RESTATEMENT

6 Months Ended

Jun. 30, 2013

Restatement

RESTATEMENT

As disclosed in a Current Report on Form 8-K the Company filed with the SEC on April 16, 2014, the Audit Committee of the Company’s Board of Directors (the “Audit Committee”) determined on April 11, 2014 that the Company’s previously filed financial statements for: (i) the three and six month periods ended June 30, 2013 included in the Form 10-Q filed with the SEC on August 19, 2013 and (ii) the three and nine month periods ended September 30, 2013 included in the Form 10-Q filed with the SEC on November 15, 2013 needed to be restated to correct the accounting for the merger with SkyMall (the “SkyMall Merger”) in such financial statements.  The Audit Committee’s determination was based upon its analysis of issues raised in comment letters from the SEC related to the Company’s accounting for the SkyMall Merger.

When the Company originally recorded the SkyMall Merger, the Board of Directors did not believe the market price for Xhibit’s common stock on the merger date was reliable and/or representative of fair value.  Accordingly, the Company valued the SkyMall Merger based on the fair value of the assets acquired and liabilities assumed.  The Company has now performed a re-assessment of the SkyMall Merger fair value and has determined that an active market for Xhibit’s common stock existed and, accordingly, the fair value of the shares issued to former owners of SkyMall (the “Merger Shares”) should have been used to value the SkyMall Merger.

Based on its reassessment of the SkyMall Merger fair value, the Company has recorded additional consideration of $125,596,000 for the SkyMall Merger.  The Company engaged an independent valuation firm to assist with a purchase price allocation based on the revised valuation.

The following table shows the effects of the restatement on the Company’s purchase price allocation for the assets acquired and liabilities assumed in the SkyMall Merger as of May 17, 2013:

	As of May 17, 2013
	As Previously Recorded			As Restated			Variance
Current assets	$	27,297,780		$	27,297,780		$	-
Property and equipment		5,267,121			5,267,121			-
Amortizable intangible assets		19,780,000			19,430,000			(350,000	)
SkyMall tradename		7,170,000			7,170,000			-
Goodwill		15,622,726			141,568,726			125,946,000
Other assets		221,043			221,043			-
Liabilities assumed		(49,858,670	)		(49,858,670	)		-
	$	25,500,000		$	151,096,000		$	125,596,000

The restatement did not have any effect on the Company’s previously reported condensed consolidated statement of operations for the three and six month periods ended June 30, 2013.  The following table show the effects of the restatement on the Company's condensed consolidated balance sheet as of June 30, 2013:

	As of June 30, 2013
	As Previously Recorded			As Restated			Variance
Total current assets	$	23,130,302		$	23,130,302		$	-
Total assets	$	75,087,728		$	200,683,728		$	125,596,000
Total current liabilities	$	48,634,688		$	48,634,688		$	-
Total liabilities	$	49,447,867		$	49,447,867		$	-
Additional paid-in capital	$	32,315,213		$	157,911,213		$	125,596,000
Accumulated deficit	$	(6,686,580	)	$	(6,686,580	)	$	-
Total stockholders' equity	$	25,639,861		$	151,235,861		$	125,596,000