Final Results - '08

Those of you familiar with xG will be able to look through the hyperbole and spot the inaccuracies, lies, and exaggerations that these reports always contain. It’s always entertaining to compare what we know to be true with what xG say is true. Lets’s remind ourselves about AIM rule 16, which in essence says that potentially stock moving news – good OR BAD – must be released to the market as it becomes known.

Where’s the news about ACH? Where’s the news about the collapse of the Florida launch? About the base stations and phones not having FCC approval? About the base stations being returned as they didn’t work?

Let’s have a look at their key points and compare them with the truth:

They Say:
· Recorded sales of a total of 327 base stations, resulting in $16.4 million in revenues, compared to $0.3 million in 2007. Operating Profit before interest and share-based compensation was $7.7 million (2007: $6.2 million loss) and xG made a net profit of $2.0 million (2007: $12.0 million loss)…. [costs of] $6.3 million related to non-cash stock-based compensation costs (2007: $7.1 million)

We Know:
· They’ve shipped basestations to customers that didn’t even want them, and then booked those down as ‘Sales’! How the hell can they sell BTS without FCC approval! They can’t be used, and they don’t work as advertised. So from the very start these accounts are a lie, or at the extreme end of aggressive accounting – booking BTS shipped (to customers who can’t use them, or don’t want them) as receivables and those future receivables as current sales.
· Share based compensation! Who are they compensating and for what?! Fredrik Walhlman, James Woodyatt for the chop-stock they’ve sold, and perhaps a few coppers for Marc too. It’s $6.3M worth of shares – what a pity they can’t be sold for full price, huh?

They Say:
· The Company remains well-financed, with year-end net cash and cash equivalents of $15.8 million (2007: $32.7 million).

We Know:
· They are burning through cash at a record rate: half their cash gone in one year. It’d be interesting to know exactly what these ‘cash equivalents’ are, and what proportion of the cash went to making a network, and what proportion ended up in the hands of Mooers and Branton? I bet they aren’t paying themselves in stock….

They Say:
· The initial phase of deployment of the xMax BSN250 base stations in the Southern Florida market has begun, xG took delivery of the first fully commercial, production-ready TX60 handsets designed and developed by Cambridge Consultants Ltd. and completed testing the integration of the TX60 handset with our BSN250 base station, enabling xMax mobile VoIP calls between our TX60 handsets and base stations. …..The xMax system provides an extended range of operation and is expected to provide superior handset battery performance and double the call capacity of mobile WiMAX networks.

We Know:
· ‘Deployment has BEGUN’? They LAUNCHED November 2006! Their only actual customer dropped them, they delivered unworking BTS to another (and booked it as revenue even though the money was refunded). Where’s the news about any of this? Evidently I missed the news that none of the equipment has FCC approval – and none of it works as advertised.
· Double the call capacity of WiMax! Superior handset battery life! They can’t even get it to work in a very simple, basic demo! Marc – I’ve worked out who your dope dealer is…

They Say:
· xG signed an agreement with Treco International, S.A. to act as its exclusive infrastructure partner in the United States, allowing xMax carriers to finance, by equipment lease, a substantial part of the capital costs needed to deploy xMax networks.

We Know:
· That Johan Bohman who owns Treco is a cocaine fuelled dodgy dealer. And I suspect that Treco seems to be a loan shark for xMax dealers. It’s a clever idea. It probably works like this: All the ‘sales’ go though Treco, which means that xG don’t have to announce who their ‘customers’ are. The BTS is shipped – whether it works or not, or the customer wants it or not – and xG record a ‘sale’ of $75k. Treco gets a kickback of $x,000 (possibly in ‘Share based Compensation’)?. Treco start sending demands to the customer of say $5k a month forever…. The only one that loses is the ‘customer.’
· Oh, and has anybody noticed that a BTS seems to be $50k to anyone else, but if you order 1000 the price goes UP to $75k!? Could that be to increase the figure the end ‘customer’ would owe Treco? It can’t be an increase in unit costs, because they are boasting elsewhere of a margin of 92.5%…!

They Say:
· Continued patent filing activity, enhancing the Company's portfolio of intellectual property. The patent portfolio now comprises a total of 47 United States matters (10 patents issued, 18 pending utility applications and 19 pending provisional applications) and a total of 82 foreign matters (8 issued, 64 pending applications, and 10 applications).

We Know:
· Patents are worth nothing unless the invention actually works, and none of xG’s have raised a flicker of interest from any technological expert. Luckily nobody except Marc has taken out a patent on Gullibility.

