KIT digital, Inc. Announces Restatement of Prior Period Financial Statements and Postponement of Third Quarter 2012 Results
Nov 21, 2012 (Marketwire via COMTEX) --KIT digital, Inc. (NASDAQ: KITD), a leading video management software and services company, today announced that, because of errors and irregularities identified by the Company in its historical financial statements, the financial statements for (1) the years ended December 31, 2009, 2010 and 2011 and (2) each of the three quarters in 2009, 2010 and 2011 will be restated. As a result of the restatement of these prior periods, the Company will also restate the quarters ended March 31, 2012 and June 30, 2012. Accordingly, investors should no longer rely upon the Companys previously issued financial statements for these periods, any earnings releases or other communications relating to these periods, or projections or estimates for any future periods. As a result, the Company will not timely file its Quarterly Report on Form 10-Q for the three months ended September 30, 2012 and will not issue an earnings release or host an earnings conference call.
The accounting errors and irregularities giving rise to the restatement relate primarily to recognition of revenue related to certain perpetual software license agreements entered into by the prior management team in 2010 and 2011. These errors and irregularities were discovered in connection with the Audit Committees previously disclosed investigation of certain transactions. As part of the restatement, the Company will adjust the financial statements for errors identified during prior periods, recording the adjustments in the appropriate historical period. Because of the Companys ongoing review and investigation of certain transactions, the Company requires additional time to complete an analysis of the accounting treatment for the software licenses and to determine the extent of the corrections that may be required to its historical financial statements. Other effects on previous financial statements are also possible. Accordingly, the Company cannot currently quantify the potential impact of the restatement.
As of today, the Company has approximately $10.6 million of cash and cash equivalents, of which approximately $4.0 million is restricted cash. The Company also has approximately $11.0 million outstanding under a secured loan facility and $2.5 million under an unsecured related party note. The Company is currently up to date with the principal and interest payments due under those loans, however, as a result of the restatement discussed above, there is an Event of Default under the secured loan facility and the Company is in discussions with the lenders. As previously disclosed, the Company has also experienced substantial losses this year, including costs related to previously disclosed litigations and restructuring expenses and will also incur additional costs related to the restatement discussed above. As a result of these circumstances, and based on the Companys forecast, the Company expects to continue to incur significant cash expenditures.
As a result of these challenges, the Company is considering a broad set of strategic alternatives including financing transactions as well as other strategic transactions including a sale of the Company or its assets. The Company continues to examine the reduction of working capital requirements to further conserve cash and may need to take additional actions in the near-term, which may include additional personnel reductions and suspension of certain development activities.
The above actions may or may not prove to be consistent with the Companys long-term strategic objectives, which have shifted in the current year, as the Company discontinued certain non-core assets, among other things. No assurance can be given that the Company will be able to enter in to an agreement for a sale of the Company or its assets or obtain financing on favorable terms, if at all, or to successfully further reduce costs in such a way that would continue to allow the Company to operate its business.
As a result of the restatement, the Company is also cancelling its 2012 Annual Meeting of Stockholders. Under current SEC rules, the restatement must be complete before the Company may hold an annual meeting of stockholders. The Company originally scheduled the 2012 Annual Meeting of Stockholders to occur on December 5, 2012.
About KIT digital, Inc.
KIT digital (NASDAQ: KITD) is a leading video management software and services company. Cosmos and Cloud, the companys video asset management systems, enable leading broadband media companies to produce, manage and deliver multiscreen socially-enabled video experiences to audiences wherever they are. KIT digital services nearly 2,500 clients in 50 countries including some of the worlds biggest brands, such as Airbus, The Associated Press, AT&T, BBC, BSkyB, Disney-ABC, Google, HP, Mediaset, MTV, News Corp, RCS Media Group, Sky Deutschland, Sky Italia, Telecom Argentina, Telecom Italia, Telefonica O2, Universal Studios, Verizon, Vodafone, VRT and Volkswagen. KIT digital maintains headquarters in New York City and offices in more than a dozen countries around the world. Visit the company at www.kitd.com or follow on Twitter at www.twitter.com/KITdigital.
Important Caution Regarding Forward-Looking Statements
This release contains certain forward-looking statements. These statements can be identified by the use of words or phrases such as believes, estimates, expects, intends, anticipates, projects, plans and variations of these words or similar words. These forward-looking statements include statements regarding the Companys intent to restate certain prior period financial statements and the errors that resulted in the decision that these historical financial statements could no longer be relied upon. T
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KIT digital, Inc. Announces Restatement of Prior Period Financial Statements and Postponement of Third Quarter 2012 Results
