Less Cloak, More Dagger
July 02, 2009
A Gulf Coast technology company, courtesy of a major investment from a Swedish billionaire, saw its revenues grow more than 5,000% in one year. Now, after a decade lurking in the background, the company is going into attack mode.
Rick Mooers and Roger Branton have won the entrepreneurial equivalent of Powerball: Sales at their company, Sarasota-based xG Technology, jumped 5,366% last year, from $300,000 to $16.4 million — turning a $12 million loss into a $2 million profit in the process.
Growth like that — recession or boom time — is normally enough to set off a parade of cartwheels in the street.
But Mooers and Branton aren’t back flipping just yet. The longtime business partners and merchant bankers are instead bracing for the biggest challenge ever for xG: Mass market acceptance for their product that aims to provide the world’s first inexpensive way to provide mobile phone service over the Internet.
“Our biggest risk isn’t technical, it isn’t financial and it’s not even people,” says Mooers, xG’s chairman and chief executive officer. “Our biggest risk now is whether someone out there will get this technology and try to crush us.”
In many ways, it’s an old story for Mooers and Branton, who have spent a large part of the past decade battling a triple-headed monster of negative press, lawsuits alleging fraud and reams of industry cynicism and doubts. The company, which has been publicly traded on the London Stock Exchange since 2006, has about 70 employees that work out of a downtown Sarasota corporate office and a research and development laboratory in Fort Lauderdale.
Its technology is based on several patented Wi-Fi related systems invented by Joe Bobier, who turned his ham radio hobby into what xG officials claim is the is the Holy Grail of wireless communications — using VoIP, Voice over
Internet Protocol, for cell phone calls, something the industry giants haven’t been able to do.
Bobier, who studied electronics and satellite communications in the U.S. Navy, came upon the discovery in the late 1990s while building his own Internet Wi-Fi service business in his hometown of Parkersburg, W.V. Bobier found he could transmit large quantities of data through low frequency radio waves, as opposed to the common and more expensive practice of using higher frequencies. “It’s cheaper and faster communications,” Branton says.
Bobier first teamed up with Branton and Mooers in 1999. Now he’s xG’s operations chief, where he oversees the company’s development of both its own cell phones and base stations to augment the technology. The company’s business model relies on utilizing what it calls its xMax network, a proprietary system that operates independently from legacy cellular networks such as Verizon or AT&T.
The xMax network, when paired with the xG phones and base stations, offers a new alternative in cell phone and Internet technology, the company claims. The key is in the frequencies xG uses: the low frequency radio waves
Bobier discovered are free, compared to the millions of dollars cell phone giants pay for high frequency waves, known as spectrum licensees.
To some, this all sounds too good to be true — a take shared by a few in the blogosphere and wireless communications industry who have resorted to posting attacks against both the company and Mooers, Branton and Bobier individually. A few of the anti-xG Web sites appear at or near the top of Google searches on the company. Some of the company’s early supporters and investors have also sued the company under fraud allegations, suits that were settled in 2002 and 2003.
Says Mooers: “There’s a lot of skepticism when you are doing something unconventional.”
A big boost
Swedish billionaire Johan Bohman, however, has embraced xG and its unconventional technology.
One of Bohman’s companies, Zurich-based Treco International, signed a multi-year contract to buy 1,000 base stations from xG late last year at a cost of $75,000 each — a $75 million deal that made up the bulk of xG’s 2008 revenues. The contract includes an option to buy 4,000 more base stations, adding $300 million to the deal.
Bohman lives part of the year in London, according to an October 2008 article in the Financial Times, which also stated that the somewhat secretive tycoon made his money in the international private equity market. Treco’s U.S.-based CEO, Richard Kromka, handles the xG investment for Bohman; Kromka was recently appointed to xG’s board of directors and splits his time now between Miami and Sarasota.
“We made a pretty educated decision to invest in this,” says Kromka, who ran a $200 million hedge fund for Deutsche Bank before going to work for Bohman a few years ago. “This is like no other company I’ve ever seen.”
Treco is essentially betting that xG’s technology will be its entry point into the lucrative industry of cell phone networks.
Kromka says the plan for Treco, once xG’s xMax is universally accepted in the marketplace, is to leverage its base station investment by becoming a service provider to a host of potential mammoth clients, from Google and
Apple to government entities to independent local phone companies known as ILECs. Treco can then charge those entities a lease fee for using its base stations.