Rick Mooers says:
"We have created the xMax Authorized Carrier Partner Program and are actively talking to interested parties and building our pipeline of customers."

We Know:
· They’ve lost: SkyTel, Telefonica, National Grid, Gama, Far Reach, Flashcomm, and ALL the other ‘customers’ that were signed up for the $57M pre-launch in the non-IPO documents. EVERY customer they’ve boasted about they have lost. They also name-dropped: Bear Sterns (old one!) Microsoft, Google, Credit Suisse, GE, Barclays, and the good old Pheonix Foundation. Well, they all came up trumps didn’t they?
· They’ve also lost/parted company with: 2 Nomads, their second biggest shareholder, and more PR companies than I can remember. Great job Rick.

They Say:
· Another significant industry trend witnessed in 2008 was the considerable increase in the number of subscribers choosing flat-rate, unlimited minute wireless calling plans, particularly prepaid plans.

We Know:
· None of them were your subscribers Rick! End users for xMax, umm, Zero.

Richard Mooers..... Roger Branton..... Mats Wennberg..... Olaf Hendgren..... Robyn Harte-Bunting..... Victor Suno..... James Woodyatt..... Palmi Sigmarsson..... Stefan Bennici ..... Gunnar Engellau..... Marc Dannenberg..... Jonas Krepp..... Paul Behler..... Charlie Geller..... Daniel Briggs..... Simon Starr..... Xavier Moreels..... Johan Bohman…and Stuart Schwartz – YOU BOYS TOOK A HELL OF A BEATING – A HELL OF A BEATING.

The Bank Hapoalim Story

Ohh, Johhhnnn. Johhhnn. Where are you John? You remember yesterday when you posted about David Falt having "lost his lawsuit against xG in which he tried to screw shares out of them"? And you remember when I took the opposite view? That it was xG that screwed Falt?

Well look what a few words of Yiddish can get you... The truth is that xG issued certificates to Falt, and others, under the name of xG Technology LLC. They then claimed they had changed their name to xG Technology INC and did the dirty on him and all the others. Here is the truth: as Realtid.se reports - HERE - Roger Branton issued the shares around March 29, 2005. Roger authorized them - 100%. Falt deposited them in the Bank of New York. Later on that year he sold some of them, but when the bank tried to get the certificates xG told them they were Null and Void. xG had stabbed him in the back. Why? Because (reading between the lines) he was disgusted at the way xG were doing business. He was dangerous to them, because he could expose them - so they tried to shut him up by suing him.

All during 2006, claims and counter claims went back and forth between Bank of New York, xG, Bank Hapoalim, Falt and the others, and Roger Branton. He claimed that the certificates HE had signed were null and void because they were issued in xG LLC, when the company was now called xG Inc. Now let's look at the letter John: You'll notice two things. Firstly you'll see that Hapoalim are siding with Falt, they are helping him. He's the one that's been ripped off. Secondly you'll notice that Hapoalim state that xG, their technology, and their principals are DODGY AS FUCK.

And to further prove just how dodgy, nasty, shallow, and vindictive xG are have a look at the two documents beneath it. They were both filed on the 9th November 2006, just four days before the date on the letter from Hapoalim. You'll see that Roger Branton - the same asshole that issued the share certificates - ONLY THEN changes the name from LLC to Inc despite the fact he'd been arguing all year that the name change had already happened! Obviously one suspects that it was only done to deny the sale of the perfectly legal certificates issued. In the writ that followed Hapaolim accused xG of FAILING to inform them of their name change from xG Technology LLC to xG Technology Inc. In fact - as evidenced here - when Falt sold the shares the certificates were perfectly valid

Rick you are a shit.
Roger you are a shit.

John? John? I can't hear you...Speak up....

Rick Mooers CPA

To become a Certified Public Accountant (CPA) is a great achievement. In total there’ll be around SEVEN years of studying to get to this point, and many people have to retake the exams several times such is their difficulty. A CPA denotes a professional of respectability, integrity and honesty, who will according to their code of ethics “commit themselves to honor the public trust” and give “unswerving commitment to honorable behavior, even at the sacrifice of personal advantage”.. .

It turns out that Rick Mooers passed the CPA exam in 1986 (congrats Rick) and got his license number: CP4184. All he had to do was submit some work he’d done as proof of practical experience and he would be a licensed CPA. But, even though he’d done that experience with a couple of firms in Maine he failed to submit anything to the CPA office. Why? He’s 99.9% there! Very strange.

