Accretive Acquisition Bolsters Client Roster and Enhances Company’s Microsoft Silverlight Capabilities

DUBAI, UNITED ARAB EMIRATES and LONDON — April 8, 2009 — KIT digital, Inc. (OTC BB:KDGL.OB - News), a leading global provider of Internet Protocol-based video enablement technologies, has acquired the assets and assumed certain current liabilities of London-based Narrowstep, Inc., an Internet TV platform company supporting content providers, broadcasters, telcos and other corporations. The acquisition expands KIT digital’s client delivery capabilities — particularly in live-streaming, long-form delivery and delivery using the Microsoft Silverlight technology.

Narrowstep’s proprietary telvOS Internet TV platform specializes in long-form video-on-demand and live streaming for enterprise customers, using Silverlight and its own content delivery network services. KIT digital management estimates Narrowstep’s current, recurring revenues to be approximately $110,000 per month. The acquisition is expected to be immediately accretive and pro forma cash flow positive based on synergies in G&A and variable costs. The transaction includes a transition of Narrowstep’s client relationships to KIT digital, including The Outdoor Channel, The Paralympics, BBVA, and the Red Cross. As part of the transaction, KIT digital will also acquire and integrate Narrowstep’s reseller relationships which include Can Communicate, a UK-based digital agency specializing in creating brand generated content, and Vivocom, a leading provider of IPTV technology and production services based in Spain.

Under the terms of the agreement, KIT digital acquires 100% of Narrowstep’s operating assets and assumes current liabilities in exchange for 25,000 shares of restricted KIT digital common stock. Concurrently with the closing, Granahan McCourt Capital, LLC, a shareholder of Narrowstep, will lend $350,000 to KIT digital in the form of an interest-free convertible note, which will be used to cover technical and operational restructuring charges incurred in the acquisition.

Kaleil Isaza Tuzman, chairman and chief executive officer of KIT digital, said, “The acquisition and integration of Narrowstep expands our IPTV delivery capabilities in a couple of key areas, while delivering an immediate financial contribution without consuming net cash. This further solidifies our position as the leader in the IP-based video platform marketplace, as measured by revenues, operating cash flow, geographic scope, and product suite capabilities. Narrowstep’s roster of enterprise customers and the expertise and capabilities of the Narrowstep team are a welcome addition to the KIT family.”

David C. McCourt, managing principal of Granahan McCourt Capital, LLC, commented, “Granahan McCourt is very supportive of this transaction, and we are happy to be providing low-cost transition financing so that KIT digital can continue to support Narrowstep’s customers and employees through the period of integration between the businesses. Both parties thought it important that KIT digital was provided a small cash cushion in the deal, to effectively transition over Narrowstep’s assets, customers and employees.”

“KIT digital has emerged as the leader in our industry and is the right home for the Narrowstep assets,” added Ellyn Ito, chief administrative officer of Granahan McCourt and restructuring advisor to Narrowstep. “We appreciate KIT’s discipline around cash flow, and believe that the synergies between the two businesses creates additional value in the market and affords the best opportunity for Narrowstep’s shareholders, customers and employees.”

In the context of the transaction, the companies will consolidate staff locations in London and New York.
The transaction has been approved by the board and expects approval from a majority of the shareholders of Narrowstep.

KIT digital’s management team will provide further details of the Narrowstep acquisition on the company’s fourth quarter and year-end 2008 earnings results conference call scheduled for today, Wednesday, April 8, 2009 at 10:30 a.m. Eastern time.

About Narrowstep
Narrowstep, Inc. is a provider of Internet TV services supporting content providers, broadcasters and telecommunications companies. Narrowstep’s proprietary technology platform delivers a TV-like experience available on the Internet. A pioneer in delivering Internet TV, Narrowstep offers the expertise and technology to move, manage and monetize video content across the Internet. Founded in 2002, with over 6 years of experience and industry knowledge, Narrowstep offers the flexibility to provide video capabilities to companies wanting to broadcast to anyone, any place and any time. Narrowstep’s telvOS(TM) suite is the only IPTV platform that can deliver to viewers long-form, full screen programming of true TV-like viewing experience over the Internet. For additional information, please visit http://www.narrowstep.com/.

About KIT digital
KIT digital, Inc. (OTC BB:KDGL.OB - News) 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 publish, manage and distribute 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, New York 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.

2008 Revenue of $23.4 Million, Up 68% Year-Over-Year; Achieved Company’s First Quarter of Positive Operating EBITDA on Revenue of $9.0 Million in Q4 2008, Up 131% Year-Over-Year

DUBAI, United Arab Emirates, April 7, 2009 - KIT digital, Inc. (OTC BB: KDGL), a leading global provider of Internet Protocol-based video enablement technologies, reported record financial results for the fourth quarter and year ended December 31, 2008. (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 Q4 and Full Year 2008
Revenue in the fourth quarter of 2008 totaled $9.0 million, an increase of 68% from $5.4 million in the previous quarter and a 131% increase from $3.9 million in the same quarter a year ago. Revenue for the full year of 2008 totaled $23.4 million, an increase of 68% from $13.9 million in 2007. 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, increase in spending by existing customers, and the inclusion of revenue from acquisitions made in 2008. Gross margin was 56% in 2008, an improvement from 51% in 2007.

