Xhibit Corp. (fka XBTCQ)

[cyberbullymouse]

A colleague asked me to check these guys out, as my company actually does what these folks pretend to do.

I was instantly suspicious of all the hyperbole and vaporware. Why does a largely offshore interactive marketing firm need to be publicly traded on the shady OTC in the US? Why does a company with strange filings, and no revs really derived from what they claim to do, have a market cap of nearly half a billion??

The more I dig, the worse it gets. And then I saw they reverse merged with SkyMall. WTF?

This article came to the same conclusion I did: there is likely something scammy going on. There is a good chance that this will completely ruin SkyMall's already somewhat goofy reputation.

The Atlantic - investigative piece

A highlight:

However, the company made $9.2 MM in revenue in 2012, with very healthy 52% gross margins. That sounds pretty good, but where does it come from? The answer comes buried deep in it's annual report:

During the first quarter of 2013 a majority of our revenues have been generated by these five employees from the sales of a weight loss product, colon cleanser and green coffee supplement...

As the profit margins for sale of these products is far higher than online marketing of education, home business or other services we have traditionally advertised, we have re-directed our advertising resources to this sector.

Ah, the answer to how Xhibit makes money. The company made money this year by selling spammy weight loss products. Last year, the company made money by selling online education and home-based business leads, but the profit was much better in nutraceuticals! But alas, this is a high risk game and the company's merchant banks aren't releasing the funds from recent credit card transactions:

None of our merchant banks were willing to immediately release the cash to us after they processed the credit cards used by our consumers to pay for these nutraceutical products. The combination of taking credit card numbers over the internet, selling products subject to more frequent returns, and selling products overseas resulted in a change in the policies of the merchant banks as they were concerned with a greater number chargebacks.

Failure to get the cash from these sales immediately with a potential delay as much as 100 days may result in the failure to meet other obligations on a timely basis, delay research and development or even impact our ability to meet payroll. We plan to raise short term capital to fund these sales.

So, in the best case the iconic SkyMall has merged with a company that makes its money selling spammy weight-loss products but poses as a marketing software company. The worst case could be much worse.