NQ Mobile has been under pressure since Muddy Waters accused the company of various wrongdoings. The fight has lasted several months with no victor in sight. NQ Mobile recently reported earnings, which disappointed investors, and investors sent shares down 20%. On the conference call NQ Mobile Inc (ADR) (NYSE:NQ) indirectly discussed the battle with Muddy Waters without mentioning the firm by name. Below are excerpts from the call which deal with the allegations.

Omar Khan – NQ Mobile Inc (ADR) (NQ) – Co-CEO

Thank you, Michelle. Hello everyone, and thank you for joining our call. Before we discuss our record year and strong position for 2014 and beyond, I’d like to take a few moments to clear the air or perhaps more appropriately, clear the waters.

The American statesman, Daniel Patrick Moynihan, once said, ‘Everyone is entitled to their own opinions, but they are not entitled to their own facts.’

Ladies and gentlemen, I want to share a few facts. The fact is, the work of the Special Committee, the attorneys, the forensic accountants they hired is independent.

It is not management’s place to speak directly to the many questions you may have about the Special Committee’s work. The special committee will speak for itself in due course, as highlighted in our statement in the earnings release, in conjunction with the filing of our annual 20-F Form.

However, the fact is that management, our entire organization, our Board of Directors, and our independent auditors are here and remain focused on our respective responsibilities.

As an organization, we are addressing the sizable opportunities in the market every single day. By the way we continue to run our business, by the way our products and services continue to solve problems, provide entertainment, and create value for our platform partners and our end-users, and demonstrated by the way we position — our position in the market is stronger than ever before.

 

NQ Mobile

The fact is your management has unrelenting resolve and commitment to continue expanding and accelerating our business partnerships and relationships, to drive results and achieve robust growth. Every employee at NQ Mobile Inc (ADR) (NYSE:NQ) is working tirelessly to hit our goals and to make our vision and strategy a reality.

The fact is in the past five months alone we have added more than 10 new major partnerships and business deals, from mobile giants and industry leaders, including Sprint, Samsung, Ubisoft, China Mobile, Huawei, The National Bureau of Statistics in China and Telkomsel, among others.

We have introduced new products and services that are solving pain points and enhancing and delighting customers and businesses alike.

We have grown the monetization of our engaged user base dramatically. And we have taken, in only two quarters, our annualized revenue run rate from just over $160m to now over $300m, with our Q1 guidance.

The fact is, as a management team and as a Company, we remain confident in our business, our financials, our competitive position and our business strategy.

Now that you’ve heard the facts, I invite you to share the opinions held by your management, the Company, employees and everyone who partners and works with us, that NQ Mobile is poised for continued, unprecedented growth.

K.B. Teo – NQ Mobile Inc. – CFO

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Jiong Shao – Macquarie – Analyst

Okay, great. Thanks. Okay, my last question (inaudible). My last question is on the financials.

I think, KB, I heard you explained about I think, $2.4m extraordinary cost in Q4 due to these audits and (inaudible) related expenses. But I also thought you said something like $1m something else maybe one time. And where the — also the CD expenses is included in any of the figures or that’s something separate

K.B. Teo – NQ Mobile Inc. – CFO

Just to clarify, I think the one is the $2.4m expenses relating to handling the short seller allegation. And that is — you know when we do the non-GAAP reconciliation that is taken out from the operating income.

And so the other indirect costs which have not been taken out (inaudible) includes some marketing and hiring of PR. And that we estimate roughly around $1m.

And on the CB, there is a interest expense as well as in the fair value of the embedded options and that actually affects the net income line. And that’s in total $2.8m. So the first two actually impact the operating line and then the [CB] interest expense as well as the fair value of the embedded option hits the net income line.

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Jun Zhang – Rosenblatt Securities – Analyst

Okay. And on the operating cost side, do you expect the operating costs associated with the short sellers [tax] continue into the Q1? And also, you know, I saw the (inaudible) interest expense in Q4. Do you also expect the interest expense will remain at the same levels in the next couple of quarters? Thanks.

 

K.B. Teo – NQ Mobile Inc. – CFO

In terms of the additional costs associated with the short seller allegations, there will be — another $5m to $8m for the first quarter. And we expect additional expense. Again, it’s what we mentioned earlier. This does not impact the long-term operating model.