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  "docSlug": "69cc18cfe079",
  "documentTitle": "NQ Mobile (NQ)",
  "authorId": "51_Muddy_Waters",
  "authorName": "Carson C. Block",
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  "sourceTypeSlug": "short_seller",
  "sourceTypeLabel": "Short seller",
  "presentationDate": "2013-10-24 00:00:00",
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  "notes": "The slide highlights a specific accounting manipulation where R&D expenses increased by 10x during consolidation.",
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      "text": "In order to give the appearance of high gross margins, the Company has reclassified a material amount of expenses from cost of goods sold to R&D.",
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      "text": "R&D expenses: 10x",
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      "text": "Yidatong has DSO of more than 4 months. The actual realized payment terms are far beyond industry norms. This combined with the annual advances that NQ makes to Yidatong, and SAIC files that show much lower sales and amounts due to NQ, is a clear sign that something is wrong with this picture. What are the auditors looking at (or are they doing more listening that looking)?",
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      "text": "In order to give the appearance of high gross margins, the Company has reclassified a material amount of expenses from cost of goods sold to R&D. Based on our analysis of 2011 SAIC files, R&D expenses increased by 10x (or $4.5mm) during consolidation as a result of a shift in costs.",
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      "text": "The Company discloses that most of the R&D is done in China. Therefore, it is surprising to see such a large increase in R&D and a related decrease in cost of goods sold. Also, there are incentives for Chinese companies to book as much to R&D as possible as a result of tax incentives.",
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      "text": "2011 financial consolidation table showing Parent, VIE, WFOE, Combined, Adjustments, and Consolidated figures.",
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      "text": "Reallocation of Costs to Boost Gross Margin.",
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