KIT digital Reports Record First Quarter 2009 Results

DUBAI, UNITED ARAB EMIRATES, May 19 (MARKET WIRE) --
KIT digital, Inc. (OTCBB: KDGL), a leading global provider of Internet
Protocol-based video enablement technologies, reported financial results
for the first quarter ended March 31, 2009. (These results are quoted in
U.S. dollars, although a material portion of the company's revenue is
earned in other currencies. See "Management of International Currency,"
below).

Financial Results for Q1 2009

Revenue in the first quarter of 2009 totaled a record $9.6 million, an
increase of 7% from $9.0 million in the previous quarter and a 174%
increase from $3.5 million in the same quarter a year ago. The company's
revenues are primarily comprised of software license and maintenance fees,
software set-up fees, and technical and creative service charges. The
year-over-year revenue improvement is principally due to the increase in
the number of customers, increased spending by existing customers, and the
inclusion of revenue from acquisitions made in 2008.

After recognizing the impact of the application of the new accounting
standard EITF 07-05, net income for the first quarter of 2009 was $168,000
or $0.04 per weighted average share outstanding, compared to a loss in the
previous quarter of $2.5 million or ($0.75) per weighted average share
outstanding and a loss in the first quarter of 2008 of $10.6 million or
($9.57) per weighted average share outstanding. The net income for the
first quarter of 2009 includes derivative income of $1.9 million due to
EITF 07-05, $963,000 in non-cash charges (including $280,000 in
stock-based compensation), $363,000 in restructuring and non-recurring
charges related to employee termination and acquisition-related facility
closing costs, and $378,000 in acquisitions-related payments and expenses.

EITF 07-05 requires the company to calculate the fair value of warrants
containing reset provisions and classify them as derivative liabilities.
This liability was recorded at March 31, 2009 at ($3.7) million. A
reduction of this liability was recorded in the first quarter of 2009, and
this reduction was classified as derivative income.

In the first quarter of 2009, Operating EBITDA, a non-GAAP term, was
$198,000 or $0.05 per weighted average share outstanding, as compared to
the previous quarter's Operating EBITDA of $32,000 or $0.01 per weighted
average share outstanding and negative Operating EBITDA in the first
quarter of 2008 of $3.5 million or ($3.11) per weighted average share
outstanding. The company defines Operating EBITDA as earnings before:
derivative income/(loss); non-cash stock based compensation;
acquisition-related restructuring costs and other non-recurring charges;
impairment of property and equipment; merger and acquisition expenses; and
depreciation and amortization (see important discussion of Operating
EBITDA in "About the Presentation of Operating EBITDA," below).

The basic and diluted weighted average common shares for the first quarter
totaled 4.3 million, as compared to 4.2 million at the end of the previous
quarter and 1.1 million at the end of the first quarter of 2008 (all
figures reflect the company's 1-for-35 reverse stock split completed on
March 6, 2009).

As of March 31, 2009, the company had cash and cash equivalents of $2.5
million, as compared to $5.9 million at December 31, 2008. The $3.4
million decrease in cash from the previous quarter was largely related to
$1,892,000 in investment activities (including $1,512,000 in property and
equipment purchases), and $800,000 in deferred consideration and loan
re-payments related to the acquisition of Visual Connection, as in October
2008.

In the quarter ended March 31, 2009, there were 463,583 shares issued as a
result of deferred equity-based consideration and earn-out payments
related to the 2008 acquisitions of Visual Connection and Kamera Content
AB. As of May 15, 2008, the company had 4,805,489 shares outstanding.

As of May 18, 2009, there are no additional required cash payments or cash
earn-outs related to any acquisitions that the company has made in the
past.

