SOURCE: KIT digital

August 14, 2008 11:32 ET

KIT digital Announces Second Quarter Financial Results

Gross Revenues up 57%, Operating Loss Down 69%, Net Loss Down 69% From Q1; Acquisition of Kamera and Corporate Consolidaton Completed; Company on Track to Achieve Cash Flow Positivity During Q4

DUBAI, UNITED ARAB EMIRATES--(Marketwire - August 14, 2008) - KIT digital, Inc. (OTCBB: KITD), a global provider of IPTV enablement technology and video-centric interactive marketing solutions, announced today financial results for the quarter ended June 30, 2008. All figures below are quoted in U.S. dollars.

For the quarter ended June 30, 2008, revenue was $5.5 million compared to $3.5 million for Q1 2008 and $3.6 million in the prior year Q2 period. The Company's revenue includes software set-up fees, software license and maintenance fees, technical and creative service charges, streaming and data fees, and advertising-related income.

The net loss for the quarter ended June 30, 2008 was $3.3 million, or $0.04 per basic and diluted share, compared to $10.6 million, or $0.27 per basic and diluted share in Q1 2008 and $7.4 million, or $0.22 per basic and diluted share, in the prior year Q2 period.

The net loss for the quarter ended June 30, 2008 reflects several non-cash items, including $73,000 in stock-based compensation, compared to $4.0 million in Q1 2008 and $1.2 million in the prior year Q2 period. Additionally, the net loss included restructuring charges of $146,000 relating to severance and facility closing compared to $2.7 million in Q1 2008 and zero for the prior year Q2 period.

Operating EBITDA loss for the quarter ended June 30, 2008 was $2.2 million, compared to a loss of $3.4 million in Q1 2008 and a loss of $6.1 million in the prior year Q2 period. Operating EBITDA as defined here is the loss before non-cash stock based compensation, restructuring and non-recurring costs, impairment of property and equipment and depreciation and amortization.

Management remains confident that the Company will cross over to a cash-flow positive position during the course of the fourth quarter of this year.

Weighted average common shares outstanding for the three months ended June 30, 2008 was 82,800,972 compared to 38,936,039 in Q1 2008 and 33,899,002 for prior year Q2 period. The weighted average common shares outstanding at August 13, 2008 were 114,524,313.

On June 30, 2008, the Company had a cash position of $7.3 million. The Company expects an additional $5.0 million forthwith from KIT Media Limited ("KIT Media"), pursuant to the Executive Management Agreement dated December 18, 2007 between KIT Capital Ltd. ("KIT Capital") and the Company. Certain funds related to KIT Media's additional $5.0 million investment are currently being held in escrow by the Company, pursuant to the issuance of warrants and certain settlements between KIT Capital and the Company, but are not reflected in the Company's reported cash balance. KIT Media and KIT Capital are each beneficially controlled by the CEO of the Company, Kaleil Isaza Tuzman.

Management believes the Company possesses cash that is more than sufficient to finance its organic growth plan through to profitability, as well as selective acquisitions.

On May 19, 2008, KIT entered into a definitive Share Purchase Agreement (the "Kamera SPA") to acquire 100% of the outstanding shares of Kamera Content AB, and took control of the day-to-day operations of Kamera's business on the same date. Cash payments totaling $4.5 million were made to consummate the Kamera acquisition and certain final conditions to the Kamera SPA were completed on June 25, 2008.

Management believes that the Company currently is in compliance with the requirements to be listed on NASDAQ Small Cap or the American Stock Exchange, except for its per share price. As such, the Company is reviewing the possibility of performing a reverse stock split and subsequent listing on one of these exchanges -- which would be executed in the context of the Company crossing over to a cash-flow positive operating position. Management believes that a listing on a more prominent exchange would enhance visibility and liquidity for the Company's common stock, and allow for certain commercial opportunities not currently available to the Company.

Kaleil Isaza Tuzman, chairman and chief executive officer of KIT digital, commented, "Our Q2 exceeded management expectations. We are experiencing strong momentum across our business. With the right-sizing of KIT digital and the acquisitions of Sputnik Agency and Kamera now complete, the company is now squarely focused on achieving positive cash flow by the fourth quarter. Our strong operating and cash position provides us the opportunity to assess selective, accretive acquisitions as appropriate."

Gavin Campion, president of KIT digital, commented, "We are pleased at the current pace of revenue and gross profit growth, especially in the context of the significant cost reduction and post-acquisition consolidation activity that took place at KIT digital in the first half of the year. Recent client additions in Asia, the Middle East and North America further demonstrate the success of KIT's focus on international markets. Our business model has been further strengthened by the acquisition of Kamera's mobile capabilities, and we continue to adhere to a disciplined cost structure and a tactical, international growth plan."

The Company estimates that over 92% of its revenues in the second quarter of 2008 were generated in the Asia/Pacific and Europe and Middle East (EMEA) geographies.

