Update: 9 EST: NQ Mobile announces changes to its BoDs, stock is crashing.

The shares of NQ Mobile Inc (ADR) (NYSE:NQ), the Chinese mobile internet service provider surged on Wednesday over speculations that it is close to filing its long-delayed annual report or 20-F with the Securities and Exchange Commission (SEC).

NQ Mobile

The stock price of the Chinese mobile internet service provider surged more than 10% during the early trading yesterday. By the end of the trading session, the stock of NQ Mobile Inc (ADR) (NYSE:NQ) closed $6.76 per share, up by 6.12%.

NQ Mobile delayed 20-F filing twice

NQ Mobile Inc (ADR) (NYSE:NQ) already delayed the filing of its fiscal 2013 audited annual 20-F twice. The company failed to submit its annual report on the schedules it set because it was waiting for the final results of its internal investigation.

In April, the board of directors of NQ Mobile Inc (ADR) (NYSE:NQ) established an independent special committee to evaluate the fraud allegations against it by Muddy Waters, a research firm headed by short seller, Carson Block.

At the time, the company decided to postpone its annual report for 15 days in connection with the internal investigation.  NQ Mobile Inc (ADR) (NYSE:NQ) failed to deliver its annual report within the 15 days extension. In May, the company said it is still working on its 20-F, and it needs more time to complete it.

Findings of NQ Mobile’s internal investigation

Last month, NQ Mobile Inc (ADR) (NYSE:NQ) released the findings of the internal investigation showing that the independent special committee did not find evidence that it committed fraud. Block noted the special committee’s observation that “there was data significant tampering.”

Block was referred to the part of the press release of NQ Mobile Inc (ADR) (NYSE:NQ), which reads, “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.” He maintained his conviction that NQ Mobile is “unequivocally a fraud.

NQ Mobile’s stock performance

The stock price of NQ Mobile Inc (ADR) (NYSE:NQ) plummeted to an all-time low of $5.85 per share on June 27. Its highest value was $25.90 over the past 52-week range. The shares of the Chinese mobile internet service provider are down almost 58% year-to-date.

Source; Yahoo! Finance
Source; Yahoo! Finance

UPDATE: 9:01 AM EST: NQ has announced certain changes to its Board of Directors and provided a status update on its 2013 annual audit. A press release from NQ Mobile states:

wo new independent Directors, Messrs. Max Yao and Justin Chen, have been appointed to the Board and the Audit Committee, effective July 6, 2014. Mr. Max Yao will also serve as Chair of the Audit Committee of the Board. Ms. Ying Han, the current Chair of the Audit Committee has informed the Board that she would be stepping down from the Board due to personal reasons not related to her role at the Company effective on July 6, 2014. There are no disagreements between Ms. Han and the Company, the Management or the Board and there are no other items that need to be publicly disclosed in conjunction with her resignation.

Furthermore, Toro has become an advisor to the firm, the company states:

In addition, in an effort to enhance shareholder representation, the Company appointed Mr. Taek Kwon, Managing Partner of Toro Investment Partners, LP (“Toro”), a large public shareholder of the Company, as an adviser to the Board and is committed to adding a shareholder representative as an independent director as soon as practicable. Prior to founding Toro, Mr. Kwon was a managing director of TPG Capital focused on the global technology, media and travel sectors

Finally, in news that spooked some investors NQ announced the following in the press release:

In addition, following the June 4, 2014 release of the summary findings of the independent investigation conducted by the independent Special Committee of the Board, the Company’s independent auditors, PricewaterhouseCoopers Zhong Tian LLP (“PwC”), informed the Company that they would need to perform additional procedures in connection with and to expand the scope of work prior to completing its 2013 annual audit work. The Company’s Board and Audit Committee are considering PwC’s request. The Company will provide a further update when available

Shares are down 21% in pre-market trading on the latest news.