     300       50       300       50       0       0  
Jayden Kulhawy     600       100       600       100       0       0  
Jenna Akins     300       50       300       50       0       0  
Jia Jiang     150,000       25,000       150,000       25,000       0       0  
Jiang Ningling     805,991                805,991                0       0  
Jianhua Sun     750       125       750       125       0       0  
Jianmei Chen     2,100       350       2,100       350       0       0  
Jianqiu Fu     15,000       2,500       15,000       2,500       0       0  
Jianshuai Teng     2,400       400       2,400       400       0       0  
Jianwei Guo     30,000       5,000       30,000       5,000       0       0  
Jie Li     300,000       50,000       300,000       50,000       0       0  
Jie Li     1,200       200       1,200       200       0       0  
Jie Li     1,200       200       1,200       200       0       0  
Jill Kulhawy     600       100       600       100       0       0  
Jingui Hao     30,000       5,000       30,000       5,000       0       0  
Jingxuan Zhang     2,400       400       2,400       400       0       0  
Jingyuan Zhang     7,800       1,300       7,800       1,300       0       0  
Jingzhong Li     60       10       60       10       0       0  
Jishan Xia     1,500       250       1,500       250       0       0  
Jocelyn Marie Smith     1,200       200       1,200       200       0       0  
John Murphy     1,200       200       1,200       200       0       0  
Joseph Yuen     300       50       300       50       0       0  
Jozef Povazan     3,000       500       3,000       500       0       0  
Juan Wei     5,100       850       5,100       850       0       0  
Jun Wang     30,000       5,000       30,000       5,000       0       0  
Junning He     15,000       2,500       15,000       2,500       0       0  
Junqing Qiao     1,200       200       1,200       200       0       0  
Kai Li     10,200       1,700       10,200       1,700       0       0  
Kaiwen Lin     75,000       12,500       75,000       12,500       0       0  
Ke Yang     30,000       5,000       30,000       5,000       0       0  
Kuiheng Liang     1,200       200       1,200       200       0       0  
Lang Family Revocable Living Trust, dated 12/27/1999(8)     78,620       10,000       10,000       10,000       68,620       *  

SS-4


 
 

TABLE OF CONTENTS

           
  Shares of Common Stock
Beneficially Owned Before
the Offering(1)
  Total
Number of
Shares to be
Sold
  Number of
Warrants
Included in
Total
Number of
Shares to be
Sold
  Shares of Common Stock
Beneficially Owned After
the Offering(1)
Name   Total   Warrants
Included in
Total
  Number   Percent
Langang Li     2,400       400       2,400       400       0       0  
Lanxiang Huo     750       125       750       125       0       0  
Lao Chi Weng     978,144                978,144                0       0  
Larry A. Flournoy Jr.     2,700       450       2,700       450       0       0  
Lauren Steele     1,500       250       1,500       250       0       0  
Le Wang     1,500       250       1,500       250       0       0  
Lei Li     27,000       4,500       27,000       4,500       0       0  
Li Qu     2,400       400       2,400       400       0       0  
Liang Xu     1,200       200       1,200       200       0       0  
Lijun Zhang     2,400       400       2,400       400       0       0  
Lin Li     1,200       200       1,200       200       0       0  
Lin Li     1,500       250       1,500       250       0       0  
Lin Wang     1,500       250       1,500       250       0       0  
Linping Song     1,500       250       1,500       250       0       0  
Lisa L. Velez     300       50       300       50       0       0  
Lisheng Ju     1,500       250       1,500       250       0       0  
Liwen Liang     30,000       5,000       30,000       5,000       0       0  
Manyun Xu     1,200       200       1,200       200       0       0  
Margaret Graw     1,500       250       1,500       250       0       0  
Mark and Marie Zener Revocable Living Trust, dated November 16, 2009(9)     24,000       4,000       4,000       4,000       20,000       *  
Mary Lynn Jeffries Revocable Trust(10)     30,000       5,000       5,000       5,000       25,000       *  
Meiyan Yu     3,000       500       3,000       500       0       0  
Meng Dong     2,400       400       2,400       400       0       0  
Mengyuan Song     1,200,000       200,000       1,200,000       200,000       0       0  
Merriman Curhan Ford & Co.(11)     561,104       561,104       561,104       561,104       0       0  
Michael and Denise Larson Family Trust(12)     2,400       400       400       400       2,000       *  
Ming Yang     30,000       5,000       30,000       5,000       0       0  
Mingde Zhang     2,400       400       2,400       400       0       0  
Mingxian Yi     2,400       400       2,400       400       0       0  
Nan Dong     1,500       250       1,500       250       0       0  
Nancy Wong     300       50       300       50       0       0  
Nick Kulhawy     600       100       600       100       0       0  
Ning Pan     38,760       6,460       38,760       6,460       0       0  
Palo Verde Fund, L.P.(13)     600,000       100,000       100,000       100,000       500,000       1.5 % 
Pandora Select Partners, LP(14)     750,000       125,000       750,000       125,000       0       0  
Peng Liu     10,200       1,700       10,200       1,700       0       0  
Ping Liu     120       20       120       20       0       0  
Pingping Tang     1,500       250       1,500       250       0       0  
Qi Cheng     60,000       10,000       60,000       10,000       0       0  
Qi Wang     6,000       1,000       6,000       1,000       0       0  

