News Feed Item

Group Led by Former Chairman and CEO Kaleil Isaza Tuzman Extends Revised Acquisition Offer to KIT Digital Board of Directors

- Urges Transparent Auction Process; Requests Response by Wednesday, December 12, 2012

NEW YORK, Dec. 5, 2012 /PRNewswire/ --

Attention: Bill Russell, Chairman

Dear KIT digital Board of Directors,

On November 23, 2012, we sent you a detailed letter describing our disappointment in the performance of KIT digital Inc.'s ("KITD" or the "Company") current management team in both administering the business and capitalizing on strategic opportunities that could have generated significant value for the Company's shareholders (the "Initial Letter").  In our Initial Letter, we also outlined our own turnaround plan for KITD and urged you to immediately engage with us regarding a provisional offer to acquire the Company.

Since sending the Initial Letter additional information has come to our attention that paints an even more troubling state of affairs within the Company than we originally believed. We believe management is confused at the current crossroads and that the Company is severely limited in its options—a situation that will likely deteriorate with time.

Your demonstrated lack of urgency regarding alternatives to create value for shareholders is particularly unacceptable given that:

  • KITD has a very low cash balance (less than $7 million of unrestricted cash available to fund operating activities) and we believe the Company is operating at a significant cash burn in the near-term — providing an extremely short runway to solve its manifold issues;
  • The Company requires additional capital but the recent, dramatic downward share price movement and lack of audited financials will make it very difficult to raise additional financing at anything but terribly dilutive terms–in fact we believe the Company failed in a desperate attempt to close a financing even prior to its announcement that it was restating historical financials and delaying third quarter results;
  • The Company appears to have misrepresented the reason for the delayed release of its 10-Q for the period ending September 30, 2012, and inappropriately utilized the filing extension granted to companies due to Hurricane Sandy in an attempt to obfuscate the underlying liquidity issues and accounting issues afflicting the Company;
  • KITD is in material, technical default under its senior secured note issued to Western Technology Investment ("WTI") due to the Company's restatement of its historical financials, enabling WTI to pursue all rights available to it under the secured note agreement to remedy this default—including foreclosure on all of KITD's assets and intellectual property globally;
  • Based on the current price of KITD common stock, the terms of the Share Purchase Agreement entered into between KITD and Hyro Limited ("Hyro") on April 21, 2012 obligate the Company to issue nearly twenty (20) million new shares to Hyro shareholders within the next 30 days; and
  • KITD's current share price and its lack of audited financials puts the Company at serious risk of running afoul of the NASDAQ continued listing requirements.

We have also received numerous unsolicited accounts of announcements and comments made by KITD management last week to employees, vendors and customers that call into question management's grasp of the Company's challenges or their ability to navigate the Company out of its dire straits. We believe these communications included claims that (a) acquisition offers received by the Company in the past have been too low to be considered; (b) the Company will pursue a standalone path and will not entertain future acquisition offers; (c) the Company has not and will not consider filing for bankruptcy protection; and (d) the Company has enough cash to weather this period and will be breakeven by January or February. Although we appreciate management's desire to calm the Company's various constituencies, reckless statements like these undermine credibility, encourage complacency and prevent the Company from successfully addressing its myriad challenges.

More importantly, we are aware of numerous strategic and financial parties interested in the Company that have been ignored, rebuffed and stonewalled in recent months and weeks by the Company and its financial advisors, or have been paralyzed for months by standstill provisions included in the form confidentiality agreement propagated by the Company as a requisite for entering into any acquisition dialogue.

If any of the foregoing conclusions are based on incorrect information, please openly correct our understanding.  

We fear that KITD's current structural, commercial and liquidity challenges will worsen and compound—leaving the Company and its shareholders with limited, if any, options to preserve or generate value for shareholders. As such, we urge you to take immediate action to the benefit of shareholders and:

  • Execute on the operational turnaround plan articulated in our Initial Letter;
  • Clearly explain your balance sheet fortification strategy to KITD shareholders, specifically how you intend to avoid a foreclosure by WTI or a similar action taken by a replacement, "last resort" lender;
  • Conduct an open and transparent auction of the business (without discriminating against any prospective bidders) with a reasonable minimum bid price; and
  • Release any party that is currently subject to a standstill provision from any restrictions on participating within or pursuing a transaction to acquire the Company.

