Xhibit Corp.

CIK:0001393631|SEC Filings

DISCONTINUED OPERATIONS

9 Months Ended

Sep. 28, 2014

As a result of the SkyMall Ventures Sale, the Company will not generate any revenues or operating profits from its loyalty business unit after September 9, 2014. Accordingly, the SkyMall Ventures business has been accounted for as discontinued operations. The Company’s Nutraceutical Products business, which commenced operations in January 2013 and was shut down in October 2013, has also been accounted for as discontinued operations.

The operating results of SkyMall Ventures and the Company’s Nutraceutical Products business for the three and nine month periods ended September 28, 2014 and September 30, 2013 are summarized below:

	Three Months Ended September 28, 2014			Three Months Ended September 30, 2013
Revenues:
SkyMall Ventures	$	8,608,509		$	11,625,353
Nutraceutical business		-			233,200
Total	$	8,608,509		$	11,858,553

Income (loss) before income taxes:
SkyMall Ventures	$	1,009,734		$	553,255
Nutraceutical business		(1,084	)		23,863
Total		1,008,650			577,118
Income taxes		-			-
Income (loss) from discontinued operations, net of taxes	$	1,008,650		$	577,118

	Nine Months Ended September 28, 2014		Nine Months Ended September 30, 2013
Revenues:
SkyMall Ventures	$	31,209,867	$	17,742,844
Nutraceutical business		-		7,094,136
Total	$	31,209,867	$	24,836,980

Income (loss) before income taxes:
SkyMall Ventures	$	3,219,549	$	998,884
Nutraceutical business		26,825		(453,148	)
Total		3,246,374		545,736
Income taxes		-		-
Income (loss) from discontinued operations, net of taxes	$	3,246,374	$	545,736

In connection with the SkyMall Ventures Sale (Note 1), the Company recorded a $19,540,450 gain on the sale of SkyMall Ventures in September 2014.

Purchase price	$	24,000,000
Less working capital holdback		(1,400,000	)
Less indemnity escrow holdback		(1,800,875	)
Cash received from Connexions at closing		20,799,125
Estimated proceeds from working capital adjustment		350,000
Estimated proceeds from indemnity holdback		1,500,000
Net assets of SkyMall Ventures at closing		(2,675,624	)
Estimated closing costs		(433,051	)
	$	19,540,450

Skymall LLC is also entitled to receive a future payment of up to $3,900,000 in cash based on a formula related to the operating profit of Skymall Ventures during the 12 months following the closing.

The net assets of SkyMall Ventures at closing consisted of the following assets and liabilities:

Cash	$	4,076,427
Accounts receivable		3,848,792
Inventories		37,455,328
Prepaid expenses		253,985
Property and equipment, net		243,095
Intangible assets, net		5,489,286
Accounts payable		(5,549,360	)
Accrued expenses		(452,888	)
Accrued payroll and related expenses		(86,609	)
Customer deposits		(42,518,306	)
Deferred revenue		(84,126	)
	$	2,675,624

SUPPLEMENTAL CASH FLOW INFORMATION

9 Months Ended

Sep. 28, 2014

Supplemental disclosure of non-cash investing and financing activities:

Supplemental Cash Flow Information

During the nine month periods ended September 28, 2014 and September 30, 2013, the Company recorded the following non-cash financing activities:

	Nine Months Ended September 28, 2014		Nine Months Ended September 30, 2013
Common stock issued for related party note conversion	$	-	$	450,000
Common stock issued for SkyMall Merger	$	-	$	151,096,000
Common stock cancelation	$	-	$	444
Common stock issued for conversion of related party debt	$	500,000	$	-

During the nine month periods ended September 28, 2014 and September 30, 2013, the Company made cash payments for the following amounts:

Nine Months Ended

September 28,

2014

Nine Months Ended

September 30,

2013

Interest

221,339

96,555

Income taxes

20,330

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Sep. 28, 2014	Dec. 31, 2013
Current assets:
Cash	$ 2,634,378	$ 17,404,201
Accounts receivable, net	1,566,910	13,377,447
Inventories	494,632	20,007,110
Prepaid expenses	1,553,264	1,597,387
Total current assets	6,249,184	52,386,145
Property and equipment, net	5,654,859	5,837,806
Intangibles, net	9,848,087	28,525,745
Deferred financing fees, net		225,872
Other assets	437,408	437,408
TOTAL ASSETS	22,189,538	87,412,976
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable	12,585,258	26,007,807
Accrued expenses	1,104,156	2,179,307
Accrued payroll and related expenses	626,370	1,267,760
Accrued restructuring costs	39,587	148,939
Customer deposits		37,481,524
Notes payable, related parties		1,235,000
Deferred revenue	134	171,428
Total current liabilities	14,355,505	68,491,765
Revolving bank line of credit		3,669,095
Related party debt		5,000,000
Accrued restructuring costs, non-current portion		36,986
Total liabilities	14,355,505	77,197,846
Commitments and contingencies
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock, authorized 80,000,000 shares, $0.0001 par value, none issued or outstanding
Common stock, 480,000,000 shares authorized, $0.0001 par value, 108,232,935 and 107,839,234 shares issued and outstanding at September 28, 2014 and December 31, 2013, respectively	10,823	10,784
Additional paid in capital	186,077,988	185,345,544
Accumulated deficit	(178,254,778)	(175,141,198)
Total shareholders' equity	7,834,033	10,215,130
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 22,189,538	$ 87,412,976