Update on Sale of xMax Market Exclusivity

February 1, 2012

xG Technology, Inc.
(“xG”, “xG Technology” or the “Company”)

Update on Sale of xMax Market Exclusivity

xG, the developer of a portfolio of wireless communications technologies, including cognitive radio networks, announces that, further to its announcement on December 22, 2011 of the agreement with Care21 Limited ("Care21") granting exclusivity for the deployment of xMax, the Company’s wireless cognitive cellular network system, in the Broward and Miami-Dade Counties of Florida, United States, the Company has to date not received the $1,560,000 payment that was originally scheduled to be received on January 25, 2012 as part of the market exclusivity fee.

Under the agreement, there is a cure period of 30 days starting from written notification of the breach. Notice has been served and the cure period will end on March 1, 2012.

The Company has met with representatives of Care21 to discuss the position, is considering all its options and will give a further update regarding the payment and the market agreement in due course.

END

Contacts

ABOUT XG TECHNOLOGY

xG Technology is a developer of innovative and disruptive communications technologies for wireless networks. Its patented intellectual property portfolio covers a range of applications including cognitive radio networks. The Company has commercialized some of these technologies to create xMax, the World's first carrier-class cognitive radio network.

xMax's standards-based IP architecture minimizes network deployment, management and operational costs while simplifying the delivery of profitable fixed and mobile services. Using field-proven cognitive radio technology, xMax enables the delivery of these mobile services in both licensed and unlicensed bands. In its initial commercial offering, the xMax cognitive radio system enables carriers and other operators to monetize profitably the free unlicensed spectrum in the 900MHz ISM band.

xMax also offers unique capabilities to enterprises, utilities, government agencies and others who require advanced wireless communications to support business operations and mission critical applications.

xG offers turnkey xMax network solutions including base stations, mobile switching centres, network management systems, deployment tools, end-user equipment and customer support.

xG has deployed a 32 square mile xMax network in Fort Lauderdale, Florida to showcase its cognitive radio, mobile VoIP and dynamic interference mitigation capabilities. The Company's xMax products have been successfully tested and trialled by the US Army at two of its US bases. Based in the USA, xG has over 60 US and more than 130 international patents and pending patent applications. For more information, please visit www.xgtechnology.com.