NQ Mobile Reports on the Special Committee's Independent Investigation

    NQ Mobile Reports on the Special Committee's Independent Investigation

PR Newswire

DALLAS and BEIJING, June 4, 2014

DALLAS and BEIJING, June 4, 2014 /PRNewswire/ -- NQ Mobile (NYSE: NQ), a
leading global provider of mobile Internet services, today announced the
results of the independent investigation conducted by an independent Special
Committee of its Board of Directors and carried out by its independent counsel
Shearman & Sterling LLP and Deloitte & Touche Financial Advisory Services
Limited acting as forensic accountants (together, the "Investigation Team").

CN34262LOGO

On October 25, 2013, the Company's board of directors formed an independent
Special Committee, consisting of four independent directors of the Company, to
conduct a review of fraud allegations made by short seller Muddy Waters the
previous day. The following is a summary of the work done by the
Investigative Team in conducting that review, along with its principal
findings:

Scope of the Investigation

The Investigation Team was led by partners in the United States who managed
teams based in both the U.S. and China.The Investigation Team conducted a
far-ranging investigation of NQ's business activities and financial records in
response to the allegations made in Muddy Waters' October 24, 2013 report (and
in six subsequent reports and letters issued through January 13, 2014). The
following major investigative actions are representative of the broad scope of
work done by the Investigation Team:

  (i) The Investigation Team conducted a thorough review of cash reported on
  the Company's financial statements and the Company's cash transactions,
  which included the following procedures: obtained bank confirmations for the
  Company's accounts through in-person visits and mail; verified 99.8[1]
  percent of NQ's cash deposits as of December 31, 2012 (the Company's last
  audited financial statement); confirmed the Company's major account balances
  at multiple points in time from November 2013 through February 2014;
  verified all cash transactions exceeding $1 million, all cash transactions
  related to the proceeds of the Company's convertible bond offering, and all
  cash transactions that the Investigation Team otherwise determined merited
  review, ascertaining in each case whether the transaction appeared to have a
  legitimate business purpose and the source and/or recipient; and confirmed
  the authenticity of major savings accounts in Beijing by tracing cash
  deposits made by the forensic accountants without notifying Company
  management or its staff.

  (ii) Reviewed and examined selected financial information and records (such
  as principal financial documents, ledgers and vouchers, bank slips and
  advices, revenue forecast and other financial forms, invoices, organization
  charts, and contracts) for any indications of fraudulent activity or
  improper financial reporting.

  (iii) Reviewed and examined selected databases of the Company (including
  those relating to the tracking of accounting data, tax data, and customer
  transactions) for any indications of fraudulent activity or improper
  financial reporting.

  (iv)Conducted more than 50 interviews in Beijing and elsewhere with top
  Company management and other staff with professional responsibilities
  implicated in the Muddy Waters initial report and subsequent reports and
  letters, top management of the Company's subsidiaries, and key personnel at
  selected business partners of the Company, including extensive diligence
  with Yidatong personnel.

  (v) Investigated the Company's major business partners in China and overseas
  through site visits; in-person and telephone interviews with staff;
  corporate information searches; related party searches; review of the
  business partners' financial documentation (where provided by the business
  partners); review of aging accounts receivable; review of applicable
  contract terms and performance under the contract; and tests of product
  functionality, where appropriate.

  (vi) Reviewed NQ's major acquisitions by (a) analyzing the Company's
  purchase contracts and related transaction documents, (b) reviewing the
  Company's related due diligence work product and valuation materials,
  including the targets' SAIC records and other documents bearing on the
  identities of parties to the transactions, and the targets' business
  models, and (c) reviewing the revenues generated by the target companies
  after being acquired by NQ.

  (vii) Collected and copied devices and emails from the Company's top
  management and persons with professional responsibilities related to the
  Company's activities referred to in the Muddy Waters allegations; processed
  millions of unique documents (including Company emails and other files),
  applied extensive English- and Chinese-language keyword search terms; and
  reviewed the resulting documents using the services of qualified attorneys.

Despite the Investigation Team's extensive review of documents and data
provided by sources both within and outside the Company, the Investigation
Team could not verify that the devices it collected and copied contained all
responsive information at the time the copies were made. On many devices, the
Investigation Team observed indications that some information might be
missing, and the Company's management and staff were unable to provide a
credible explanation for what the Investigation Team observed.

[1] This number represents 100 percent verification of all queried accounts;
the Investigation Team did not attempt to confirm two accounts with low
balances, where, because of the location, the cost of verifying the sums
involved outweighed the value of conducting the procedure.

