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KIT digital, Inc. Announces Restatement of Prior Period Financial Statements and Postponement of Third Quarter 2012 Results
By: Marketwire .
Nov. 21, 2012 05:07 PM
NEW YORK, NY -- (Marketwire) -- 11/21/12 -- 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 Company's 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 Committee's 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 Company's 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 Company's 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 Company's 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.
Important Caution Regarding Forward-Looking Statements
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