KIT Digital to Restate Historical Financial Statements Due to “Errors and Irregularities”

Posted by Joe Zaller
Nov 25 2012

KIT digital said 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.”

This decision was reached after discussions with the Company’s senior management and outside advisors. The Audit Committee discussed the matters described in this report with Grant Thornton LLP, the Company’s independent registered public accounting firm.

The company said that investors should no longer rely on KIT’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 company also cancelled its 2012 Annual Meeting of Stockholders.

According to a KIT Digital filing with the SEC, “the accounting errors and irregularities 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 that resulted in impairment charges. The Audit Committee has also determined that certain transactions entered into by the Company under the prior management team during fiscal years ended December 31, 2008 through 2011 were related party transactions and that additional disclosure with respect to those transactions should have been included in the footnotes to the relevant financial statements.  Because of the timing of the completion of the Audit Committee investigation and 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.

KIT also reiterated it has “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 its ongoing turmoil, KIT said that it 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.”

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Related Content:

Press Release: KIT digital, Inc. Announces Restatement of Prior Period Financial Statements and Postponement of Third Quarter 2012 Results

KIT Digital 8K Filing — Restating Financials – November 15 2012

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