Principal Findings

The Investigation Team did not find any evidence that the Company had engaged
in the fraudulent conduct alleged by Muddy Waters.Specifically, subject to
the above:

  (i)The Investigation Team determined that the Company's cash balances
  wereverifiable and consistent with public disclosures.

  (ii)The Investigation Team did not find evidence that the Company's
  revenues were inconsistent with public disclosures.

  (iii)The Investigation Team did not find evidence that the Company made
  major payments during the period under review except for legitimate business
  purposes to benefit the Company and its shareholders.

  (iv)The Investigation Team found that (a) the Company's past and present
  relationships with business partners in China and overseas (including
  Yidatong) serve legitimate commercial objectives, (b) with regard to
  Yidatong in particular, the Company's revenues and cash flows from customers
  to carriers through Yidatong are verifiable and consistent with public
  disclosures, and (c)the overall relationship between Yidatong and NQ Mobile
  is consistent with the Company's public disclosures.

  (v)The Investigation Team found that the Company evaluated its acquisition
  targets after conducting due diligence (using internal resources) that
  included examining the business models, financial information and commercial
  viability of the target companies. The Company's acquisitions have
  contributed to increasing its revenues and user traffic.

  (vi)The Investigation Team found that the Company's handling of its May
  2011 IPO proceeds did not reflect any departures from market practice.

  (vii)The Investigation Team found that the Company, during the period
  before its May 2011 IPO, had some lax internal controls and informal
  business practices; to a limited degree, these informal business practices
  persist.These findings, however, do not reflect fraud.

  (viii) In investigating the allegations relating to the Company's
  acquisition of its current domain name ("nq.com") in 2011, which allegations
  the Investigation Team found were not supported by the evidence, the
  Investigation Team found that the purchase price also included certain
  services, and that the service element was not unbundled from the capital
  expense in accounting for the transaction.This did not affect the Company's
  stated revenues, did not suggest any fraudulent diversion of assets and was
  not material to the Company's financial statements.

The Investigation Team made no effort to evaluate judgments by Muddy Waters as
to the soundness of the Company's business strategy.

The Investigation Team has made a series of recommendations to further enhance
the Company's internal controls, which the Company's Board of Directors has
adopted and directed the Company's management to implement.The Company
intends to take measures to enhance its internal controls in the immediate
future and will strive to emerge from this process a stronger overall
organization.

About NQ Mobile

NQ Mobile Inc.(NYSE:NQ) is a leading global provider of mobile internet
services.NQ Mobileis a mobile security pioneer with proven competency to
acquire, engage, and monetize customers globally.NQ Mobile'sportfolio
includes mobile security and mobile games & advertising for the consumer
market and consulting, mobile platforms and mobility services for the
enterprise market. As ofDecember 31, 2013,NQ Mobilemaintains a large,
global user base of 481 million registered user accounts and136 million
monthly active user accounts through its consumer mobile security business,
107 million registered user accounts and 20 million monthly active user
accounts through its mobile games & advertising business and over 1,250
enterprise customers.NQ Mobilemaintains dual headquarters inDallas, Texas,
USA and Beijing, China. For more information onNQ Mobile, please
visithttp://www.nq.com

Forward Looking Statements

This news release contains "forward-looking statements" within the meaning of
Section27A of the Securities Act of 1933, as amended, and Section21E of the
Securities Exchange Act of 1934, as amended, and as defined in the U.S.
Private Securities Litigation Reform Act of 1995. These forward-looking
statements can be identified by terminology such as "will," "expects,"
"anticipates," "future," "intends," "plans," "believes," "estimates" and
similar statements. All statements other than statements of historical fact in
this press release are forward-looking statements and involve certain risks
and uncertainties that could cause actual results to differ materially from
those in the forward-looking statements. These forward-looking statements are
based on management's current expectations, assumptions, estimates and
projections about the Company and the industry in which the Company operates,
but involve a number of unknown risks and uncertainties, Further information
regarding these and other risks is included in the Company's filings with the
U.S. Securities and Exchange Commission. The Company undertakes no obligation
to update forward-looking statements to reflect subsequent occurring events or
circumstances, or changes in its expectations, except as may be required by
law. You are urged to consider these factors carefully in evaluating the
forward-looking statements contained herein and are cautioned not to place
undue reliance on such forward-looking statements, which are qualified in
their entirety by these cautionary statements.

INVESTOR RELATIONS:

NQ Mobile Inc.
+852 3975 2853
+1 469 310 5281
investors@nq.com

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SOURCE NQ Mobile Inc.

Website: http://www.nq.com
Contact: CONTACTS: Sherry Smith, MWW for NQ Mobile, +1-646-797-3139,
ssmith@mww.com; Kim Titus, NQ Mobile, +1-972-841-0506, kim.titus@nq.com
 
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