Hmmmmm. Could it be that he discovered that the penalties for a CPA found responsible for financial fraud are draconian? Go straight to Bubba, do not pass go. What would’ve been a civil crime for Joe Public ends up being a criminal offense for a CPA.

Warning...!

Warning - I nearly died from laughing when I saw this. Wear some sort of corset or girdle before clicking on this link. Looks like times are tough for our old buddy Marc Dannenberg. Still, it's nice to see the registration of Flashcomm SA wasn't wasted :-)

LINK

How does it go? MMMMMoooooooHHHHHAAAAAAAAAAAAAaaaaaaaHHHHHHHHHHHaaaaaaaaaa!

El Con Communications, LLC

Obviously with the history of iDigi and the allegations of money being siphoned off then at “50 cents on the dollar” I was interested to have a look at the set up of some of the other companies in the Mooers Branton empire. There is a bewildering amount, a huge number of inactive companies (10 iDigi ‘whatever’ LLCs), but also several active companies too. Obviously the companies and their bank accounts that I suspect that have the real cash in them - the offshore accounts, the accounts in Iceland - are not going to show up on an internet search, but I thought I’d check out the web search at Delaware Corporation House and Florida Corporation House anyway. The websites are great, particularly the Florida one. Anyway, I found some interesting/amusing things:

240 S Pineapple Ave Sarasota, FL 34236
This address pops up as the address of dozens and dozens of companies, not just Mooers and Branton companies either. What is it? A huge tower block? Must be crowded huh? Well in fact it seems like 240 S Pineapple drive is just a lawyers office. The sort of place where you might get an imitation brass plaque outside, and a postbox inside. There are no massive offices for the powerhouse of the MB empire - at least not at their registered address. Why do they always have to be mysterious? To be honest it makes them look like they’ve something to hide :-). Check out some of the companies listed there - I didn’t make these up – I almost choked on my cornflakes when I found the first one:

El Con Communications, LLC
El Con Associates, L.L.L.P
Dodgepoint Associates, LLC
Courthouse Square Associates of St. Pete, Inc
….And dozens of others.

We’ve no way of knowing if any of the above are M&B companies, although they are named perfectly. Does El Con contain any money from the xMax con?

Anyway there are some that we know are M&B companies:

Binghamton Housing Group, L.L.C.
Mooers Branton & Co. Incorporated
Landmark Hospitality, LLC
MOOERS PARTNERS, LLC
MB MERCHANT GROUP, LLC
BRANTON PARTNERS, llc:
Branton Family Company LLC
BRANTON APTS CO., LLC:
SANDHILL MERCHANT GROUP, LLC
CONNECTCOM INC.
CONNECTCOM MERCHANT GROUP, LLC

Most of these we know absolutely nothing about. What assets they have. Where they came from. They’re just entries at the lawyers office. No websites, no mentions. Nothing. The only ones that do have any info on are Binghamton Associates and xG Technology Inc, and they both seem to owe money! Not huge amounts, but when you’ve got $22M in cash in the Company account, plus $70K a month, plus $300k a year, plus bonus, plus share options, you’d have thought these piddling amounts aren’t a problem.

Binghamton Associates LLC has Richard L. Mooers, Kevin S. Zern, and David S. Band (the lawyer) on the filing documents. They’ve just had a nice touch selling THIS hotel for $1.8M to Avichal Corp. With that in mind you’d have thought that the near $15,000 they owe to the City of Binghampton for unpaid water rates for another property at 92-98 State Street would be loose change. But they are about to be cut off! Hmmmm

And of course xG Technology, Inc. Firstly on the Florida filings they were about to be struck off in October 2007 for not returning their annual report, and had to send a nice letter to the authorities. That would’ve been interesting.

The Delaware filing is VERY informative. I’m not an expert on Delaware tax law, but as far as I understand you pay $250 if you’ve less than 1000 shares, or $250 for each million of assets divided by the number of shares. This is just the fee to be incorporated in Delaware, not the actual US business tax they’d pay. In the official filing we get the following information for the 2008 tax year.

Tax/Void Warning - Filing Information
File Number: 3562449
Name: XG TECHNOLOGY, INC
Tax Year: 2008
Tax: $41,590.16
Penalty: $0.00
1.5% Monthly Interest: $76.41
Previous Credit/Balance: $36,520.87 CR
Filing Fee: $25.00
Amount Due: $5,170.70

Begin Date End Date Designation/Stock Class No. of Shares Par Value/Share
05/08/2007 COMMON 500,000,000 .010000
PREFERRED 250,000,000 .010000


Whoa! Seven HUNDRED and fifty MILLION shares! That’s just silly. I thought the 129,925,276 they’ve already issued was a lot - There’s still 620,074,724 to go! That won’t be dilutive…...much! If I understand it correctly, by the tax they owe for this year it seems they value their own assets at $166M – a long way from the $1.5B their promoters were talking about.