SS-5


 
 

TABLE OF CONTENTS

           
  Shares of Common Stock
Beneficially Owned Before
the Offering(1)
  Total
Number of
Shares to be
Sold
  Number of
Warrants
Included in
Total
Number of
Shares to be
Sold
  Shares of Common Stock
Beneficially Owned After
the Offering(1)
Name   Total   Warrants
Included in
Total
  Number   Percent
Qi Yu     4,200       700       4,200       700       0       0  
Qian Shang     3,450       575       3,450       575       0       0  
Qiang Dou     1,500       250       1,500       250       0       0  
Qin Yu     2,400       400       2,400       400       0       0  
Qin Zhang     15,000       2,500       15,000       2,500       0       0  
Qingdong Wang     225,000       37,500       225,000       37,500       0       0  
Qinghua Du     23,760       3,960       23,760       3,960       0       0  
Quanlei Gai     9,000       1,500       9,000       1,500       0       0  
Randy or Brenda Slapnicka     15,000       2,500       2,500       2,500       12,500       *  
Regis Kwong     833,379                833,379                0       0  
Richard Chiang     250                250                0       0  
Rina Orina     600       100       600       100       0       0  
Robert Florek     3,000       500       3,000       500       0       0  
Robert Johnson     44,400       7,400       44,400       7,400       0       0  
Ronald D Goach     1,500       250       1,500       250       0       0  
Ronald L. Chez     360,000       60,000       360,000       60,000       0       0  
Rui Li     750       125       750       125       0       0  
Rui Wang     6,000       1,000       6,000       1,000       0       0  
Sean Glassel     300       50       300       50       0       0  
Shanhou Zhao     1,200       200       1,200       200       0       0  
Shaojie Liang     6,000       1,000       6,000       1,000       0       0  
Sheng Tian     1,200       200       1,200       200       0       0  
Shengyun Sun     1,500       250       1,500       250       0       0  
Sherry Steele     2,400       400       2,400       400       0       0  
Sherry Steele “In Trust”(15)     1,500       250       1,500       250       0       0  
Shouqiang Zhang     6,000       1,000       6,000       1,000       0       0  
Shufen Zhao     2,400       400       2,400       400       0       0  
Shuyuan Sun     3,000       500       3,000       500       0       0  
Shuyun Wang     10,200       1,700       10,200       1,700       0       0  
Shuzhen Wang     225,000       37,500       225,000       37,500       0       0  
Silver Rock II, Ltd.(16)     180,000       30,000       180,000       30,000       0       0  
Stephen L. Fischer     15,091       2,500       2,500       2,500       12,591       *  
Tan Wang     1,500       250       1,500       250       0       0  
Tao Zhang     5,100       850       5,100       850       0       0  
Taylor Steele     1,500       250       1,500       250       0       0  
The Michael & Barbara Williams Revocable Living Trust(17)     45,000       7,500       7,500       7,500       37,500       *  
The Win and Rose Williams Foundation(18)     15,000       2,500       2,500       2,500       12,500       *  
Tieling Wang     5,100       850       5,100       850       0       0  
Timothy Hahn     300       50       300       50       0       0  
Tina Louise Kam     1,500       250       1,500       250       0       0  
Tongbing Li     47,520       7,920       47,520       7,920       0       0  
Tracy Glassel     300       50       300       50       0       0  

SS-6


 
 

