Diguang International Announces Fourth Quarter and Full Year 2010 Results

Fourth Quarter Highlights

• Net revenue increased 13.4% year-over-year to $16.3 million
• Gross profit totaled $0.22 million, or 1.3% of sales, compared to gross profit of $1.6 million a year ago
• Net loss was $2.7 million, or $0.12 cents per diluted share, in 2010, compared to a loss of $2.9 million, or $0.13 per diluted share, in 2009
• In June 2010, Diguang featured its LED Displays and LED TVs at COMPUTEX2010 Taipei
• In October 2010, Diguang featured its LED lighting products at the Hong Kong International Lighting Fair

"Due to the various factors in the development of the LED TV business in the past, the Company did not perform as well as expected, "said Mr. Yi Song, executive officer and chairman of the board of directors of the Company. "Nowadays product competition has become more fierce, with labour costs going up continuously and we are seeing the same for some of the raw material prices. Furthermore, our production base for the development of the Company cannot be fully and effectively utilized, which will cause higher depreciation and finance costs. Although the Company still endeavors to reduce general and administrative expenses by strengthening management control and increasing future income streams by increasing sales, we cannot be sure that there would be obvious improvement to profit this year. Of course, we will make our utmost efforts to reduce losses," added Mr. Song.

Highlights for the Three Months Ended December 31, 2010

Net revenue totaled approximately $16.3 million for the three months ended December 31, 2010, a significant increase of 13.4%, compared to $14.4million for the three months ended December 31, 2009. The fourth quarter of 2010 represents the second consecutive quarter of expanded sales for the Company's traditional CCFL products and newly developed large size LED backlights and LED monitors, which benefited from the economic recovery in 2010.

Gross profit for the fourth quarter of 2010 totaled $0.22 million, or 1.3% of net sales, compared with gross profit of $1.6 million for the same period of 2009.

Operating expenses totaled approximately $3.0 million for the fourth quarter of 2010, down 28.5% from $4.2 million in the fourth quarter of 2009. As a percentage of net revenue, fourth quarter 2010 total operating expenses amounted to 18.3%, compared to fourth quarter 2009 operating expenses at 29.1% of net revenue. The decrease of net operating expense was mainly due to a decrease in R&D expenses, the company reduced research and development activities after new developed products were put into production.

The Company's net loss attributable to common shares during the three months ended December 31, 2010 was $2.7 million, down from net loss attributable to common shares of $2.9 million for the three months ended December 31, 2009. The loss per basic and diluted share was $0.12 for the three months ended December 31, 2010, compared with the loss per basic and diluted share of $0.13 for the three months ended December 31, 2009.

Fiscal Year 2010 Results

Total revenue for 2010 was approximately $64.9 million, up 47.31% from $44.1 million in fiscal year 2009. Gross profit for 2010 was $5.0 million, up 40.0% from a gross profit of $3.6 million a year ago. Gross margin was 7.7% for 2010, down from 8.1% for 2009. The Company recorded an operating loss of $3.6 million, compared with an operating loss of $7.0 million in 2009. Net loss attributable to common shares for 2010 was $4.0 million, compared with net loss attributable to common shares of $7.2 million in 2009. Basic and diluted loss per share were $0.18 for 2010 compared to $0.33 in 2009.

Financial Condition

As of December 31, 2010, Diguang had $6.6 million in cash and cash equivalents, $3.1 million in restricted cash and an approximate $1.8 million working capital deficit. As of December 31, 2010, shareholders' equity was $13.7 million.

Business Outlook

Diguang continues to anticipate demand in its LED backlight, LED TV and general lighting product segments. According to the DisplayBank's projections, the Global LED market will reach $14 billion in 2013, reflecting a five-year compound annual growth rate 18.7%. The Company expects to be able to sell more large-size LED backlight and large-size LED TV sets in 2011 by working with its main customers.

The display backlight market is highly competitive. Taking into consideration factors such as geographic market, product mix and customer base, the Company's main competitors are as follow: Shian Yih Electronics Ind. Co. Ltd. (Taiwan), Wai Chi Electronics Ltd. (Hong Kong), Radiant Opto-Electronics Corporation (Taiwan) and K-Bridge Electronics Co. Ltd. (Taiwan) etc. Even though these competitors are based outside China, each has significant manufacturing operations in China. Competitive advantages in these markets derive from a favorable combination of price, quality and customer service. With increased labor inflation in China, the Company's comparative advantage of lower costs comparing to other Asian countries will gradually diminish.

The Company estimates fiscal 2011 revenue to be in the range of $40 million to $50 million.

Sales to the Company's largest customer generated 17.28% of our revenue for 2010 compared with 11.18% in 2009. Sales to the Company's three largest customers accounted for 17.28%, 11.19%, and 9.84% of total revenue in 2010 and 11.18%, 7.86% and 6.62% in 2009.

Mr. Song noted, "In 2011, Diguang will seek to diversify its customer base by expanding its international sales efforts. The Company also expects to introduce new backlight technologies for a variety of applications that it hopes will help expand and diversify its customer base. Meanwhile, we will strengthen the development of new products, such as backlights for flat panel televisions. Diguang will attempt to finish construction of its new manufacturing facility in the Guangming District of Shenzhen City if further financing can be raised, and hopes to commence production at the new facility during the second quarter of 2011."

About Diguang International Development Co., Ltd.

Through its subsidiaries, Diguang develops and produces CCFL and LED backlights for a wide range of TFT-LCD products. A backlight is the typical light source of a liquid crystal display (LCD), with applications spanning televisions, computer monitors, cellular phones, digital cameras, DVDs and other home appliances. Leveraging its LED expertise, the Company also creates and markets energy-saving technologies and solutions for rapidly growing markets such as LED backlight monitors and LED general lighting.

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Safe Harbor Statements

This press release contains forward-looking statements made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward looking statements are based upon the current plans, estimates and projections of Diguang's management and are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. Therefore, you should not place undue reliance on these forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: business conditions in China, weather and natural disasters, changing interpretations of generally accepted accounting principles; outcomes of government reviews; inquiries and investigations and related litigation; continued compliance with government regulations; legislation or regulatory environments, requirements or changes adversely affecting the businesses in which Diguang is engaged; fluctuations in customer demand; management of rapid growth; intensity of competition from other providers of backlights; timing approval and market acceptance of new product introductions; general economic conditions; geopolitical events and regulatory changes, as well as other relevant risks, including but not limited to risks outlined in the Company's periodic filings with the U.S. Securities and Exchange Commission. Diguang does not assume any obligation to update the information contained in this press release.

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