Kromka realizes that for Treco’s base station investment to pay off, xG has to convince the marketplace that its technology works. He says the company’s top executives boost his confidence, as he was especially impressed by learning that Mooers and Branton built the company, protected the technology and survived the naysayers for nine years with little debt and without any outside venture capital.
Indeed, Mooers and Branton estimate that since 2001 they have spent between $5 million and $10 million of their own money through their merchant bank, Mooers Branton & Co., in developing xG and the xMax technology. They also raised tens of millions of dollars in investments from international investors prior to Bohman and Treco.
Bohman, Treco and xG’s other shareholders are also betting that Branton and Mooers’ long-range plans for xG will come to fruition. While mobile VoIP is the company’s bull’s eye for now, xG is aiming to leverage its xMax technology for several other users. That includes developing and selling a smart phone for mobile broadband use and creating a desktop modem.
‘Unique and revolutionary’
Up to the Treco deal, Mooers and Branton spent much of the past few years trying to balance the delicate line of running a public company while trying to protect their technology from competitors. It was mostly uncharted territory for the business partners, who met as accountants while working in and around Philadelphia in the mid-1980s.
They both enjoyed the data side of the work, but weren’t too keen on the rigid structure of a life in an accounting firm. Mooers suggested to Branton one day in the early 1990s that they start a merchant bank, which is similar to a venture capital operation, only with a lot more personal money at stake.
It all sounded great to Branton, except for one hiccup: “The only problem back then,” says Branton, “is Rick and I didn’t have any money.”
But Mooers convinced Branton to dump his calculator and take the leap anyway. “We just wanted to prove we weren’t only bean counters,” Mooers says. “We wanted to do something entrepreneurial.”
The pair set out to find business plans it could get passionate about and invest in through the merchant bank. For example, it worked with a telecommunications company in the mid 1990s, helping it go public. It later invested in a hospitality company and moved the merchant banks’ headquarters to Sarasota.
Then, in a trip to West Virginia in 1999, Mooers and Branton met Bobier, as the merchant bankers had invested in a few small companies run by Bobier’s family. Mooers and Branton were immediately wowed by Bobier’s advance work in mobile communications. “We recognized that it was a unique and revolutionary idea and that we had to protect it,” says Branton.
By 2002, Bobier had moved to Sarasota, where Mooers and Branton staked him with $500,000 and gave him six months to turn the theories behind the technology into something substantial. Mooers and Branton took leadership roles in the company, while pushing the still-active merchant bank to the background.
The period from 2002 to 2008 was a fitful one for xG. The cell phone industry was rapidly maturing and the company was trying to innovate while simultaneously keeping up with the changes. But as word in the technology community got out about what xG was doing, the naysayers began to multiply. Some doubters were and remain skeptical purely on technology grounds, xG executives believe, while others have hidden competitive agendas.
The lawsuits against xG, including a highly publicized one filed by a European investor, were both costly and emotionally draining to defend. “At the time,” says Branton, “if you were a shareholder with us, you weren’t looking too good.”
But with the Treco contract leading the way, the battles Mooers and Branton are fighting are about to become less cloak and more dagger. The company is projecting 2009 will be one of its best years ever. Says Branton: “We want to be to the wireless cell phone industry what Skype was to the landline industry.”
Mooers, in the company’s 2008 annual report, also says xG is on the cusp of something big. “In our analysis, no alternative to the xMax Mobile VoIP solution exists,” says Mooers. “It’s clear that the prospects for xG, its products and its technology have never been better.”
AT A GLANCE
xG Technology
Headquarters: Sarasota
CEO: Rick Mooers
FY 2008 Revenues: $16.4 million
Stock symbol: XGT (London Stock Exchange)
Patents: 10 granted, 37 pending
Recent stock price: $1.85
52-week stock-price range: $0.49 to $6
Price-earnings ratio (trailing 12 months): 1.45
Dividend: N/A
Market capitalization: $2.45 million
Source: Google Finance
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Please put a date that this was published IN the article. Yes, I know… It I very handy to tell me that today is July 9th… instead of the date of the article!
“Market capitalization: $2.45 million”
Do some backgroud check before writing stories like this. The market cap @ $1.85 is about $250 million. And the “revenues” are nothing more than trade recievebles… they will never convert into payments.