TABLE OF CONTENTS

           
  Shares of Common Stock
Beneficially Owned Before
the Offering(1)
  Total
Number of
Shares to be
Sold
  Number of
Warrants
Included in
Total
Number of
Shares to be
Sold
  Shares of Common Stock
Beneficially Owned After
the Offering(1)
Name   Total   Warrants
Included in
Total
  Number   Percent
Valerie Londrie     300       50       300       50       0       0  
VeriFone, Inc.(19)     3,000,000       500,000       3,000,000       500,000       0       0  
Vivian Yan Huo     300       50       300       50       0       0  
W. Lynne Tanner     3,000       500       3,000       500       0       0  
Wanai Yang     1,200       200       1,200       200       0       0  
Wei Huang     60,000       10,000       60,000       10,000       0       0  
Wei Zou     3,000       500       3,000       500       0       0  
Weitao Zhang     1,500       250       1,500       250       0       0  
Wenyu Jin     3,000       500       3,000       500       0       0  
Whitebox Multi-Strategy Partners, L.P.(20)     756,000       126,000       756,000       126,000       0       0  
Whitebox Small Cap Long Short Equity Partners, L.P.(21)     144,000       24,000       144,000       24,000       0       0  
Xia Liu     750       125       750       125       0       0  
Xianglei Sui     3,000       500       3,000       500       0       0  
Xianrong Meng     10,200       1,700       10,200       1,700       0       0  
Xiaobo Xing     1,500       250       1,500       250       0       0  
Xiaofei Zhou     5,100       850       5,100       850       0       0  
Xiaofeng Pan     6,000       1,000       6,000       1,000       0       0  
Xiaoguo Zhao     1,200       200       1,200       200       0       0  
Xiaohan Liu     30,000       5,000       30,000       5,000       0       0  
Xiaohua Cai     7,200       1,200       7,200       1,200       0       0  
Xiaolei Liu     750       125       750       125       0       0  
Xiaoli Luan     1,200       200       1,200       200       0       0  
Xiaolong Ji     150,000       25,000       150,000       25,000       0       0  
Xiaomei Sun     2,400       400       2,400       400       0       0  
Xiaomei Sun     10,200       1,700       10,200       1,700       0       0  
Xiaomin Xu     12,000       2,000       12,000       2,000       0       0  
Xiaoni Ma     6,000       1,000       6,000       1,000       0       0  
Xiaoqian Liu     3,000       500       3,000       500       0       0  
Xiaoqing Zheng     1,200       200       1,200       200       0       0  
Xiaoqing Zheng     2,100       350       2,100       350       0       0  
Xiaoqiu Zhao     12,000       2,000       12,000       2,000       0       0  
Xiaoyan Cui     2,400       400       2,400       400       0       0  
Xiaoyuan Liu     3,000       500       3,000       500       0       0  
Xiaozhuang Yao     120,000       20,000       120,000       20,000       0       0  
Xiling Tian     1,500       250       1,500       250       0       0  
Xin Wang     39,000       6,500       39,000       6,500       0       0  
Xinan Zhang     2,400       400       2,400       400       0       0  
Xingwang Lu     10,200       1,700       10,200       1,700       0       0  
Xingye Zhang     3,000       500       3,000       500       0       0  
Xinli Wang     2,400       400       2,400       400       0       0  
Xue Gao     750       125       750       125       0       0  
Xuejun Wang     1,500       250       1,500       250       0       0  

