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xG Technology Reports Fourth Quarter 2013 Results

Foundation for Growth Firmly in Place (March 06, 2014)

SARASOTA, Fla., March 6, 2014 /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 fourth quarter and year ended December 31, 2013.

Key 2013 Accomplishments

  • Built over $20 million in backlog for a total at year-end of over $34 million
  • Listed on NASDAQ; raised total net proceeds of $17.4 million in July IPO and November follow-on offering
  • Received FCC certification for xMax product suite, allowing full commercial production and delivery to customers
  • Awarded 9 new patents covering cognitive technologies, spectrum sharing and mobile VoIP
  • Successfully transitioned from internal production to an ISO-certified contract manufacturer
  • Began delivering against orders and booking revenue
  • Established new sales and customer service teams

John C. Coleman, xG's CEO, stated, "During 2013, xG made tremendous progress in productizing and rolling out our xMax cognitive radio access network as a commercially available solution to enable high performance spectrum sharing. Building on this success our objective for 2014 is to develop consistent revenue streams, paving the way toward rapid growth and significant market adoption. We are completing our transition to volume contract manufacturing to meet both backlog and new orders. Our sales and customer services teams are in place, and will enable xG to offer value added services as part of an xMax solution sale to our customers. In short xG is well-positioned to capitalize on policy and market support for spectrum sharing as a solution to the need to deliver more mobile bandwidth. All of these factors have come together to help propel xG to positively disrupt the wireless marketplace and deliver results in 2014."


Review of Results

On a reported basis, total fourth quarter 2013 revenues were $373,000 compared to $0.0 revenue in the fourth quarter of 2012. The components of fourth quarter revenue were $323,000 from sales of equipment and $50,000 from engineering and consulting services agreement.

On a pro forma basis, assuming the recognition of $480,000 of deferred revenue in the quarter, total fourth quarter 2013 revenues were $853,000 compared to $0.0 revenue in the fourth quarter of 2012. The components of fourth quarter revenue were $778,000 from sales of equipment and $75,000 from engineering and consulting services agreement. Gross margin in the quarter was 53%.

Pro forma operating loss was $2.6 million compared to operating loss of $4.2 million in the fourth quarter of 2012. This decreased loss is attributable to the recording of cost of components and personnel associated with the recording of revenue and higher depreciation and amortization costs as the Company began to amortize capitalized costs as they became available for sale, offset by lower general and administrative, development, and stock based compensation expenses in the quarter relative to last year.

Pro forma net loss was $3.6 million, or $(0.23) per share compared to $4.7 million, or $(0.78) per share in the fourth quarter of 2012. Included in this operating loss was $0.3 million in expenses associated with our November follow-on offering. Weighted average number of shares outstanding for the quarter ended December 31, 2013 was 15.394 million compared to 6.04 million for the quarter ended December 31, 2012.

On a reported basis, total 2013 revenues were $406,000 compared to $0.0 million in 2012. The components of 2013 revenue were $323,000 from sales of equipment and $83,000 from an engineering services agreement.

On a pro forma basis, assuming the recognition of $480,000 of deferred revenue in the quarter, total 2013 revenues were $886,000 compared to $0.0 million in 2012. The components of 2013 revenue were $778,000 from sales of equipment and $108,000 from an engineering services agreement.

Pro forma 2013 operating loss was $13.7 million compared to operating loss of $13.0 million in 2012. This increased loss is attributable to the abovementioned recording of cost of components and personnel, higher development costs associated with the readying of products for sale, higher amortization and depreciation as mentioned above, and higher general and administrating and stock based compensation costs.

Pro forma 2013 net loss was $27.3 million, or $(2.84) per share, compared to net loss of $13.8 million, or $(2.29) per share for 2012. The 2013 net loss includes non-cash expense of $10.1 million.

Weighted average number of shares outstanding for the year ended December 31, 2013 was 9.598 million compared to 6.03 million for the year ended December 31, 2012.

xG ended fourth quarter 2013 with $5.5 million in cash, up from $271,000 at December 31, 2012.

Conference Call

Management will host a conference call to discuss these results today, Thursday March 6, 2013 at 5:00 p.m. ET.

To participate in the conference call, please call 888-803-5993 (toll free) or 706-634-5454 (international call-in) and reference code # 4981648. The conference call will also be broadcast live over the Internet, which can be accessed via the Investor Relations section of xG's web site at http://www.xgtechnology.com/Company/investors-overview.html. All participants should call or access the website approximately 10 minutes before the conference begins. The webcast and slide presentation will be available for replay for 90 days.

For those who cannot listen to the live broadcast, a replay of the call will be available from March 6, 2014 at 8:00 p.m. Eastern Time through March 9, 2014, and can be accessed by dialing (855) 859-2056 or (404) 537-3406, passcode # 4981648. A webcast replay will be available on xG's website for 90 days.

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 spectrum sharing. 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 network operators make more efficient use of their spectrum allocations and to create new opportunities for innovation in unlicensed spectrum. 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). 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 60 U.S. and over 130 international patents and pending patent applications, and its technology is available for licensing in both domestic and foreign markets. 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
David Worthington
Fusion PR
www.fusionpr.com
(212) 651-4200

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

Jody Burfening/Carolyn Capaccio
LHA
ccapaccio@lhai.com
(212) 838-3777

xG TECHNOLOGY, INC.


STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)



For the Three Months Ended
December 31,



2013



2012

Revenue

$

373


$

Cost of revenue and operating expenses






Cost of components and personnel


100



General and administrative expenses


1,059



1,634

Development


693



1,743

Stock based compensation


259



295

Amortization and depreciation


1,058



523

Total cost of revenue and operating expenses


3,169



4,195

Loss from operations


(2,796)



(4,195)

Other income (expense)






Interest expense, net


(43)



(189)

Impairment


(933)



(286)

Total other income (expense)


(976)



(475)

Loss before income tax provision


(3,772)



(4,670)

Income tax provision




Net loss

$

(3,772)


$

(4,670)

Basic and diluted net loss per share


(0.25)



(0.78)

Weighted average number of shares outstanding basic and diluted


15,394



6,040

xG TECHNOLOGY, INC.


STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)



For the Year Ended
December 31,



2013



2012

Revenue

$

406


$

Cost of revenue and operating expenses






Cost of components and personnel


102



General and administrative expenses


5,501



5,543

Development


5,468



4,806

Stock based compensation


796



554

Amortization and depreciation


2,370



2,063

Total cost of revenue and operating expenses


14,237



12,966

Loss from operations


(13,831)



(12,966)

Other income (expense)






Other expense


(10,068)



Inducement expense


(391)



Interest expense, net


(2,227)



(535)

Impairment


(933)



(286)

Total other income (expense)


(13,619)



(821)

Loss before income tax provision


(27,450)



(13,787)

Income tax provision




Net loss

$

(27,450)


$

(13,787)

Basic and diluted net loss per share


(2.86)



(2.29)

Weighted average number of shares outstanding basic and diluted


9,598



6,031

xG TECHNOLOGY, INC.


BALANCE SHEETS

(IN THOUSANDS EXCEPT SHARE DATA)

(UNAUDITED)



As of December 31,

ASSETS


2013



2012

Current assets






Cash

$

5,517


$

271

Inventory


2,916



Accounts Receivable, net of allowance of $16 ($470 from related party, net of allowance of $10)


788



Prepaid expenses and other current assets


49



16

Due from related party


1,350



Total current assets


10,620



287

Property and equipment, net


806



1,725

Intangible assets, net


18,196



17,608

Total assets

$

29,622


$

19,620

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)






Current liabilities






Accounts payable

$

1,841


$

655

Accrued expenses


772



754

Accrued bonuses


298



2,633

Accrued interest


42



42

Accrued interest to related parties




1,127

Due to related party


1,526



1,098

Deferred revenue related party


480



Obligation under capital lease


129



Convertible notes payable to related party




17,198

Total current liabilities


5,088



23,507

Long-term obligation under capital lease


118



Convertible notes payable


2,000



2,000

Total liabilities


7,206



25,507

Commitments






Stockholders' equity (deficit)






Series A Convertible Preferred Stock$0.01 par value per share:






10,000,000 and 25,000,000 shares authorized, none issued or outstanding as of December 31, 2013 and 2012




Common stock,$0.00001 par value, 300,000,000 and 250,000,000 shares authorized, 18,682,310 and 6,041,946 shares issued as of December 31, 2013 and 2012, respectively


*



*

Additional paid in capital


174,000



118,247

Accumulated deficit


(151,562)



(124,112)

Treasury stock, at cost2,284 shares as of December 31, 2013 and 2012, respectively


(22)



(22)

Total stockholder's equity (deficit)


22,416



(5,887)

Total liabilities and stockholders' equity

$

29,622


$

19,620


* Less than $1

xG TECHNOLOGY, INC.


STATEMENTS OF OPERATIONS

Non-GAAP Reconciliation

(IN THOUSANDS EXCEPT SHARE DATA)

(UNAUDITED)



For the Three Months Ended
December 31, 2013


GAAP


Adjustments


Non-GAAP,

as adjusted

Revenue ($480 from related party)

$

373


$ 480


$ 853

Cost of revenue and operating expenses







Cost of components and personnel


100


301


401

General and administrative expenses


1,059



1,059

Development


693



693

Stock based compensation


259



259

Amortization and depreciation


1,058



1,058

Total cost of revenue and operating expenses


3,169


301


3,470

Loss from operations


(2,796)


179


(2,617)

Other income (expense)







Interest expense, net


(43)



(43)

Impairment


(933)



(933)

Total other income (expense)


(976)



(976)

Loss before income tax provision


(3,772)


179


(3,593)

Income tax provision




Net loss

$

(3,772)


$ 179


$ (3,593)

Basic and diluted net loss per share


(0.25)


0.02


(0.23)

Weighted average number of shares outstanding basic and diluted


15,394




15,394








xG TECHNOLOGY, INC.


STATEMENTS OF OPERATIONS

Non-GAAP Reconciliation

(IN THOUSANDS EXCEPT SHARE DATA)



For the Year Ended
December 31, 2013


GAAP


Adjustments


Non-GAAP,

as adjusted

Revenue ($480 from related party)

$

406


$ 480


$ 886

Cost of revenue and operating expenses







Cost of components and personnel


102


301


403

General and administrative expenses


5,501



5,501

Development


5,468



5,468

Stock based compensation


796



796

Amortization and depreciation


2,370



2,370

Total cost of revenue and operating expenses


14,237


301


14,538

Loss from operations


(13,831)


179


(13,652)

Other income (expense)







Interest expense, net


(10,068)



(10,068)

Inducement expense


(391)




(391)

Interest expense, net


(2,227)



(2,227)

Impairment


(933)



(933)

Total other income (expense)


(13,619)



(13,619)

Loss before income tax provision


(27,450)


179


(27,271)

Income tax provision




Net loss

$

(27,450)


179


(27,271)

Basic and diluted net loss per share


(2.86)


$ 0.02


(2.84)

Weighted average number of shares outstanding basic and diluted


9,598




$ 9,598








SOURCE xG Technology, Inc.

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