SOURCE:
KIT digital
2008-08-14 10:32:00
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–(EMWNews – August 14, 2008) – KIT digital, Inc. (
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. (
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 Companys 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)
========== ========== ========== ==========
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