Shares of xG Technology Inc (NASDAQ:XGTI) were down 43.87% on Friday to $0.55, weighed down by its public offering pricing and warrants issues. The company has a market cap of $2.28 million at 7.37 million shares outstanding. Shares have been trading in a 52-week range of $0.53 to $34.80.
xG Technology is a company that develops a portfolio of intellectual property, which is embedded in its software algorithms that offer cognitive interference mitigation and spectrum access solutions for a range of applications using commercial off the shelf devices. The company has a wireless networks portfolio and targets potential clients like the U.S. Department of Defense in an attempt to offer them wireless communications tools that are secure and reliable.
The company has actually made a few contracts with the Department of Defense across the last twelve months, primarily revolving around its lead product, which is xMax or the implementation of its cognitive radio intellectual property. These long-term contracts could provide a stable source of revenue for the company but a sharp collapse in share prices was seen when xG Technology reported its public offering pricing.
In particular, the company is offering 7,300,000 units at a price of $0.685 per unit, each of which consists of one share of its common stock and 1.25 of a Warrant to purchase one share of its common stock at an exercise price of $0.685 per share. This was already 30% lower than its open market bid, which turned out to be instantly dilutive.
In addition, xG Technology has also granted to the underwriters a 45-day option to acquire an additional 1,095,000 shares and/or 1,368,750 warrants to cover over-allotments in connection with the offering. The company has a total debt of $3 million but its cash on hand is only at $500,000 so the capitalization is likely to be used up quickly. Revenues came in shy of $1 million for the first quarter.
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