xG Technology Reports First Quarter 2015 Results

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May 15, 2015, 04:05 ET

SARASOTA, Fla., May 15, 2015 /PRNewswire/ -- xG Technology, Inc. ("xG" or the "Company") (Nasdaq: XGTI, XGTIW), a developer of wireless communications and spectrum sharing technologies, announced its results for the first quarter ended March 31, 2015.

Key Recent Accomplishments

Entered into a Strategic Technology Alliance Agreement with Drakontas, LLC ("Drakontas"), a developer of mobile collaboration software designed to help public safety professionals share information more rapidly and more accurately, to cooperate in the marketing of each other's respective solutions, xMax and DragonForce. DragonForce is one of the most innovative emerging technologies for mobile collaboration in the public safety market.
Was awarded a new patent, "Hybrid ARQ system with Snapshot Feedback Mechanism for Interference Prone Wireless Networks," covering enhanced techniques for mitigating interference in wireless transmissions.
Entered into an agreement with DirectView Holdings, Inc., to integrate xMax's private mobile broadband technology with DirectView's recently-announced body-worn camera scheduled for commercial launch early in the third quarter of 2015.
Successfully completed the installation and deployment of a three-site pilot xMax broadband wireless network for the Bay Area Regional Interoperable Communications Systems Authority ("BayRICS") in the San Francisco Bay area.

George Schmitt, CEO and Chairman of the Board of xG Technology, said, "The xG team has strengthened xMax's competitive positioning and go-to-market strategy by increasing the number of demonstrations we conduct by building strategic marketing relationships with key providers to target end markets, and by expanding our IP portfolio through recently-issued patents. We continue to evaluate alternatives to secure financing, preferably of a non-dilutive nature, as we selectively invest in developing our growth. We continue to enjoy high levels of activity, and are solely focused on driving revenue generation this year."

Review of Results

Total first quarter 2015 revenues were $584,000 compared to $250,000 revenue in the first quarter of 2014. Revenue generated from equipment sales totaled $510,000, revenue from consulting revenue totaled $74,000.

First quarter operating loss was $4.0 million compared to operating loss of $5.1 million in the first quarter of 2014.

Net loss was $3.5 million, or $(0.15) per share compared to $5.2 million, or $(0.27) per share in the first quarter of 2014.

Weighted average number of shares outstanding for the quarter ended March 31, 2015 was 30.0 million compared to 18.8 million for the quarter ended March 31, 2014. As of April 29, 2015, 1,195,000 shares of the Series B Preferred Stock and 83,650 shares of the Series B Preferred Stock issued as dividends have been converted into 4,054,987 shares of common stock. As of April 29, 2015, all outstanding shares of the Series B Preferred Stock have been fully converted. As of May 15, 2015, 1,685,000 shares of the Series C Preferred Stock and 117,950 shares of the Series C Preferred Stock issued as dividends have been converted into 3,631,417 shares of common stock. As of May 15, 2015, 115,000 shares of the Series C Preferred Stock remain outstanding.

xG ended first quarter 2015 with $821,000 in cash and restricted cash compared to $758,000 at December 31, 2014.

xG continues to actively evaluate various alternatives of financing in order to obtain additional capital to allow the Company to deliver its products and fulfill its current backlog, including further stock sales.

About xG Technology

xG Technology has created a broad portfolio of intellectual property that makes wireless networks more intelligent, accessible, affordable and reliable. The company has created xMax, a patented all-IP cognitive radio technology that enables robust mobile broadband communications for private, consumer and government networks. xMax can solve the crisis facing the wireless industry caused by data-hungry devices and applications that are straining network capacity. It eliminates the need to acquire scarce and expensive licensed spectrum, thus lowering the total cost of ownership for wireless broadband access. xG's goal is to help wireless broadband networks deliver voice, video and data services to fixed and mobile users. The xMax cognitive radio system incorporates advanced optimizing technologies that include spectrum sharing, interference mitigation, multiple-input multiple-output (MIMO) and software defined radio (SDR). These and other technologies make xMax ideal for wide area, as well as rapid emergency communication deployment. xG offers solutions for numerous industries worldwide, including urban and rural wireless broadband, utilities, defense, emergency response and public safety.

Based in Sarasota, Florida, xG has over 50 U.S. and over 120 international patents and pending patent applications. xG is a publicly traded company listed on the NASDAQ Capital Market where xG common stock is traded under the symbol XGTI and xG warrants are traded under the symbol XGTIW. For more information, please visit www.xgtechnology.com.

