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  Logo - http://photos.prnewswire.com/prnh/20121224/CN34262LOGO    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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