XG has to convince the marketplace whether the technology works or not? Either it works or it doesn’t. All of these celebrated “sales” are to companies controlled by shareholders who have no communications operating history. According to the company, National Grid, Gama and Telefonica all took a look and didn’t see any value in the technology.
I’m impressed the Mooers and Branton had no money to start with, yet after helping with a small telecom IPO and investing in a small hospitality company they had $5 to $10 million to invest in XG. In 2002 the article claims they staked Bobier with $500,000. All of the money on the XG balance sheet has been raised by investors and the only increase in shares for Mooers and Branton have been in the form in compensation.
Where is this $5 to 10 million that Mooers and Branton have invested? No mention that they pay themselves $840,000 a year.
I realize this was basically a press release from xg with passing reference to the major red flags associated with this company.
Baseball is back spreading the same old smears and deception again. xG have never claimed that Gama, Telefonica and NGW ”...didn’t see any value in the technology.” That is Baseball’s inference based purely on speculation.
FYI, Baseball has obsessively stalked xG Technology on other bulletin boards for the last two years despite claiming to have no interest in the company. He is one of the ”...few in the blogosphere and wireless communications industry who have resorted to posting attacks against both the company and Mooers, Branton and Bobier individually.”
When asked what his occupation or interest in xG was on another forum, he repeatedly refused to answer and then lied that he was some sort of financial professional in an investment banks. I don’t know many investment bankers in the current climate who have time to obsessively stalk companies they claim not to have any position or interest in, do you?
This is very typical of those “supporters” of xg technology. I brought up issues with the company and the management team and he attacks me personally. Notice he did not address the actual subjects. My personal attacks against MB have been limited to their activities in regards to XG.
XG announced that Gama, Telefonica and National Grid were all reviewing the technology under a non-binding agreement. Dominatus, do you have any evidence that xg has recieved a dime from any of these companies? All of those non-binding agreements expired without any comments from the company.
What about the $100 million deal with Far Reach Communications? I questioned how a small webhosting company in Florida can obtain $100 million in financing and was personally attacked by Dominatus. Turns out it was all a PR ruse by a boiler room individual named Marc Dannenberg who helped xg sell their securities in the past.
These are all typical boiler room tactics. Claim to have a revolutionary technology, but do not allow outside, independent scrutiny. Personally attack any criticism and label it a conspiracy by competitors. Issue press releases implying connections with established companies to establish legitimacy with misleading phrasing. It’s been 7 years and they have still yet to earn a single $1 from a vendor not associated with a shareholder.
Prove me wrong just once Dominatus.
More of the typical lies from .Baseball’. Firstly, I have never attacked him personally but have asked him to explain his interest in xG Technology since he has been such a persistent and dishonest critic of the company. He refused to explain what his interest is and, when pressed, claimed to work for an investment bank. Baseball is clearly from the US and from the times of his posts must have been posting in company time (if he really is an investment banker which he isn’t). He has shown absolutely amateurish knowledge of thre capital markets, has obsessively stalked the company online for years now and has lied about his occupation. Draw your own conclusions!
Put up or shut up, Baseball. Tell us your interest in xG, your occupation and your employer. Otherwise admit you are have l,ied about your personal status and hidden behind the anonymity of the web to do so.
As for the $100 million, that was part of the Admission Document, if memory serves me right, which was verified by the Nominated Advisor through Due Diligence at the time of listing. It was not any type of “PR ruse” and Marc Dannenberg had absolutely nothing to do with the Listing process in any way. Baseball knows all this but he just lies and makes stuff up to attack the company. Changing economic circumstances have caused many financial institutions to withdraw credit lines from clients./ Looks like that is what happened with Far Reach and since Far Reach couldn’t produce the cash, they were fired by XG.
Come on, Baseball. Tell the world who you really are and why you have been relentlessly pursuing xG for close to three years now. Stop hiding behind a computer screen like a coward.
I am sure that Baseball will come back with some absurd, disingenuous response that he knows is based upon lies and distortion. Some shareholders in xG have speculated that he is a former employee of iDigi (a previous incarnation of xG) who lost his job when that company had troubles. Most people move on with their lives in circumstances like that, others become embittered and have to blame someone else for their misfortunes. Guess which camp Baseball is in?
He sure as hell isn’t an investment banker or any sort of financial professional.