With respect to our provisional buy-out offer from the Initial Letter, neither you nor your advisors have engaged with us directly. However, several days after you received our Initial Letter, we were contacted by an executive of JEC Capital (the New York hedge fund that currently controls the Company and for which current KITD CEO Peter Heiland serves as Managing Director), who stated that you were not taking our offer seriously because you were unsure of our financial backing, and encouraged us to submit an offer to the board of KITD using a "customary offer letter format".  While we believe this is a delaying tactic—since we used a standard, conditional offer structure and you are aware of at least one of our large private equity partners—we have nevertheless complied with this request. Earlier today, December 5, 2012, we separately submitted a revised, non-binding offer letter in a customary format to the Company's board of directors, as well as a draft confidentiality agreement that we would be prepared to sign in order to pursue a potential transaction. As part of this documentation, we said we would expect to be able to reach a definitive and binding acquisition agreement within thirty (30) days of being granted due diligence access.

Given the current price of KITD stock, compounded by the Company's strategic drift and worsening liquidity and capital structure issues, we have lowered our indicative offer to acquire the Company to a range of $1.35 -$1.70 per share—representing, at the midpoint of the range, a 112% premium to the $0.72 closing price of the Company's shares on Tuesday, December 4, 2012. Our offer is subject to due diligence, your release of certain parties from standstill agreements, and a mutually acceptable definitive agreement.

We believe that time is of the essence and are prepared to immediately engage with the Company and its legal and financial advisors regarding this transaction. In the absence of a response to this letter by 5pm ET on Wednesday, December 12, 2012 that generates demonstrable progress towards a transaction, we will evaluate other options available to us—including, but not limited, to an offer extended directly to shareholders and/or alternative entry points into the Company's capital structure.

We look forward to your timely response.


Kaleil Isaza Tuzman

On behalf of KIT Capital, Ltd.

Contact: Jonathan Cutler
[email protected]

