KIT digital restates accounts, CEO bids
KIT digital’s former CEO Kaleil Isaza Tuzman, who left the business earlier in March, has offered to buy the complete business back at $3.75 a share, valuing the company at some $214 million. In addition, he accused KIT’s current management of deliberately seeking to “scapegoat” the company’s former management, and of wasting cash by moving the company’s HQ from low-cost Prague to high-cost New York City.
Tuzman, in a letter, said KIT’s new audit committee members may have chosen to apply different revenue recognition policies, a move that isn’t prior management’s responsibility. He also said that given the board’s “emphasis on the dire current liquidity situation of the company, it appears to us that you, in conjunction with the company’s senior creditors, may be conspiring to artificially decrease the company’s stock price so as to acquire the company at a fire sale price that is unfair to shareholders.”
Last week, video management specialist KIT digital said it will be restating its results for the past three years (2009, 2010 and 2011) because of errors and irregularities in its financial statements. The company adds that the individual quarter-year numbers will also be re-stated.
KIT digital warns investors that they 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.” KIT digital is also to delay filing its regular quarterly report for the period ending September 30th, nor will it issue an earnings release or host its usual conference call. The company also warned that it may “default” on its loan obligations. The company is also cancelling its planned AGM due on December 5th.
“These errors and irregularities were discovered in connection with the Audit Committee’s previously disclosed investigation of certain transactions,” says the company. “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.”