I don’t intend to engage further with Baseball in this thread as arguing with him is like arguing with someone who believes the moon landings were faked or that the Twin Towers were brought down by the US government. People like that aren’t interested in the truth so will not be persuaded by the truth.
I simply want to make it clear to readers that Baseball is well known to some of us who have been following xG as shareholders for some time now and he clearly has his own agenda which has no room for the facts. I recommend you treat his postings here with extreme skepticism.
I have challenged you multiple times to show just one lie. I do find it amusing that you would claim you never attacked me personally and call me dishonest in the same sentence.
There is some irony that you continuously use the word obsessive to describe me while spending so much time discussing and speculating about me.
Here are the facts; anyone is free to judge for themselves.
** Shareholders in a previous MB company called iDigi sued for fraud and received shares of xg technology as compensation. Several former insiders of the company have also sued alleging fraud. The company claimed they were listing the shares on AIM to help them appear more legitimate to vendors in contract negotiations. This of course led to no contracts outside of affiliates of shareholders. My great conspiracy theory is that the only way that the iDigi shares could get liquidity is to have the shares listed on an exchange.
** The company utilized a European boiler room to sell shares.
** In 7 years, the company has not received a dime from a company not affiliated with XG shareholders. This seems odd for a company with such a revolutionary technology.
** The company once claimed a black box demonstration failed due to “military jamming equipment”
** Another former investor claims a presentation by MB and Bobier “did not work at all, as the people running it found out after the presentation—when the ‘magic dust’ had disappeared.”
** The company announced they were raising prices due to strong demand, when the didn’t have any customers!
Here is another conspiracy theory. In the article above, there is a claim that MB have spent $5 to $10 million on XG over the past few years, yet that investment was never announced nor appeared on the balance sheet or income statement. Here is excerpt from a strong quoting a former CEO of iDigi…..(Heimann) claims that Mooers and another partner, Roger Branton, wanted to “adjust” entries in the 1999 year-end financial figures “that would show investments in the $10s (of millions) and $100 millions range by valuing their contributions at exorbitant amounts, without any reference to reality.” Sounds familiar, probably just a coincidence.
XG is a scam! This article is a simple PR job from XG and shouldn’t have been written if the journalist had done some background checks.
This is a puff piece that must not have undergone any independent fact-checking. Anyone who actually knows something about radio communications can look at xG’s patents and other publications and see that they don’t have a clue. The theoretical limits of what’s possible in digital radio have been known since the basic principles were published over 60 years ago. They’re based on solid mathematical proofs that are universally accepted, outside of xG Technology at least.
xG is following the classic pattern set by so many would-be breakthrough outfits before them: a naive, untrained inventor thinks he has created something revolutionary, and by the time he learns otherwise he has already received so much money and adulation from his investors that there’s no going back. Promises are broken, delays mount and the excuses pile up. They become obsessed with secrecy. They refuse to permit any independent verification, claiming unspecified competitors want to either steal or destroy their invention, conveniently omitting the fact that patents exist precisely to protect against this sort of thing.
Cranks and crackpots pursuing perpetual motion are well known, and many still exist. It is not as well known that the communications field has its own set of cranks who think, or at least claim, that they can beat basic laws of physics and mathematics. Investors would do well to educate themselves or consult competent professionals because, while they can be fooled, nature never will be.
Claude Shannon and Baseball68 are right on target. Domitianus is either a director of xG or an investor that has alot to lose, because he/she didn’t do due diligence on the company before investing. Part of this due diligence, if it would have been done, would have dug up the fact that a group of senior level engineers that formed the core technical arm of the company left xG over a year and a half ago, because the company has zero value. This fact alone should raise a serious <font color=“red”>RED FLAG</font> to any investor looking at xG.
What a delightful person indeed, this “holy crow/witchhunter/etc”. He evidently has a large position in xG and spends considerable effort trying to sell its shares.
But he must not have very much confidence in the company he touts as he spends his time scouring the Internet for xG critics (and there are many). Anyone brash enough to question xG’s claims will be treated to relentless attacks, harassment and threats by email and anonymous phone calls.
With friends like him, and claims for their technology that have never been successfully proven in public, xG Technology doesn’t need many more enemies.
An interesting technical discussion of xG’s claims for it’s “Flash” modulation can be found at
http://www.ka9q.net/xmax.html