{
  "docId": "019dd923-622c-750b-8b96-2fbe642fbf78",
  "docSlug": "69cc18cfe079",
  "documentTitle": "NQ Mobile (NQ)",
  "authorId": "51_Muddy_Waters",
  "authorName": "Carson C. Block",
  "documentKindSlug": "research-note",
  "documentKindLabel": "Research note",
  "sourceTypeSlug": "short_seller",
  "sourceTypeLabel": "Short seller",
  "presentationDate": "2013-10-24 00:00:00",
  "orientation": "portrait",
  "aspectRatio": 0.77272725,
  "pageNumber": 69,
  "pageCount": 81,
  "prevPage": 68,
  "nextPage": 70,
  "slideType": "expose_contradiction",
  "function": "expose_contradiction",
  "density": "overcrowded",
  "nDataPoints": 10,
  "notes": "This slide is part of a short-seller research report (likely Muddy Waters or similar) alleging accounting fraud.",
  "elementsJson": [
    "paragraph",
    "bullet_list",
    "footnote"
  ],
  "metadataConfidence": 1,
  "imagePath": null,
  "slideHref": "/slides/019dd923-622c-750b-8b96-2fbe642fbf78/69",
  "deckHref": "/decks/019dd923-622c-750b-8b96-2fbe642fbf78",
  "deckJsonHref": "/decks/019dd923-622c-750b-8b96-2fbe642fbf78.json",
  "deckAnchorHref": "/decks/019dd923-622c-750b-8b96-2fbe642fbf78#slide-69",
  "components": [
    {
      "bbox": null,
      "kind": "callout",
      "text": "The reason NQ’s SAIC financials show this revenue shift is because the Company pays minimal PRC taxes because it has far less profit than it claims. The Company’s SAIC and SEC financials are fraudulent.",
      "attrs": null,
      "subkind": null,
      "toolName": "Visual emphasis",
      "toolSlug": "visual-emphasis",
      "confidence": null,
      "componentId": "019dd953-0936-7173-ab11-19bc21bf4812",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.13,
        "w": 0.66,
        "x": 0.17,
        "y": 0.55
      },
      "kind": "list",
      "text": "NationSky’s balance sheet shows too few taxes due as of December 31, 2012. NQ purports that Nation Sky generated $12.6 million of revenue in 2012, although NationSky’s SAIC financials actually show $15.2 million of revenue. (The profit numbers are essentially the same though.) Chinese companies file monthly tax returns for VAT and Business Tax, while they file income tax returns on a quarterly basis. The yearend taxes payable balance should be at least approximately RMB 600,000. The balance sheet shows only RMB 38,000 payable.",
      "attrs": null,
      "subkind": "bullet",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "6bee24e1-5987-47af-9a98-7eb1d32ad0b9",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.13,
        "w": 0.66,
        "x": 0.17,
        "y": 0.29
      },
      "kind": "list",
      "text": "NQ claims that Beijing Feiliu (“FL Mobile” or “FL”) pays no income tax in 2012 and 2013, and a reduced rate thereafter because it was approved for a software enterprise tax preference under the new tax law. This is not true. The preference is only available for newly-established software companies. FL was established in 2009, but obtained qualified software company status only in 2011. (FL would have gone through the qualification process after establishment in order to be eligible for VAT refunds.) In order to enjoy the tax holiday, FL would need to have obtained its qualification in 2010.",
      "attrs": null,
      "subkind": "bullet",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "9493c4ce-a252-4523-91c2-921a910d9b69",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.03,
        "w": 0.66,
        "x": 0.17,
        "y": 0.09
      },
      "kind": "paragraph",
      "text": "only 27.7% of the VIE's 2010 income taxes, while the VIE's purported revenue grew 193.2% in 2011.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "22e17f05-be31-434f-959d-f4f3a91bcba0",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.07,
        "w": 0.66,
        "x": 0.17,
        "y": 0.14
      },
      "kind": "paragraph",
      "text": "NQ Beijing and the VIE are located in the same building and pay taxes to the same district tax office. PRC tax law requires business between related entities to be conducted at prices equivalent to those for arms length transactions. It is implausible that the VIE would be permitted to shift this much profit from an entity that pays income taxes to one that does not.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "43f86930-3150-4f85-95dc-71356f83e0d5",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.1,
        "w": 0.66,
        "x": 0.17,
        "y": 0.43
      },
      "kind": "paragraph",
      "text": "FL’s tax preference (forgetting the qualification timing issue) would only be valid for two years from and including its first profitable year. NQ reported in its 20-F a US GAAP profit of $119,000 in 2011 on sales of $2.1 million (from SAIC). It is unlikely that FL was unprofitable in 2011 for PRC tax accounting purposes. The claim that FL would not have to pay tax in 2013 seems to be another example of bungled tax treatment resulting from fraudulent accounting.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "51b57ec8-b4ed-45ea-b9bb-c341a89b4ee3",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.04,
        "w": 0.66,
        "x": 0.17,
        "y": 0.69
      },
      "kind": "paragraph",
      "text": "Another suspicious element of NationSky’s income statement is that its 2012 sales and marketing expenses of only $479,000 seem too low to support a sales, presales, and marketing staff of over 80 people in 10 offices.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "6e6ffa1d-20ab-470e-90a9-05582c8becb0",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.04,
        "w": 0.66,
        "x": 0.17,
        "y": 0.23
      },
      "kind": "paragraph",
      "text": "The reason NQ's SAIC financials show this revenue shift is because the Company pays minimal PRC taxes because it has far less profit than it claims. The Company's SAIC and SEC financials are fraudulent.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "7648bc8a-6d3e-443b-b098-dd147a567868",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.05,
        "w": 0.66,
        "x": 0.17,
        "y": 0.85
      },
      "kind": "source-note",
      "text": "89-92 footnotes detailing sources",
      "attrs": null,
      "subkind": null,
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "a3b93860-f020-44f3-8b2e-ff0c95c9edbf",
      "frameworkName": null,
      "frameworkSlug": null
    }
  ],
  "metrics": [],
  "tools": [],
  "frameworks": [],
  "arcBeats": [
    {
      "to": 80,
      "from": 61,
      "beatId": "e4f2b8e1-7912-4f93-8c38-79d385cde878",
      "arcName": "Overcoming the Monster",
      "arcSlug": "overcoming-monster",
      "beatName": "Appendix Data",
      "beatSlug": null,
      "evidence": "The document provides extensive data and evidence to support its claims.",
      "position": 2,
      "confidence": 0.8,
      "parentBeatName": null,
      "parentBeatSlug": null
    }
  ],
  "loops": [],
  "imagePathAlt": null,
  "thumbSrc": null,
  "thumbSrcAlt": null,
  "locked": true
}