Q1 2009 Operational Highlights

-- Signed 18 new client contracts across major geographies;

-- Completed the first "instance" deployment of the company's "VX"
digital asset management suite, an upfront multi-year enterprise license
with video search engine blinkx plc;

-- Purchased the remaining 49% interest the company did not already own
of its creative services unit, Reality Group Pty Ltd, bringing the
company's ownership to 100%;

-- Continued post-acquisition integration of technical operations across
Prague, Toronto and Stockholm offices;

-- An estimated 95%of KIT digital revenue in the first quarter was
generated in the Asia/Pacific and EMEA (Europe, Mid-East, and Africa)
regions, and approximately 5% was generated in the Americas.

Management Commentary

"Our first quarter was strong across the board and represents a solid
start towards achieving our 2009 objectives," said Kaleil Isaza Tuzman,
chairman and chief executive officer of KIT digital. "In fact, for the
first time in many years Q1 exceeded the previous Q4 despite the typical
seasonality of our business -- where Q1 revenues are typically down
around 15% on average relative to Q4, as the result of stronger relative
corporate spending and customer usage levels in November and December.
Instead, our revenues increased 7% sequentially quarter-over-quarter,
reflecting ongoing strength in the IP video segment."

Gavin Campion, president of KIT digital, added, "We spent last year
putting together the building blocks to the be the leading '3-screen'
IPTV platform provider -- online, mobile and set-top box-enabled TV.
These building blocks included bringing in new management, cleaning up
our capital structure, acquiring Kamera and Visual Connection, and
integrating certain disparate elements of our VX enterprise suite. In the
first quarter of 2009, we began to reap the rewards from this
foundational work, as we continue to solidify our position as the largest
independent company in the IP video software platform space."

Subsequent to the end of the first quarter of 2009, the company acquired
certain assets of online TV provider Narrowstep, Inc. and submitted an
application for a Nasdaq Capital Markets exchange listing, for which it
expects to obtain approval shortly.

Conference Call

KIT digital will hold a conference call to discuss these results at 10:30
a.m. Eastern time on Tuesday, May 19, 2009.The conference call will
feature remarks from KIT digital's executive management team, followed by
a question and answer period.

Date: Tuesday, May 19, 2009
Time: 10:30 a.m. Eastern time (7:30 a.m. Pacific time)
Dial-in # (North America): +1-800-895-0198
Dial-in # (outside of North America): +1-785-424-1053
Conference ID: 7KITDIGITAL

Please call the conference telephone number approximately 5-10 minutes
before the scheduled start time. If you experience any difficulty
connecting with the conference call, please contact the Liolios Group at
+1-949-574-3860.

A simultaneous webcast and replay of the call will be accessible via the
Investor Relations section of KIT digital's website at www.kitd.com. A
telephone replay of the call will be available for 30 days by dialing +
1-800-283-4783 (North America) or + 1-402-220-0859 (outside of North
America).

About the Presentation of Operating EBITDA

Management uses Operating EBITDA for forecasting and budgeting, and as a
proxy for operating cash flow. Operating EBITDA is not a financial measure
calculated in accordance with U.S. generally accepted accounting
principles (GAAP) and should not be considered in isolation, or as an
alternative to net income, operating income or other financial measures
reported under GAAP. The company defines Operating EBITDA earnings
before: derivative income/(loss), non-cash stock based compensation;
acquisition-related restructuring costs and other non-recurring charges;
impairment of property and equipment; merger and acquisition expenses;
and depreciation and amortization. Other companies (including the
company's competitors) may define Operating EBITDA differently. The
company presents Operating EBITDA because it believes it to be an
important supplemental measure of performance that is commonly used by
securities analysts, investors and other interested parties in the
evaluation of companies in a similar industry. Management also uses this
information internally for forecasting, budgeting and performance-based
executive compensation. It may not be indicative of the historical
operating results of KIT digital nor is it intended to be predictive of
potential future results. See "GAAP to non-GAAP Reconciliation" below for
further information on this non-GAAP measure and reconciliation of
Operating EBITDA to net loss for the periods indicated. Shares used in
the calculation of GAAP diluted earnings per share are the same as the
shares used in the calculation of diluted adjusted operating
income/(loss) per share except when the company reports a GAAP loss.