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  Shares of Common Stock
Beneficially Owned Before
the Offering(1)
  Total
Number of
Shares to be
Sold
  Number of
Warrants
Included in
Total
Number of
Shares to be
Sold
  Shares of Common Stock
Beneficially Owned After
the Offering(1)
Name   Total   Warrants
Included in
Total
  Number   Percent
Xueling Song     2,400       400       2,400       400       0       0  
Xuying Wang     2,400       400       2,400       400       0       0  
Yan Li     1,200       200       1,200       200       0       0  
Yan Wang     11,400       1,900       11,400       1,900       0       0  
Yan Zhang     12,000       2,000       12,000       2,000       0       0  
Yanhui Liu     750       125       750       125       0       0  
Yaning Zhang     6,000       1,000       6,000       1,000       0       0  
Yanlei Cheng     6,000       1,000       6,000       1,000       0       0  
Yao Feng     1,500       250       1,500       250       0       0  
Yaoguo Bai     3,000       500       3,000       500       0       0  
Yaohong Sun     2,400       400       2,400       400       0       0  
Yi Lu     3,000       500       3,000       500       0       0  
Yibo You     2,400       400       2,400       400       0       0  
Yichun Lu     30,000       5,000       30,000       5,000       0       0  
Ying Pan     1,500       250       1,500       250       0       0  
Ying Xia     18,000       3,000       18,000       3,000       0       0  
Yingjuan Wang     2,400       400       2,400       400       0       0  
Yingli Liang     5,100       850       5,100       850       0       0  
Yingying Qu     2,400       400       2,400       400       0       0  
Yingying Qu     10,200       1,700       10,200       1,700       0       0  
Yingzi Su     2,400       400       2,400       400       0       0  
Yong Shan     15,000       2,500       15,000       2,500       0       0  
Yongfeng Zhang     7,800       1,300       7,800       1,300       0       0  
Yonghui Gu     150,000       25,000       150,000       25,000       0       0  
Yongshun Tang     6,000       1,000       6,000       1,000       0       0  
Yousheng Li     6,000       1,000       6,000       1,000       0       0  
Yu Tang     12,000       2,000       12,000       2,000       0       0  
Yuanjun Ye     45,000       7,500       45,000       7,500       0       0  
Yuanxi Zhang     12,000       2,000       12,000       2,000       0       0  
Yuchun Liu     6,000       1,000       6,000       1,000       0       0  
Yue Zhang     1,500       250       1,500       250       0       0  
Yufan Ma     6,000       1,000       6,000       1,000       0       0  
Yufu Sheng     15,000       2,500       15,000       2,500       0       0  
Yulan Yang     1,200       200       1,200       200       0       0  
Yunfeng Zhao     10,500       1,750       10,500       1,750       0       0  
Yunxia Guo     1,500       250       1,500       250       0       0  
Yuping Liu     2,400       400       2,400       400       0       0  
Yuxian You     1,200       200       1,200       200       0       0  
Zhaohui Liu     1,500       250       1,500       250       0       0  
Zhen Wei     1,500       250       1,500       250       0       0  
Zhenfeng Su     2,400       400       2,400       400       0       0  
Zheng Song     6,000       1,000       6,000       1,000       0       0  
Zhenyu Lin     120       20       120       20       0       0  
Zhiqiang Chu     1,500       250       1,500       250       0       0  
Zhiyuan Gai     3,000       500       3,000       500       0       0  

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  Shares of Common Stock
Beneficially Owned Before
the Offering(1)
  Total
Number of
Shares to be
Sold
  Number of
Warrants
Included in
Total
Number of
Shares to be
Sold
  Shares of Common Stock
Beneficially Owned After
the Offering(1)
Name   Total   Warrants
Included in
Total
  Number   Percent
Zhongchen Hui     3,600       600       3,600       600       0       0  
Zhongming Han     2,400       400       2,400       400       0       0  
Zhongya Wang     15,000       2,500       15,000       2,500       0       0  

* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the SEC, and includes voting and investment power with respect to the securities. Based on 32,472,075 shares of common stock of Trunkbow issued and outstanding as of the date of this prospectus. For purposes of calculating the percentage ownership, any shares that each selling stockholder has the right to acquire within 60 days under warrants or options have been included in the total number of shares outstanding for that person, in accordance with Rule 13d-3 under the Exchange Act.
(2) Christopher Eric Jensen, as manager of CJMJ, LLC, has voting and dispositive power over the shares held by CJMJ, LLC.
(3) Phillip Cory Roberts, the Managing Member of Bay Peak, LLC, has voting and dispositive power over the securities owned by Bay Peak, LLC.
(4) Robert Earnest Kulhawy has voting and dispositive power over the securities held by Calco Capital Corporation.
(5) Elizabeth Benton Johnson, as trustee of the William Benton Johnson Trust, has voting and dispositive power over the securities owned by the William Benton Johnson Trust.
(6) Mark and Marie Zener, as managing directors of Equitunity China Fund I, LLC, have voting and dispositive power over the securities held by Equitunity China Fund I, LLC.
(7) Consists of (i) 358,500 shares underlying warrants, and (ii) 1,792,500 shares of common stock of Trunkbow owned by HPCG Trunkbow Holdings, L.P. HPCG Trunkbow Investments, LLC is the general partner of HPCG Trunkbow Holdings, L.P. Christopher Eric Jensen, as manager of HPCG Trunkbow Investments, LLC, has voting and dispositive power over the shares held by HPCG Trunkbow Investments, LLC.
(8) Lanny R. Lang, as trustee of the Lang Family Revocable Living Trust, dated 12/27/1999, has voting and dispositive power over the securities held by the Lang Family Revocable Living Trust, dated 12/27/1999. Lanny R. Lang was an officer and director of each of VT Dutch Services until August 28, 2008, and Bay Peak 5 Acquisition Corp. until February 10, 2010, each our predecessor.
(9) Mark and Marie Zener, trustees of the Mark and Marie Zener Revocable Living Trust, dated November 16, 2009, have voting and dispositive power over the securities owned by the Mark and Marie Zener Revocable Living Trust, dated November 16, 2009.
(10) Mary Jeffries, trustee of the Mary Lynn Jeffries Revocable Trust, has voting and dispositive power over the securities owned by the Mary Lynn Jeffries Revocable Trust.
(11) Peter V. Coleman has voting and dispositive power over the securities held by Merriman Curhan Ford & Co.
(12) Michael R. Larson, trustee of the Michael and Denise Larson Family Trust, has voting and dispositive power over the securities owned by the Michael and Denise Larson Family Trust.
(13) Tony Stacy has voting and dispositive power over the securities owned by Palo Verde Fund, L.P.
(14) Andrew J. Redleaf, as Managing Member of the General Partner of Pandora Select Partners, LP, has voting and dispositive power over the securities owned by Pandora Select Partners, LP.
(15) Sherry Steele has voting and dispositive power over the securities held by Sherry Steele “In Trust”.
(16) Ezzat Jallad has voting and dispositive power over the securities owned by Silver Rock II, Ltd.
(17) Michael and Barbara Williams, each a trustee of the Michael & Barbara Williams Revocable Living Trust, have voting and dispositive power over the securities owned by the Michael & Barbara Williams Revocable Living Trust. Michael Williams was an officer and director of our predecessor, VT Dutch Services, Inc., until August 28, 2008.

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(18) Michael S. Williams, president of the Win and Rose Williams Foundation, has voting and dispositive power over the securities owned by the Win and Rose Williams Foundation.
(19) Each of Doug Bergeron, chief executive officer of VeriFone, Inc., Robert Dykes, chief financial officer of VeriFone, Inc., and Albert Liu, senior vice president and general counsel of VeriFone, Inc. has voting and dispositive power over the securities owned by VeriFone, Inc.
(20) Andrew J. Redleaf, managing member of the general partner of Whitebox Multi-Strategy Partners, L.P., has voting and dispositive power over the securities owned by Whitebox Multi-Strategy Partners, L.P.
(21) Andrew J. Redleaf, managing member of the general partner of Whitebox Small Cap Long Short Equity Partners, L.P., has voting and dispositive power over the securities owned by Whitebox Small Cap Long Short Equity Partners, L.P.

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PLAN OF DISTRIBUTION

We are registering the shares of common stock previously issued to permit the resale of such shares of common stock by the holders from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the selling stockholders of the shares of common stock. We will bear all fees and expenses incident to our obligation to register the shares of common stock.

The selling stockholders may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers, the selling stockholders will be responsible for underwriting discounts or commissions or agent's commissions. The shares of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions,

on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;
in the over-the-counter market;
in transactions otherwise than on these exchanges or systems or in the over-the-counter market;
through the writing of options, whether such options are listed on an options exchange or otherwise;
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
an exchange distribution in accordance with the rules of the applicable exchange;
privately negotiated transactions;
short sales;
sales pursuant to Rule 144;
broker-dealers may agree with the selling securityholders to sell a specified number of such shares at a stipulated price per share;
a combination of any such methods of sale; and
any other method permitted pursuant to applicable law.

If the selling stockholders effect such transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of common stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging in positions they assume. The selling stockholders may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares.

The selling stockholders may pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act

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of 1933, as amended, amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

The selling stockholders and any broker-dealer participating in the distribution of the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of shares of common stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling stockholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.

Under the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

There can be no assurance that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement, of which this prospectus forms a part.

The selling stockholders and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholders and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock.