The net loss for the fourth quarter of 2008 was $2.5 million or ($0.75) per weighted average share outstanding, compared to a loss of $2.6 million or ($0.78) per weighted average share outstanding in the previous quarter and a loss of $12.5 million or ($11.21) per weighted average share outstanding in the fourth quarter of 2007. The net loss for the fourth quarter of 2008 includes $15,000 in restructuring charges related to employee termination and acquisition-related facility closing costs (as compared to none in the year-ago quarter), as well as certain non-cash items, including $607,000 in stock-based compensation.

The net loss for 2008 was $19.0 million or ($7.55) per weighted average share outstanding, an improvement from a net loss of $34.6 million or ($34.69) per weighted average share outstanding in 2007. The net losses include non-cash stock-based compensation of $4.9 million in 2008 and $4.7 million in 2007, and restructuring charges of $3.1 million related to employee termination and acquisition-related facility closing costs in 2008.

In the fourth quarter, Operating EBITDA, a non-GAAP term, was $32,000 or $0.01 per weighted average share outstanding, as compared to a loss of $1.6 million or ($0.48) per weighted average share outstanding in the previous quarter, and a loss of $5.2 million or ($4.69) per weighted average share outstanding in fourth quarter of 2007. For the full year 2008, Operating EBITDA totaled a loss of $7.2 million or ($2.88) per weighted average share outstanding, as compared to a loss of $22.6 million or ($22.68) per weighted average share outstanding in 2007. The company defines Operating EBITDA as earnings before 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 common shares outstanding ending the fourth quarter totaled 4.2 million, as compared to 3.3 million at the end of the previous quarter and 1.1 million at the end of the fourth quarter of 2007 (all figures reflect the company’s 1-for-35 reverse stock split completed on March 6, 2009).  For the full 2008, the weighted average common shares outstanding totaled 2.5 million, as compared to 1.0 million in 2007.

As of December 31, 2008, the company had cash and cash equivalents of $5.9 million, as compared to $10.2 million at December 31, 2007.

Q4 2008 Operational Highlights

• Signed 18 new enterprise clients across major geographies
• Completed acquisition of IPTV specialist firm Visual Connections, a.s., based in Prague, Czech Republic
• An estimated 95% of KIT digital revenue in the fourth quarter was generated in the Asia/Pacific and EMEA (Europe, Mid-East, and Africa) geographies, and approximately 5% in the Americas
• Bolstered online video offering with social networking platform alliance with WebAlive, owner of “WebCommunity,” representing the first plug-and-play social networking platform for businesses
• KIT digital president, Gavin Campion, and the former vice chairman and CFO of WPP’s Grey Global Group, Steven G. Felsher, were appointed to KIT digital’s board of directors

Management Commentary
“The fourth quarter and full year 2008 represented great progress across the board,” said Kaleil Isaza Tuzman, chairman and chief executive officer of KIT digital. “Despite challenging global economic conditions, we surpassed the promises we made as new management on January 9, 2008 to exceed $20 million in revenue in 2008 and turn the corner to operating cash flow-positive by December 2008. In fact, we ended the year by exceeding our revenue goal by more than $3 million and achieved positive operating cash flow for the whole fourth quarter. We also simplified our capital structure in 2008 by eliminating the outstanding preferred securities, and substantially strengthened our management team and board of directors.”

Gavin Campion, president of KIT digital, added, “Our success in 2008 can be attributed to our focus on enterprise-oriented IP video software, and our strategy of adding clients in global markets where broadband 3G mobile networks are experiencing high levels of sustained growth. Now that the ‘restructuring phase’ of our evolution is behind us, we expect to be more aggressive in 2009—actively expanding our market share and acquiring competitors where this can be done smartly and accretively.”

The company plans to apply for a Nasdaq Capital Markets exchange listing following the SEC filing of its Form 10-K for 2008.

Conference Call
KIT digital will hold a conference call to discuss these results at 10:30 a.m. Eastern time on Wednesday, April 8, 2009. The conference call will feature remarks from KIT digital’s executive management team, followed by a question and answer period.

Date: Wednesday, April 8, 2009
Time: 10:30 a.m. Eastern time (7:30 a.m. Pacific time)
Dial-in # (North America): +1-800-862-9098
Dial-in # (outside of North America): +1-785-424-1051
Conference ID: 7KITDIGITAL

Please call the conference telephone number approximately five 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 section of KIT digital’s website at www.kitd.com. A telephone replay of the call will be available for 30 days by dialing +1-800-839-5632 (North America) or +1-402-220-2559 (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 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 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.

Management of International Currency
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. (OTC BB: 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 publish, manage and distribute 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.

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