INSERT TABLE HERE (picture)

Management of InternationalCurrency

A portion of KIT digital's revenues arise from international operations.
Revenues generated and expenses incurred by its international subsidiaries
are often denominated in the currencies of the local countries. As a
result, the company's consolidated U.S. dollar financial statements are
subject to fluctuations due to changes in exchange rates. The company
employs a "natural hedging" strategy in which management endeavors to
match revenue generated in a given currency against the associated client
delivery costs denominated in the same currency. This strategy is designed
to result in approximately neutral cash-flow impact from foreign exchange
movements, regardless of changes in reported gross revenues.

About KIT digital

KIT digital, Inc. (OTCBB: KDGL) is a leading, global provider of
proprietary IP-based video enablement 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, mobile networks
and IPTV set-top boxes. The KIT VX platform allows clients to ingest,
manage, distribute and publish digital video content, build online/mobile
communities and integrate advertising. KIT 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 ABC Disney, Associated Press, General
Motors, IMG, Kmart, Nasdaq, News Corp, RCS, Telefonica and Verizon. KIT
digital has principal offices in Dubai, Melbourne (Australia), Prague,
Toronto and London. For additional information, please visit www.kitd.com.

Forward-Looking Statements

This press release contains certain "forward-looking statements" related
to the businesses of KIT digital, Inc. which can be identified by the use
of forward-looking terminology such as "believes," "expects" or similar
expressions. Such forward-looking statements involve known and unknown
risks and uncertainties, including uncertainties relating to product
development and commercialization, the ability to obtain or maintain
patent and other proprietary intellectual property protection, market
acceptance, future capital requirements, regulatory actions or delays,
competition in general and other factors that may cause actual results to
be materially different from those described herein as anticipated,
believed, estimated or expected. Certain of these risks and uncertainties
are or will be described in greater detail in our public filings with the
U.S. Securities and Exchange Commission. KIT digital, Inc. is not under
any obligation to (and expressly disclaims any such obligation to) update
or alter its forward-looking statements whether as a result of new
information, future events or otherwise.

GAAP to non-GAAP Reconciliation Three months ended
March 31,
(amounts in thousands) ------------------------
2009 2008
----------- -----------
Consolidated Statement of Operations
Reconciliation

Net income (loss) on a GAAP basis $ 168 $ (10,647)
Non-cash stock-based compensation 280 4,001
Merger and acquisition and investor
relations expenses 378 -
Depreciation and amortization 683 245
Restructuring charges 119 2,745
Other non-recurring charges 244 135
Impairment of property and equipment - 229
Impairment of goodwill - -
Interest income (1) (61)
Interest expense 139 14
Amortization of deferred financing costs 164 -
Derivative income (1,950) -
Other income (29) (22)
Registration rights liquidated damages - -
Income tax expense 3 1
Minority interest - (96)
----------- -----------
Operating EBITDA (loss) $ 198 $ (3,456)
=========== ===========

Consolidated Statement of Operations
Reconciliation per Share

Net income (loss) per share on a GAAP basis $ 0.04 $ (9.57)
Non-cash stock-based compensation 0.07 3.60
Merger and acquisition and investor
relations expenses 0.09 -
Depreciation and amortization 0.16 0.22
Restructuring charges 0.03 2.47
Other non-recurring charges 0.06 0.12
Impairment of property and equipment - 0.21
Impairment of goodwill - -
Interest income - (0.05)
Interest expense 0.03 0.01
Amortization of deferred financing costs 0.04 -
Derivative income (0.45) -
Other income (expense) (0.02) (0.03)
Registration rights liquidated damages - -
Income tax benefit (expense) - -
Minority interest - (0.09)
----------- -----------
Operating EBITDA (loss) per share $ 0.05 $ (3.11)
=========== ===========

Weighted average common shares outstanding 4,289,630 1,112,459
----------- -----------

KIT DIGITAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands, Except Share Data)

