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7
May
2008
xG Technology, Inc.
BUSINESS UPDATE LETTER TO SHAREHOLDERS
ACCOMPANYING THE ANNUAL REPORT AND ACCOUNTS
xG Technology, Inc. ("xG" or "the Company"; LSE-AIM: XGT), the communications technology business, has posted the Annual Report and Accounts for 2007. A business update letter from the Chairman and Chief Executive Officer has been included with the Annual Report as follows: Dear Shareholder,
I am pleased to enclose xG's Annual Report for the year ended 31st December 2007.
The year was a pivotal one for the Company. While R&D is still our central core competency, we also now focus on commercialising products. This exciting transition began in the fourth quarter of 2007 and is now well under way.
We are selling territories to a number of distributors across the USA and Canada . In order to accelerate the development of the xMax network, on a very selective basis, we have offered to conditionally waive part of the territory fee to some of our initial distributors, provided they buy a certain number of base stations over a fixed period of time. Even in this challenging overall market environment, we were thus able to make our customers' buy decisions easier. In fact, this resulted in a profit in the first quarter of 2008.
Our distributors are currently mapping their territories using our base station 200 series. As the year progresses, we will upgrade existing 200 series installed base stations to our new base station 250 series to enable our distributors to roll out the xMax mobile wireless VoIP model in tandem with the Cambridge Consultants-designed TX60 handset. The base station 250 series is anticipated to be 4G compliant. Initially, we will direct the increased 4G throughput towards user capacity and concentrate on voice services only. This will allow the Company and our distributors to become familiar with our network performance. Thereafter, there is an orderly, planned progression to other services.
The increasing level of interest in xMax is allowing the Company to take a firm commercial approach to ensure we have effective distribution in place. Inevitably, there will be some changes within the distributors which were signed up at a very early stage in this process. Where a company ceases to represent xMax, the assigned territory reverts to xG and becomes available for resale to another distributor. These measures allow our distributors who are making good progress to build their territories and then attract the end users that start the annuity streams payable to both them and the Company. Our focus is not simply selling equipment, rather we are selling business opportunities including but not limited to the exclusive market territories. As our success continues, we expect to achieve steadily improving commercial terms of business, particularly in relation to the returns from the sale of territories.
On another positive note, today's financial markets are hard to navigate and the decrease in liquidity is being felt by companies of all sizes, but it is against this backdrop that xG Technology reported a strong cash position as of December 2007. We have recently partnered with a finance company that is prepared to lease our base station equipment to our distributors, provided they meet certain underwriting criteria. Where qualified distributors meet such criteria, it allows the Company to receive full payment on our base station sales up front. The Company has and will also continue to selectively consider financing its customers, which allows xG to secure additional revenue from the provision of this finance.
With a technology that is deployed at a low cost, provides high speed wireless connectivity in unlicensed spectrum, contains a revolutionary battery solution and has a demonstrable path to 4G applications, xG Technology is well-positioned to execute on our collective business opportunity - even despite the difficult market environment in which most companies find themselves.
As many of you are aware, xG's directors, officers, and managers have staunchly defended our shareholder backers to ensure the earliest stakeholders receive rewards commensurate with the risk they have taken with us. As we continue proving up this opportunity, we will not lose sight of this primary goal.
I look forward to reporting on our next milestones. Should you require any further information, please do not hesitate to contact me. Yours sincerely, Richard Mooers
Chairman and Chief Executive Officer
Ends
Enquiries:
Rick Mooers, Chairman and CEO
Roger Branton, COO and CFO
+44 20-7367-8888
www.xgtechnology.com
Steve Liebmann, Simon Bloomfield or Chris Price
Bankside
+44 20-7367-8888
Xavier Moreels or Francis Moore
ING Bank N.V., London Branch (Nominated Adviser)
+44 20-7767-1000
ABOUT XG TECHNOLOGY (AIM:XGT)
XG TECHNOLOGY'S BUSINESS
Based in Florida, USA, xG Technology has developed innovative, patented wireless communications technologies which offer the potential to reduce significantly the capital investment in and running costs of wireless voice and data communications services.
XGT has designed a mobile VoIP (Voice over Internet Protocol) base station and handset product line. Branded as xMax, these products are intended for use by regional carriers (internet service providers, competitive local exchange carriers and entrepreneurial parties) seeking to deliver mobile Internet Protocol voice and data services directly to
consumers without using the incumbent circuit switched or coaxial cable networks. The xMax system provides extended range of operation and an expected superior handset battery performance. Planned future releases of the xMax product line include integrated video and data applications.
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