XG Technology Inc. (NASDAQ:XGTI) Plunges After a New Portion of Convertible Notes

[[tagnumber 0]]XG Technology Inc. (NASDAQ:XGTI) stock bounced back up in a correction yesterday after it had plunged to a multi–year low on the new sale of convertible notes filed on Monday and after the reverse split. The company‘s financials do not seem good as all but technically XGTI could have another jump today.[[tagnumber 1]] [[tagnumber 0]][[tagnumber 3]][[tagnumber 1]] [[tagnumber 0]]On Tuesday, XGTI closed the session at $2.12 for a share while the gain from the previous close was over 30%. That is not so impressive looking at chart where it is seen that the previous close was actually an at least five–year low for the company. XGTI 1–for–10 reverse split became effective on Friday last week while the trading volume exploded yesterday.[[tagnumber 1]] [[tagnumber 0]] [[tagnumber 1]] [[tagnumber 0]]Technical indicators look very bullish for XGTI today and it could surge again towards the center of its trading range and across the 10– and 20– day moving averages. Yet, fundamentally XGTI has nothing that could support a higher price.[[tagnumber 1]] [[tagnumber 0]]For this year‘s first quarter, the company reported a increase in revenue to $584,000 from $250,000 for the same period last year. That only looks like an increase though, as $480,000 of that had actually been previously recorded as deferred revenues, meaning actual new sales are in fact getting lower.[[tagnumber 1]] [[tagnumber 0]] [[tagnumber 1]] [[tagnumber 15]][[tagnumber 16]][[tagnumber 1]] [[tagnumber 0]]Dilution risk is very high as well. Just in the first three months of the year XGTI issued more than 10 million new shares while it also has various instruments like convertible preferred stock and convertible notes in its capital structure that hide huge potential to dilute shareholders.[[tagnumber 1]] [[tagnumber 0]] [[tagnumber 1]] [[tagnumber 0]]On Monday this week, XGTI filed another 8–K to declare the sale of additional convertible notes with a principal of $466,667 to the issued in June $1,166,000. As the initial notes are due already in December this year, it is not clear how they will be repaid. XGTI has total assets of around $22 million and $16 million of that are intangibles representing capitalized software development costs.[[tagnumber 1]] [[tagnumber 15]] [[tagnumber 1]]