Each Director is Personally and Collectively Liable – No Way to Claim Ignorance

LKMforward is a shareholder movement that consists of long time shareholders of NQ Mobile and its successor company, Link Motion.  This collection is made up of large and small shareholders. We have all watched with dismay as a company, with a myriad of assets and very promising new businesses, has squandered these advantages to the detriment of all shareholders. We believe that the primary reason for this situation is the inability of various factions of the Board of Directors to put aside differences and unite on behalf of shareholders. Our group consists of attorneys, CPAs (Certified Public Accountants), CFEs (Certified Fraud Examiners), business leaders, and many others from all walks of life.  We are all keenly aware of the Board’s duties to the Company and its shareholders.  Primary among those duties is the duty of the individual Board members to put any differences aside and work exclusively on behalf of the Company and all shareholders.

 

We are all aware of a pending deadline with the NYSE.  The Company has been out of compliance with its financial filing requirements since May 15, 2018 when it missed the automatic extension granted to companies to complete the annual report for 2017 on form 20F.  The NYSE, at is discretion, can grant such companies with an extension to meet its filing requirements and typically gives an initial 6-month time frame to cure.  November 15th is tomorrow. It is the Boards duty both individually and collectively to immediately engage the Exchange to prevent the delisting of a company with significant book value and outstanding future prospects.

 

On September 18, 2018, in the shareholder letter filed with the SEC, the Board stated the following:

“The Company has identified a clear pathway forward to growth and profitability.  We have already begun, and will continue, to work with the entire organization and all relevant parties to move the Company ahead. We are committed to being a better Company and to achieve outstanding results for all our shareholders.  We recognize that the personal dispute between the beneficial owners of RPL Holdings Ltd., one of our major shareholders, will likely be ongoing for some time, but we are taking the necessary steps to ensure that these matters to do not continue to impact the Company.”

 

It was clear to each shareholder then, and apparently to the Co-Chairs of the Board who released that shareholder communication, that the Company and each director of the board clearly recognized its duty to shareholders. However, since that date, there has been silence from the company as the share price has lost more than 50% of its value to an anemic $0.30 per ADS today. With the NYSE deadline pending tomorrow, there is no more time to delay. The first and foremost step for the Board is to immediately contact the NYSE and present a plan to the Exchange to remain listed. To that end, the shareholder requisition on LKMforward.com that was delivered to the full Board of Directors, contains the specific starting point for the Company to begin the necessary steps to move forward and communicating that these steps are being executed is a great first step in discussing with the NYSE to petition for additional time to regain compliance status. The next several months should then be devoted to implementing a plan and restoring value for all shareholders.

 

We are confident that the legal counsel of the Board, the Company and each individual director has advised you that failure to promptly act on this matter increases the already significant damages suffered by shareholders and the liability of the Board and each individual director for its inaction. This path can be reversed through action, and the damages reversed over time. However, failure to act in the face of the pending delisting of the company is an indictment of the entire Board of Directors, both individually and collectively. We look forward to action tomorrow that will prevent the impending delisting of the company by the NYSE.  We also look forward to a full response to the requisition and the beginning of the EGM process necessary to enact the required changes.

 

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