xG Technology Reports Third Quarter 2016 Results and Conference Call

SARASOTA, Fla., Nov. 14, 2016

Key Recent Accomplishments

• The Company announced a $16 million binding agreement to acquire Vislink Communication Systems. The purchase is expected to close by year-end 2016. Vislink, which has a present year sales run rate that is expected to be between $45 million and $50 million, specializes in the wireless capture, delivery and management of secure, high-quality, live video from the field to the point of usage.
• The Company received a $3.0 million award in partnership with Southwest Research Institute® ("SwRI") issued by the Defense Information Systems Agency for Prototype Spectrum Sharing Systems for the 2025-2110 MHz frequency band. The award underscores the applicability of xG's unique core technology and leverages IMT's digital broadcasting expertise.
• xG business unit Integrated Microwave Technologies ("IMT") received a $500,000 order from a leading robotic defense contractor for wireless video transmission modules for use in military remote ordnance disposal applications.
• IMT received a $200,000 order from a prominent state police agency located in the Mid-Atlantic region for an Airborne Video Downlink System ("AVDS"). The system consists of video communications equipment and related services that extend the efficacy of tactical operations by leveraging police airborne units.
• The Company announced it is on track to record annual cost savings exceeding $2.0 million resulting from synergies realized by the acquisition of IMT. This is above the amount forecasted in February 2016 when the acquisition was concluded, and includes cost reductions that have already been recorded as well as ones that are to come.

George Schmitt, CEO and Chairman of the Board of xG Technology, said, "We are pleased to report making forward progress in our operations, particularly our efforts to hold our costs in line as we ramped up revenues. We are seeing contributions from both the xMax and IMT sides of our business lines, and we expect that to continue through ongoing opportunities that leverage the strength of our expanded technology solutions."  

Mr. Schmitt continued, "We expect that the proposed acquisition of Vislink will deliver tremendous synergies with xG's xMax and IMT business units in a several areas, including satellite communications-based solutions, highly configurable software-based development platforms, and antenna design and manufacturing. Subject to our closing on the Vislink acquisition, we expect to see our overall revenues range around $75 million next year, allowing for some fluctuation due to currency exchange rates. If we achieve that, we expect to record positive EBITDA in the range of $10 million to $15 million, cash flow in the range of $5 million to $10 million, and positive net income for the year, excluding one-time financing and other non-recurring costs. This will be driven by the cost-cutting that has already occurred, the synergies to be realized from this acquisition, and strong traction we are seeing in the marketplace for our products."

Review of Results

Revenues for the three and nine months ended September 30, 2016, were $1,913,000 and $4,497,000, respectively, representing an increase of $1,724,000 and $3,351,000, respectively, from $189,000 and $1,146,000 in the corresponding periods in 2015. The revenue of $1,913,000 resulted from $1,851,000 from sales of equipment and $62,000 from engineering services for the three months ended September 30, 2016, which can be attributed to the acquisition of IMT. The revenue of $4,497,000 resulted from $4,339,000 from sales of equipment and $158,000 from engineering services during the nine months ended September 30, 2016. Of the $4,497,000 in revenue, $154,000 was previously recorded as deferred revenue.

For the three and nine months ended September 30, 2016, the Company had a net loss of $3.1 million and $11.8 million, respectively, compared to a net loss of $3.1 million and $10.6 million for the three and nine months ended September 30, 2015, respectively, an increase of $1.2 million from the corresponding nine month period a year ago. The increase in net loss is due to an increase in amortization and depreciation, general and administrative, and research and development expenses, largely due to the acquisition of IMT.