Firm scores in IPO; yet losses could linger

A long-anticipated IPO for Sarasota-based xG Technology, a firm that markets and sells a patented system for Internet-based phone calls, was the culmination of a busy week July 19.

The IPO was a hit: The firm (symbol: XGTI) raised more than $7 million, and the stock reached nearly $6 a share after it opened at $5.51. The investment, though, is clearly a projection on the company's future and its technology, because the current and recent past has been long on promises and short on profits. In fact, in a pre-IPO public filing, the company states it “has a history of operating losses and we expect to continue to realize net losses for at least the next 12 months.”

The firm lost $13.79 million in 2012, the Securities and Exchange Commission filing states, and its accumulated deficit since it was founded in 2002 is $124.1 million. “The company expects to continue to have development costs as it develops the next generation of products,” the filing states. “We intend to invest significantly in our business before we expect cash flows from operations will be adequate to cover our anticipated expenses.”

Executives add that the company, which holds multiple patents in wireless broadband technology, might require additional capital in the future to develop more products. The IPO was filed under the federal JOBS (Jumpstart Our Business Startups) Act of 2012, which provides for less reporting in some cases.

Beyond the IPO, xG Technology made some changes to its board of directors. Four directors, including xG Technology Chief Financial Officer Roger Branton, who helped launch the company, have left the board. Another xG official who helped found the business, Rick Mooers, relinquished his executive chairman position, according to a company statement.

Four new board members were named to the board after the IPO, including Ken Hoffman, a public utilities attorney and the vice president of regulatory affairs at Florida Power & Light. George Schmitt, a technology and telecommunications executive who has been on the xG board since March 2011, will replace Mooers in the executive chairman position.