KIT digital's significant corporate milestones announced during the second quarter of 2008 and since June 30, 2008 include:

    
--  Completion, on May 8, 2008, of a $15 million investment in common
    stock of the Company by a group of institutional investors, led by a $7.06
    million investment by KIT Media;
--  Completion of the acquisition of 100% ownership interest in Kamera
    Content, a Stockholm-based mobile content development and distribution
    company with clients such as Vodafone, Telefónica, MSN and China Mobile;
--  Completion of the acquisition of 100% ownership in video-centric
    interactive online agency Sputnik, and the appointment of Sputnik managing
    director Gavin Campion to be president of KIT digital;
--  OTCBB ticker symbol changed from RGRP to KITD;
--  Polkomtel, Poland's leading mobile services provider, chose KIT
    digital to provide mobile distribution of EuroCup 2008 and Olympics
    content;
--  Stephen O'Farrell and Barak Bar-Cohen appointed to senior management
    roles in Asia/Pacific and Americas groups, respectively;
--  RCN, a leading broadcaster in Latin America, chose KIT digital to
    provide a broad range of streaming media initiatives;
--  Media Gateway, a leading international digital media content clearing
    house, agreed to work with KIT digital to provide a broad suite of video
    content for various mobile TV launches in the Middle East and North Africa
    (MENA) region;
--  Notice that KIT Media, an affiliate of KIT Capital, is exercising its
    right to purchase $5 million of common stock at a price of $0.16 per share,
    with funding into escrow pursuant to Company issuance of warrants.
    

Conference Call

The Company will host a conference call to discuss Q2 2008 results at 10:30 a.m. ET on Thursday, August 14, 2008. To participate in the call, please dial +1 (800) 766 1337 (North America) or +1 (404) 920 6210 (outside of North America). The passcode for the call is 41935739. Please dial into the call at least five minutes before the scheduled start time to allow for processing time.

For interested individuals unable to join the live conference call, a replay of the call will be available through August 28, 2008, +1 (800) 766 1337 (North America) or +1 (404) 920 6210 (outside of North America). The passcode for the call is 41935739. An online archive of the webcast will be available on the Company's website for 30 days following the call.

About KIT digital

KIT digital, Inc. (OTCBB: KITD) is a leading, global provider of proprietary IP-based video distribution technologies and video-centric interactive marketing solutions. Through its end-to-end platform, KIT digital works closely with consumer brands, content providers and telcos to maximize the value of video content via the Internet and mobile networks. The KIT platform allows clients to publish, manage and distribute digital video content, build online/mobile communities and integrate advertising. The Company offers businesses a full range of interactive marketing solutions and KIT clients can access approximately 100 KIT-syndicated channels and 40,000 KIT-syndicated videos. KIT digital clients include News Corp., Verizon, IMG, China Mobile, Telefonica, Vodafone, K-Mart, Coles, NASDAQ, Hummer and RCS. KIT digital has principal offices in Dubai, Melbourne (Australia), Stockholm, New York and London. For additional information, please visit www.kit-digital.com.

Forward-Looking Statements

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 -- With the exception of historical information, the matters discussed in this press release are forward-looking statements that involve a number of risks and uncertainties. The actual future results of KIT digital, Inc. could differ significantly from those statements. Factors that could cause actual results to differ materially include risks and uncertainties such as the inability to finance the company's operations or expansion, inability to hire and retain qualified personnel, changes in the general economic climate, including rising interest rates and unanticipated events such as terrorist activities. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of such terms, or other comparable terminology. These statements are only predictions. Although we believe that the expectations reflected in the forward-looking statements are reasonable, such statements should not be regarded as a representation by the Company, or any other person, that such forward-looking statements will be achieved. We undertake no duty to update any of the forward-looking statements, whether as a result of new information, future events or otherwise. In light of the foregoing, readers are cautioned not to place undue reliance on such forward-looking statements. For further risk factors see the risk factors associated with our Company, review our SEC filings.

ITEM 1.  FINANCIAL STATEMENTS.

KIT DIGITAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands, Except Share Data)


                                                             December 31,
                                           June 30, 2008       2007 (A)
                                          ---------------  ---------------
                                            (Unaudited)
Assets:

Current assets:
  Cash and cash equivalents               $         7,308  $        10,189
  Accounts receivable, net                          4,944            3,057
  Other current assets                              1,383            1,288
  Restricted cash                                       -              100
                                          ---------------  ---------------
  Total current assets                             13,635           14,634

Property and equipment, net                         1,634            1,307
Deferred tax assets                                   288              263
Software, net                                       1,348              505
Customer list, net                                  2,346              253
Domain names, net                                      24               30
Goodwill                                            9,809            1,123
                                          ---------------  ---------------
  Total assets                            $        29,084  $        18,115
                                          ===============  ===============

Liabilities and Stockholders’ Equity:

Current liabilities:
  Bank overdraft and other obligations    $           242  $           190
  Accounts payable                                  3,600            3,121
  Accrued expenses                                  2,757            1,616
  Income tax payable                                  143              139
  Acquisition liability - Kamera                    3,000                -
  Other current liabilities                         2,006            1,478
                                          ---------------  ---------------
  Total current liabilities                        11,748            6,544

Capital lease obligations                             268              292
                                          ---------------  ---------------
  Total liabilities                                12,016            6,836
                                          ---------------  ---------------
Commitments                                             -                -
                                          ---------------  ---------------
Minority interest                                    (137)             (76)
                                          ---------------  ---------------
Stockholders' equity:
  Series A preferred shares, $0.0001 par
   value: authorized 0 and 10,000,000
   shares; issued and outstanding 0 and
   10,000,000 at June 30, 2008 and
   December 31, 2007                                    -                1
  Common stock, $0.0001 par value:
   authorized 500,000,000 shares; issued
   and outstanding 114,420,868 and
   38,936,039 at June 30, 2008 and
   December 31, 2007, respectively                     11                4
  Additional paid-in capital                       94,642           74,820
  Accumulated deficit                             (77,481)         (63,524)
  Accumulated other comprehensive income               33               54
                                          ---------------  ---------------
  Total stockholders' equity                       17,205           11,355
                                          ---------------  ---------------
  Total liabilities and stockholders'
   equity                                 $        29,084  $        18,115
                                          ===============  ===============


(A) - Reference is made to the Company’s Annual Report on Form 10-KSB for
the year ended December 31, 2007 filed with the Securities and Exchange
Commission in April 2008.





KIT DIGITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Amounts in Thousands, Except Share and Per Share Data)
(Unaudited)



                              Three months ended       Six months ended
                                   June 30,                 June 30,
                            ----------------------  ----------------------
                               2008        2007        2008        2007
                            ----------  ----------  ----------  ----------

Revenue                     $    5,485  $    3,584  $    8,987  $    6,586
                            ----------  ----------  ----------  ----------

 Variable and direct third
  party costs:
   Hosting, delivery and
    reporting                      587         589       1,102       1,272
   Content costs                   635         496         819         912
   Direct third party
    creative production
    costs                        1,220         779       1,973       1,428
                            ----------  ----------  ----------  ----------
   Total variable and direct
    third party costs            2,442       1,864       3,894       3,612
                            ----------  ----------  ----------  ----------

   Gross profit                  3,043       1,720       5,093       2,974

 General and administrative
  expenses:
   Compensation, travel and
    associated costs
    (exclusive of non-cash
    stock-based compensation)    4,084       6,393       8,407      11,483
   Non-cash stock-based
    compensation                    73       1,237       4,074       2,479
   Legal, accounting, audit
    and other professional
    service fees                   269         237         614         530
   Office, marketing and
    other corporate costs          928       1,144       1,766       2,176
   Depreciation and
    amortization                   354         242         599         491
   Restructuring charges           146           -       2,891           -
   Other non-recurring
    charges                        510           -         645           -
   Impairment of property
    and equipment                    -           -         228           -
                            ----------  ----------  ----------  ----------
   Total general and
    administrative expenses      6,364       9,253      19,224      17,159
                            ----------  ----------  ----------  ----------

   (Loss) from operations       (3,321)     (7,533)    (14,131)    (14,185)

 Interest income                    29         213          90         332

 Interest expense - other          (40)        (26)        (54)        (33)
 Other income                      111          20         132          20
                            ----------  ----------  ----------  ----------

   Net (loss) before income
    taxes                       (3,221)     (7,326)    (13,963)    (13,866)

 Income tax benefit
  (expense)                          -           -          (1)          5
                            ----------  ----------  ----------  ----------

   Net (loss) before
    minority interest           (3,221)     (7,326)    (13,964)    (13,861)

 Minority interest                 (89)        (33)          7         (28)
                            ----------  ----------  ----------  ----------

   Net (loss) available to
    common shareholders     $   (3,310) $   (7,359) $  (13,957) $  (13,889)
                            ==========  ==========  ==========  ==========

 Basic and diluted net
  (loss) per common share   $    (0.04) $    (0.22) $    (0.23) $    (0.46)
                            ==========  ==========  ==========  ==========
 Weighted average common
  shares outstanding        82,800,972  33,899,002  60,868,506  30,459,898
                            ==========  ==========  ==========  ==========

Comprehensive (loss):
   Net (loss)               $   (3,310) $   (7,359) $  (13,957) $  (13,889)

   Foreign currency
    translation                    (85)         13         (21)         32
                            ----------  ----------  ----------  ----------
   Comprehensive (loss)     $   (3,395) $   (7,346) $  (13,978) $  (13,857)
                            ==========  ==========  ==========  ==========

Contact Information

  • Contact:
    Julian Soler
    Director of Communications
    KIT digital, Inc.
    +1-646-435-8888
    Email Contact