We will pay all expenses of the registration of the shares of common stock pursuant to the registration rights agreement, estimated to be $250,000 in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, that a selling stockholder will pay all underwriting discounts and selling commissions, if any. We will indemnify the selling stockholders against liabilities, including some liabilities under the Securities Act, in accordance with the registration rights agreements, or the selling stockholders will be entitled to contribution. We may be indemnified by the selling stockholders against civil liabilities, including liabilities under the Securities Act, that may arise from any written information furnished to us by the selling stockholder specifically for use in this prospectus, in accordance with the related registration rights agreement, or we may be entitled to contribution.

Once sold under the registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our affiliates.

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LEGAL MATTERS

We are being represented by Loeb & Loeb LLP with respect to legal matters of United States federal securities and New York State law. The validity of the common stock offered in this offering and legal matters as to Nevada law will be passed upon for us by Lewis and Roca LLP. Legal matters as to PRC law will be passed upon for us by Han Kun Law Offices. Loeb & Loeb LLP and Lewis and Roca may rely upon Han Kun Law Offices with respect to matters governed by PRC law.

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16,130,231 Shares

[GRAPHIC MISSING]

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED

  
  
Common Stock
  
  



 

PROSPECTUS



 

  
  
      , 2010

You should rely only on the information contained in this prospectus. No dealer, salesperson or other person is authorized to give information that is not contained in this prospectus. This prospectus is not an offer to sell nor is it seeking an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is correct only as of the date of this prospectus, regardless of the time of the delivery of this prospectus or any sale of these securities.

Until       , 2010 (40 days after the commencement of the offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 

 


 
 

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses, other than underwriting discounts and commissions, to be paid by the Registrant in connection with the issuance and distribution of the common stock being registered. All amounts other than the SEC registration fees and FINRA fees are estimates.

 
SEC Registration Fees   $ 8,950  
FINRA Fees     13,052  
Printing and Engraving Expenses     15,000  
Legal Fees and Expenses     500,000  
Accounting Fees and Expenses     3,500  
Miscellaneous     10,000  
Total   $ 550,502  

Item 14. Indemnification of Directors and Officers

Our officers and directors are indemnified as provided by the Nevada Revised Statutes (“NRS”) and our bylaws.

Under the NRS, director immunity from liability to a company or its shareholders for monetary liabilities applies automatically unless it is specifically limited by a company’s articles of incorporation that is not the case with our articles of incorporation. Excepted from that immunity are:

(i) a willful failure to deal fairly with the company or its shareholders in connection with a matter in which the director has a material conflict of interest;
(ii) a violation of criminal law (unless the director had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe that his or her conduct was unlawful);
(iii) a transaction from which the director derived an improper personal profit; and
(iv) willful misconduct.

Our bylaws provide that we will indemnify our directors and officers to the fullest extent not prohibited by Nevada law; provided, however, that we may modify the extent of such indemnification by individual contracts with our directors and officers; and, provided, further, that we shall not be required to indemnify any director or officer in connection with any proceeding (or part thereof) initiated by such person unless:

(2) such indemnification is expressly required to be made by law;
(3) the proceeding was authorized by our Board of Directors;
(4) such indemnification is provided by us, in our sole discretion, pursuant to the powers vested us under Nevada law; or
(5) such indemnification is required to be made pursuant to the bylaws.

Our bylaws provide that we will advance all expenses incurred to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was our director or officer, or is or was serving at our request as a director or executive officer of another company, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request. This advanced of expenses is to be made upon receipt of an undertaking by or on behalf of such person to repay said amounts should it be ultimately determined that the person was not entitled to be indemnified under our bylaws or otherwise.

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Our bylaws also provide that no advance shall be made by us to any officer in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is reasonably and promptly made: (a) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to the proceeding; or (b) if such quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to our best interests.

Item 15. Recent Sales of Unregistered Securities

In February 2010, concurrent with the Share Exchange, (i) we entered into a securities purchase agreement with certain 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 and (ii) certain holders of our outstanding warrants 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.

Merriman Curhan Ford & Co. acted as the exclusive financial advisor and placement agent in the above and received (i) a cash fee and expense reimbursement equal to $1,568,090.50 and (ii) warrants to purchase 561,104 at an exercise price of $2.00 per share.

