KIT Digical, Inc. (PINK:KITD) Heads for Chapter 11
Kit Digital, Inc. (PINK:KITD), until very recently a NASDAQ company, has not fared well. While initially inviting some interest as an OTC company, KITD seem to be riddled by too many problems, and the stock bombed in the last two days. On Wednesday, KITD slid down 34% to 25 cents, following the loss on Tuesday. The highest level for KITD was $1, quickly abandoned in the very first days of the new life as a penny stock. Now, KITD is listed with a skull and bones warning. 
KITD is a class in itself, and so fat has not been a part of the usual promotions. Strangely, no pumper has dared approach this ticker, probably aware of the debt and losses burdening the firm. Kit Digital offers a widespread technology for managing video, with major clients worldwide. Still, its financials reveal that the business model has the potential to create burdening debt and losses:
- $30.56 million cash
- $125.3 million total current liabilities
- $90 million quarterly operations loss
In fact, KITD landed the pink sheets accidentally. Once it was threatened by exclusion from NASDAQ, the director and a group of investors claimed they were ready with a buyout plan, aided by two investment companies, at a range of $1.35-$1.70 per share. However, Mr. Tuzman claims that an inside investor may trigger a severe drop in price and achieve an acquisition, or trigger a bankruptcy.
It is already expected that KITD will go the bankruptcy route, as it will file for Chapter 11 protection until the end of April. Currently, Deutsche Bank is advising the company on its strategic options. With this in mind, KITD may not be a worthy bet, and may have a long way to fall.
In the past year, the company mounted a great expansion, but later divested half of the newly acquired businesses. In addition, KITD laid off half its staff last summer.
The company may expect to remind shareholders of itself as it posts pro forma yearly data, but this could also have short-term effects. So far, the company’s situation has been too precarious to invite investors. In the next few days, KITD will produce what could be interpreted as mostly bad news, so it is best to stay away and be very aware of the special situation of this new, strange-looking pink sheet.
KITD is the new venture of Mr. Tuzman, former founder and executive of Govworks, a website for administrative services that rose and fell in the dot-com era.