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
As DevOps methodologies expand their reach across the enterprise, organizations face the daunting challenge of adapting related cloud strategies to ensure optimal alignment, from managing complexity to ensuring proper governance. How can culture, automation, legacy apps and even budget be reexamined to enable this ongoing shift within the modern software factory? In her Day 2 Keynote at @DevOpsSummit at 21st Cloud Expo, Aruna Ravichandran, VP, DevOps Solutions Marketing, CA Technologies, was jo...
Predicting the future has never been more challenging - not because of the lack of data but because of the flood of ungoverned and risk laden information. Microsoft states that 2.5 exabytes of data are created every day. Expectations and reliance on data are being pushed to the limits, as demands around hybrid options continue to grow.
Poor data quality and analytics drive down business value. In fact, Gartner estimated that the average financial impact of poor data quality on organizations is $9.7 million per year. But bad data is much more than a cost center. By eroding trust in information, analytics and the business decisions based on these, it is a serious impediment to digital transformation.
Business professionals no longer wonder if they'll migrate to the cloud; it's now a matter of when. The cloud environment has proved to be a major force in transitioning to an agile business model that enables quick decisions and fast implementation that solidify customer relationships. And when the cloud is combined with the power of cognitive computing, it drives innovation and transformation that achieves astounding competitive advantage.
Digital Transformation: Preparing Cloud & IoT Security for the Age of Artificial Intelligence. As automation and artificial intelligence (AI) power solution development and delivery, many businesses need to build backend cloud capabilities. Well-poised organizations, marketing smart devices with AI and BlockChain capabilities prepare to refine compliance and regulatory capabilities in 2018. Volumes of health, financial, technical and privacy data, along with tightening compliance requirements by...
As IoT continues to increase momentum, so does the associated risk. Secure Device Lifecycle Management (DLM) is ranked as one of the most important technology areas of IoT. Driving this trend is the realization that secure support for IoT devices provides companies the ability to deliver high-quality, reliable, secure offerings faster, create new revenue streams, and reduce support costs, all while building a competitive advantage in their markets. In this session, we will use customer use cases...
Andrew Keys is Co-Founder of ConsenSys Enterprise. He comes to ConsenSys Enterprise with capital markets, technology and entrepreneurial experience. Previously, he worked for UBS investment bank in equities analysis. Later, he was responsible for the creation and distribution of life settlement products to hedge funds and investment banks. After, he co-founded a revenue cycle management company where he learned about Bitcoin and eventually Ethereal. Andrew's role at ConsenSys Enterprise is a mul...
DXWorldEXPO LLC announced today that "Miami Blockchain Event by FinTechEXPO" has announced that its Call for Papers is now open. The two-day event will present 20 top Blockchain experts. All speaking inquiries which covers the following information can be submitted by email to [email protected] Financial enterprises in New York City, London, Singapore, and other world financial capitals are embracing a new generation of smart, automated FinTech that eliminates many cumbersome, slow, and expe...
Evan Kirstel is an internationally recognized thought leader and social media influencer in IoT (#1 in 2017), Cloud, Data Security (2016), Health Tech (#9 in 2017), Digital Health (#6 in 2016), B2B Marketing (#5 in 2015), AI, Smart Home, Digital (2017), IIoT (#1 in 2017) and Telecom/Wireless/5G. His connections are a "Who's Who" in these technologies, He is in the top 10 most mentioned/re-tweeted by CMOs and CIOs (2016) and have been recently named 5th most influential B2B marketeer in the US. H...
DXWorldEXPO | CloudEXPO are the world's most influential, independent events where Cloud Computing was coined and where technology buyers and vendors meet to experience and discuss the big picture of Digital Transformation and all of the strategies, tactics, and tools they need to realize their goals. Sponsors of DXWorldEXPO | CloudEXPO benefit from unmatched branding, profile building and lead generation opportunities.
The best way to leverage your Cloud Expo presence as a sponsor and exhibitor is to plan your news announcements around our events. The press covering Cloud Expo and @ThingsExpo will have access to these releases and will amplify your news announcements. More than two dozen Cloud companies either set deals at our shows or have announced their mergers and acquisitions at Cloud Expo. Product announcements during our show provide your company with the most reach through our targeted audiences.
DevOpsSummit New York 2018, colocated with CloudEXPO | DXWorldEXPO New York 2018 will be held November 11-13, 2018, in New York City. Digital Transformation (DX) is a major focus with the introduction of DXWorldEXPO within the program. Successful transformation requires a laser focus on being data-driven and on using all the tools available that enable transformation if they plan to survive over the long term. A total of 88% of Fortune 500 companies from a generation ago are now out of bus...
With 10 simultaneous tracks, keynotes, general sessions and targeted breakout classes, @CloudEXPO and DXWorldEXPO are two of the most important technology events of the year. Since its launch over eight years ago, @CloudEXPO and DXWorldEXPO have presented a rock star faculty as well as showcased hundreds of sponsors and exhibitors! In this blog post, we provide 7 tips on how, as part of our world-class faculty, you can deliver one of the most popular sessions at our events. But before reading...
Cloud Expo | DXWorld Expo have announced the conference tracks for Cloud Expo 2018. Cloud Expo will be held June 5-7, 2018, at the Javits Center in New York City, and November 6-8, 2018, at the Santa Clara Convention Center, Santa Clara, CA. Digital Transformation (DX) is a major focus with the introduction of DX Expo within the program. Successful transformation requires a laser focus on being data-driven and on using all the tools available that enable transformation if they plan to survive ov...
DXWordEXPO New York 2018, colocated with CloudEXPO New York 2018 will be held November 11-13, 2018, in New York City and will bring together Cloud Computing, FinTech and Blockchain, Digital Transformation, Big Data, Internet of Things, DevOps, AI, Machine Learning and WebRTC to one location.