The most interesting bit though is for a company with $22M of ‘cash, or cash equivalents’ in hand they don’t seem to be able to find $5k to pay their taxes! Hmmmm.

Going Cheap: 100,000 xG Shares

Interesting story in today’s press. It seems that although there are several Swedish owners of xG stock, none of them is declaring it to the Finance Inspectorate. I wonder why not? It came to light as a guy called ‘Maths O Sundqvist’ who has a company called Skrindan has defaulted on a One Billion SEK loan with Carnegie Bank. Among the assets of the fire sale auction was 100,000 xG shares. I love the way his employee Peter Lind tries to distance himself from ACH, claiming they bought them elsewhere (even though they also had stock in Central Asia Gold too…!), and I also LOVE the way they call xG a ‘Bubble Company’.

And has Vic Suno left xG? It says he was a director ‘until this January’? Rats and sinking ships eh? [Edit: It's been pointed out on iii that this is incorrect. The article actually says he was a Director (of xG), and an employee of ACH until January. My bad. Poor Swedish.]

”The speculative bubble company XG Technology has attracted many venture investors shares. It now turns out that even financier Maths O Sundqvist got in on the company.

The large holdings in Maths O Sundqvists empire is well described. It includes large holdings in established listed company like Industrivärden, Fabege and SCA. During his financial crisis, other parts of his portfolio were in a forced sale, like his holdings in Hexagon and Öresund.

But it is not just the kind of reputable shares included in the portfolio. Carnegie Bank released information before the auction of his Skrindan Company on March 17 that shows the company owns shares in crisis company Central Asia Gold and contentious XG Technology.

According to Peter Lind who worked at Skrindens he bought the 100 000 xG shares in March 2007 for about $ 10, which means a total of about 7 million SEK at the then exchange rate. Peter Lind bought 10,000 himself at the same time..

This means that Sundqvist went into XG-shares near the top. Since 2007, the XG price has fallen to 88 cents as of last Friday, which values the holding at 800 000 SEK.

Several other Swedes are among the major owners of XG Technology. The Swedish-controlled banking firm ACH in Switzerland is one of them. ACH has according to xG's website almost 10 percent of the shares. ACH recently went bankrupt. And for Peter Lind, it is important to distance themselves from the banking firm that is already blacklisted by the Stockholm Stock Exchange, even before the bankruptcy.

”I want to emphasize that we did not buy shares in XG by ACH, but the investment was carried out after a presentation of the company where its future prospects were presented. We saw on a similar investment that we would have done at Sandvik and Volvo.”

Other major shareholder in the company director Mats Wennberg, which increased its holding in the autumn. He bought shares over the past six months stock prices and now owns about 2.6 million shares (2 per cent of the shares). Victor Suno, xG director until January this year , and an employee at ACH, owned under the last known data 250 000 shares.

xG shares have carefully avoided established and regulated fund ownership Sweden. It is clear from the statistics that Finance Inspectorate prepares quarterly. Among Swedish equity funds, which are under the supervision of Finance Inspectorate, there isn’t anyone who owns any xG shares. “

So, as well as ACH’s shares being dumped, this guys 100k will too by the looks of it. Going down. Next stop $0.01?

ACH - Dirty Deeds Done Dirt Cheap

If you had any doubt as to the downright dodgyness of ACH allow me to put that doubt to rest. Theirs is a tale of insider-trading, outright fraud, stock manipulation, and the launches of bogus companies. Let’s start out with a little background.

ACH Securities was founded by a bunch of Swedes, including Olof Hedengren, former CEO of Fischer Partners. He started the firm together with two colleagues from Fischer, the head of asset management, Peter ‘The Turk’ Andersson, and Dennis Carlsson. Other Fisher people who had both been fired for unauthorized trading joined them: Patric Sjölund, and Norwegian Pål Mørch (who later would become a partner in ACH with 12 percent of the company). You’ll come to realize that when someone is caught out insider trading, or doing dodgy deals, they end up in one of three places: ACH, EFG private bank, or prison. These places covet the skills only found in the dregs of the financial world.

As we know ACH were thrown out of the Stockholm market in 2004 for refusing to disclose the identities of person’s insider trading Skandia shares. However they continued to act as if nothing had happened, they had the same mostly Swedish customers, they used the same brokers, the only difference was that the Swiss Privacy laws meant that they could be even more brazen.