The issuance of the Investor Shares and Investor Warrants was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended (“Securities Act”) and/or, Rule 506 of the Securities Act, Regulation D under the Securities Act, and Regulation S, and the issuance to the BP5 Warrant Investors was not subject to registration pursuant to applicable provisions of the Federal Bankruptcy Code. We have relied on the status of the Investors as (i) “accredited investors” as such term is defined in Rule 501 of Regulation D, or (ii) non-US persons under Regulation S, as the case may be, in claiming the exemption from registration of the Investor Shares. The recipients of the Investor Shares and Investor Warrants represented to us that they were acquiring the securities for investment purposes only, and not with a view towards distribution or resale except in compliance with applicable securities laws. No general solicitation or advertising was used in connection with any transaction, and the certificates evidencing the securities that were issued contained a legend restricting their transferability absent registration under the Securities Act or the availability of an applicable exemption therefrom.

Item 16. Exhibits and Financial Statement Schedules

EXHIBITS

The following exhibits are filed as part of this registration statement:

 
Exhibit
Number
  Description
 1.1+   Form of Underwriting Agreement
 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)
 5.1    Opinion of Lewis and Roca LLP
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)

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Exhibit
Number
  Description
21.1    Subsidiaries of Trunkbow Holdings International Limited(1)
23.1*   Consent of Bernstein & Pinchuk LLP
23.2+   Consent of Lewis and Roca LLP (included in Exhibit 5.1)
24.1*   Power of Attorney (contained in the signature page of the Registration Statement)

* Filed herewith.
+ To be filed by subsequent amendment.
(1) Incorporated herein by reference to the Registration Statement on Form 10 filed by Trunkbow on June 4, 2010.

Item 17. Undertakings

The undersigned registrant hereby undertakes:

(6) To file, during any period in which offers or sales are being made pursuant to this Registration Statement, a post-effective amendment to this registration statement:

(1) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933.

(2) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20.0% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

(3) to include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement.

(ii) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(iii) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(iv) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, if the registrant is subject to Rule 430C (§230.430C of this chapter), each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(v) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant’s annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual

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report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(vi) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions described in Item 15 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

(vii) That for the purpose of determining any liability under the Securities Act of 1933 in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(1) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

(2) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(3) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

(4) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser

(viii) The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(I) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Beijing, People’s Republic of China, on October 14, 2010.

 
  TRUNKBOW INTERNATIONAL HOLDINGS LIMITED
    

By:

/s/ Qiang Li
Name: Qiang Li
Title: Chief Executive Officer

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Qiang Li and Dr. Hou WanChun and each of them, his or her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution, for each and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, or any related registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed below by the following persons in the capacities and on the dates indicated:

   
Signature   Title   Date
/s/ Dr. Hou WanChun
Dr. Hou WanChun
  Chairman of the Board of Directors   October 14, 2010
/s/ Li Qiang
Li Qiang
  Chief Executive Officer and Director
(Principal Executive Officer)
  October 14, 2010
/s/ Ye Yuan Jun
Ye Yuan Jun
  Chief Financial Officer
(Principal Accounting and Financial Officer)
  October 14, 2010
/s/ Bao Jihong
Bao Jihong
  Director   October 14, 2010
/s/ Wang Xin
Wang Xin
  Director   October 14, 2010
/s/ Cory Roberts
Cory Roberts
  Director   October 14, 2010
/s/ Albert Liu
Albert Liu
  Director   October 14, 2010
/s/ Regis Kwong
Regis Kwong
  Director   October 14, 2010
/s/ Dr. Tan Kok Hui
Dr. Tan Kok Hui
  Director   October 14, 2010


 
 

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Signature   Title   Date
/s/ Iris Geng
Iris Geng
  Director   October 14, 2010
/s/ Dr. Lv Ting Jie
Dr. Lv Ting Jie
  Director   October 14, 2010
/s/ Huang Zhaoxing
Huang Zhaoxing
  Director   October 14, 2010
/s/ Li Dong
Li Dong
  Director   October 14, 2010
/s/ Larry Gilmore
Larry Gilmore
  Director   October 14, 2010


 
 

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EXHIBIT INDEX

 
Exhibit
Number
  Description
 1.1+   Form of Underwriting Agreement
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)
5.1   Opinion of Lewis and Roca LLP
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)
21.1    Subsidiaries of Trunkbow Holdings International Limited(1)
23.1*   Consent of Bernstein & Pinchuk LLP
23.2+   Consent of Lewis and Roca LLP (included in Exhibit 5.1)
24.1*   Power of Attorney (contained in the signature page of the Registration Statement)

* Filed herewith.
+ To be filed by subsequent amendment.
(1) Incorporated herein by reference to the Registration Statement on Form 10 filed by Trunkbow on June 4, 2010.