Cautionary Statement Regarding Forward Looking Statements

Statements contained herein that are not based upon current or historical fact are forward-looking in nature and constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements reflect the Company's expectations about its future operating results, performance and opportunities that involve substantial risks and uncertainties. These statements include but are not limited to statements regarding the intended terms of the offering, closing of the offering and use of any proceeds from the offering. When used herein, the words "anticipate," "believe," "estimate," "upcoming," "plan," "target", "intend" and "expect" and similar expressions, as they relate to xG Technology, Inc., its subsidiaries, or its management, are intended to identify such forward-looking statements. These forward-looking statements are based on information currently available to the Company and are subject to a number of risks, uncertainties, and other factors that could cause the Company's actual results, performance, prospects, and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements.

For More Information:

Media and Analyst Relations
Daniel Carpini
xG Technology
www.xgtechnology.com
(941) 953-9035

Investor Relations:
James Woodyatt
xG Technology
www.xgtechnology.com
(954) 572-0395

Carolyn Capaccio/Jody Burfening
LHA
212-838-3777
[email protected]

xG TECHNOLOGY, INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT NET LOSS PER SHARE DATA)

	For the Three Months Ended
	March 31,
	2015		2014
Revenue	$	584	$	250
Cost of revenue and operating expenses
Cost of components and personnel		330		63
General and administrative expenses		1,586		1,679
Development		1,550		2,453
Stock based compensation		133		214
Amortization and depreciation		960		948
Total cost of revenue and operating expenses		4,559		5,357
Loss from operations		(3,975)		(5,107)
Other income (expense)
Changes in fair value of derivative liabilities		485		—
Interest expense, net		(47)		(46)
Total other income (expense)		438		(46)
Loss before income tax provision		(3,537)		(5,153)
Income tax provision		—		—
Net loss	$	(3,537)	$	(5,153)
Dividends and deemed dividends		1,070		—
Net loss attributable to common shareholders		(4,607)		(5,153)
Basic and diluted net loss per share	$	(0.15)	$	(0.27)
Weighted average number of shares outstanding basic and diluted		29,979		18,757

xG TECHNOLOGY, INC.
UNAUDITED CONDENSED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER SHARE DATA)

	March 31, 2015			December 31, 2014
ASSETS
Current assets
Cash	$	221		$	758
Cash, restricted		600			—
Inventory, net		3,758			4,070
Accounts receivable, net of allowance of $30 and $30 ($335 and $480 from related party)		557			702
Prepaid expenses and other current assets		336			411
Total current assets		5,472			5,941
Property and equipment, net		882			816
Intangible assets, net		16,111			16,382
Total assets	$	22,465		$	23,139
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	1,393		$	868
Accrued expenses		731			511
Accrued interest		87			42
Deferred revenue		50			—
Due to related parties		264			2,110
Deferred revenue − related party		—			480
Obligation under capital lease		135			123
Derivative liabilities		520			270
Total current liabilities		3,180			4,404
Long-term obligation under capital lease		83			—
Convertible note payable		2,000			2,000
Total liabilities		5,263			6,404
Commitments and contingencies
Series A convertible preferred stock – $0.00001 par value per share:
3,000,000 shares authorized at March 31, 2015 and December 31, 2014; 0 and 750,000 issued or outstanding as of March 31, 2015 and December 31, 2014 (liquidation preference of $0 at March 31, 2015 and $750,100 at December 31, 2014)		—			378
Series B convertible preferred stock – $0.00001 par value per share:
3,000,000 and 0 shares authorized at March 31, 2015 and December 31, 2014; 250,000 and 0 issued or outstanding as of March 31, 2015 and December 31, 2014 (liquidation preference of $252,300 at March 31, 2015)		104			—
Series C convertible preferred stock – $0.00001 par value per share:
3,000,000 and 0 shares authorized at March 31, 2015 and December 31, 2014; 1,589,720 and 0 issued or outstanding as of March 31, 2015 and December 31, 2014 (liquidation preference of $1,600,391 at March 31, 2015)		895			—
Total convertible preferred stock		999			378
Stockholders' equity (deficit)
Preferred stock – $0.00001 par value per share:
1,000,000 and 7,000,000 shares authorized at March 31, 2015
and December 31, 2014; none issued or outstanding as of March 31, 2015 and December 31, 2014		—			—
Common stock, – $0.00001 par value, 100,000,000 shares authorized, 36,419,029 and 26,176,153 shares issued as of March 31, 2015 and December 31, 2014, respectively		—	*		—	*
Additional paid in capital		190,302			186,919
Accumulated deficit		(174,077)			(170,540)
Treasury stock, at cost – 2,284 shares at March 31, 2015 and December 31, 2014, respectively		(22)			(22)
Total stockholders' equity		16,203			16,357
Total liabilities and stockholders' equity	$	22,465		$	23,139