March 31, December 31,
2009 2008
(Unaudited)
------------ ------------
Assets:
Current assets:
Cash and cash equivalents $ 2,525 $ 5,878
Investments 200 -
Accounts receivable, net 9,073 8,331
Inventory, net 1,088 2,130
Other current assets 2,943 1,539
------------ ------------
Total current assets 15,829 17,878
------------ ------------

Property and equipment, net 4,128 2,928
Deferred tax assets 64 64
Software, net 2,087 2,265
Customer list, net 2,765 2,988
Domain names, net 16 19
Goodwill 16,150 15,167
------------ ------------
Total assets $ 41,039 $ 41,309
============ ============

Liabilities and Stockholders' Equity:
Current liabilities:
Bank overdraft $ 1,454 $ 1,456
Capital lease and other obligations 356 395
Secured notes payable 934 966
Senior secured notes payable, net of debt
discount of $412 and $550 1,088 950
Accounts payable 6,649 5,775
Accrued expenses 3,447 2,240
Income tax payable 152 160
Acquisition liability - Kamera 1,500 3,000
Acquisition liability - Visual 1,075 2,218
Derivative liability 3,720 -
Other current liabilities 2,233 3,818
------------ ------------
Total current liabilities 22,608 20,978

Capital lease and other obligations, net
of current 862 949
Secured notes payable, net of current 202 236
Acquisition liability - Visual, net of
current 538 1,075
------------ ------------
Total liabilities 24,210 23,238

Equity:
Stockholders' equity:
Common stock, $0.0001 par value:
authorized 30,000,000 shares; issued and
outstanding 4,745,756 and 4,183,280,
respectively - -
Additional paid-in capital 84,868 101,057
Accumulated deficit (67,751) (82,499)
Accumulated other comprehensive loss (288) (250)
------------ ------------
Total stockholders' equity 16,829 18,308
Non-controlling interest - (237)
------------ ------------
Total equity 16,829 18,071
------------ ------------
Total liabilities and equity $ 41,039 $ 41,309
============ ============

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
March 31,
------------------------
2009 2008
----------- -----------

Revenue $ 9,624 $ 3,502
----------- -----------

Variable and direct third party costs:
Cost of goods and services 3,478 -
Hosting, delivery and reporting 282 515
Content costs 461 184
Direct third party creative production costs 805 753
----------- -----------
Total variable and direct third party costs 5,026 1,452
----------- -----------

Gross profit 4,598 2,050

General and administrative expenses:
Compensation, travel and associated costs
(including non-cash stock-based compensation of
$280 and $4,001, respectively) 3,693 8,324
Legal, accounting, audit and other professional
service fees 270 345
Office, marketing and other corporate costs 717 838
Merger and acquisition and investor relations
expenses 378 -
Depreciation and amortization 683 245
Restructuring charges 119 2,745
Other non-recurring charges 244 135
Impairment of property and equipment - 229
----------- -----------
Total general and administrative expenses 6,104 12,861
----------- -----------

Income (loss) from operations (1,506) (10,811)

Interest income 1 61
Interest expense (139) (14)
Amortization of deferred financing costs and debt
discount (164) -
Derivative income 1,950 -
Other income 29 22
----------- -----------

Net income (loss) before income taxes 171 (10,742)
Income tax expense (3) (1)
----------- -----------

Net income (loss) 168 (10,743)
Plus: Net loss attributable to the
non-controlling interest - 96
----------- -----------

Net income (loss) available to common
shareholders $ 168 $ (10,647)
=========== ===========

Basic and diluted net income (loss) per common
share $ 0.04 $ (9.57)
=========== ===========
Basic and diluted weighted average common shares
outstanding 4,289,630 1,112,459
=========== ===========

Comprehensive income (loss):
Net loss $ 168 $ (10,647)
Foreign currency translation (37) 64
----------- -----------
Comprehensive income (loss) $ 131 $ (10,583)
=========== ===========

Investor Relations Contact:
Matt Glover
Liolios Group
Tel. +1-949-574-3860
Email Contact

Media Contact:
Jonathan Cutler
Verse Communications
Tel. +1-818-981-3023
Email Contact

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