Soon enough a hard-core network of people like Bernhard von der Osten-Sacken, Edvin Austbø, and Norwegian financier Arne Fredly would be using ACH to do the deals that no-one else would do. We know that Osten-Sacken has been arrested. Fredly has just won a libel case against a Norwegian newspaper because they couldn’t come up with enough hard evidence for his dealings, but…just because no-one would squeal does not mean he didn’t do it.

Their deals included:

· Insider trading on a number of Electrolux trades
· Insider trading on the Findexa bid on Eniro.
· Insider trading in Gambro before the bid for medical technology company became known in April 2006
· Insider trading on SSAB's acquisition of the North American steel company Ipsco for 56 billion kronor.
· And as recently as October ’08 Arne Fredly bet 500 million on a short position in Ericsson shortly before a profit warning. Strangely, Edvin Austbø made exactly the same trade, at exactly the same time. What a co-incidence.

All these deals were done by ACH. In fact an insider there said to the Dagens Naeringsliv newspaper that they knew what their quarters’ sales were going to be even before any of the sales had happened!

Osten-Sacken was, as we’ve discussed also involved in the Allokton fraud (along with our other old pal Johan Bohman of EFG, and xG via Casper Holdings). When Police were looking to question him about the insider trading he fled – to Switzerland, where he rented a villa in Verbier. He was joined there by Andreas Forsell, the former Finance Director of Allokton, who found another job waiting. Guess where? Yep, ACH Securities!

ACH, despite being banned in Sweden, have worked hard there in the IPO’s of some fairly dodgy companies These include Central Asia Gold, Malka Oil and not least the outright scandal that is TMG International (TMGI).

They punted this company to investors, and then – here’s the nasty bit – were revealed to be responsible for huge short trades in the company from our motley crew in collusion with the owner Jostein Eikeland. The Company lost 96% of its value, and made some people even richer. Eikeland is now being investigated by the Norwegian Economic Crimes Bureau for serious fraud.


Now what is interesting about this is not the dodgy deal, but how it mirrors what could have gone on in xGT. ACH bought TMGI’s shares at a massive discount, and then sold them on the open market for ‘face value’. This is a process known as a ‘Chop-House’ trade, where one buys at literally pennies in the pound. At one stage at the end of 2005/2006 ACH was TMGI's largest shareholder with 65 million shares, that’s around a third of the company. But three months later ACH has disappeared from the shareholder register.

Where did the stock go?

They ended up registered at… SIS Segaintersettle! From there the shares were either sold, or ended up back at TMGI. In effect ACH were using SIS as an extra layer to disguise who the real physical owner of the stock is, just like a computer hacker uses as proxy terminal. It’s very difficult to find out who bought the stock and who sold it (and what chopped price they paid). And if it’s the same person doing both buying and selling then that’s more difficult to detect too…

It seems that it was common practise for ACH. The same pattern was used with Central Asia Gold, listed on the NGM Stock Exchange. [N.B. Who is a MAJOR shareholder of NGM? – Our friend Fredrik Wahlman!] In 2005, there were 50 million shares registered with ACH. Six months later, ACH has disappeared from the shareholder list. Instead, SIS Segaintersettle comes up with 90 million shares, about 40 percent of the company!

Then one looks at Malka Oil, the ‘sister company’ to Central Asia Gold: and one third of the shares end up registered at SIS. Chairman of Malka Oil is Mikhail Malyarenko. He is also a board member of Tomsk Refining with Pål Mørch, partner at ACH. (Look out for the IPO of Tomsk Refining – coming to a Chop House near you…!) Obviously the same motley Crew, with ACH, were merrily insider trading at all these companies.

Now lets remind ourselves of the situation at xG, and see is it fits the pattern:

1. Discounted ‘Chop-House’ issue? – Check!
2. Use of SIS Segaintersettle? – Check!
3. ACH holding masses of stock? – Check!
4. Insiders selling with prior knowledge of stock movements? – Check!
5. Involvement of these insider trading people? Well, we don’t know, BUT Johan Bohman, AND Fredrik Wahlman move in all the same circles…..
6. Collusion between the company’s principals and ACH? – I’ve no doubt whatsoever. Just follow the money.

Now that ACH is closed I’ll make a prediction: Most, if not all of the above names will end up connected with, or working for, EFG Private bank. They are the only other company that can truly appreciate their ‘special’ talents. EFG is owned by one of xG’s major shareholders – Johan Bohman.