SOURCE: Marathon Patent Group

May 15, 2017 16:00 ET

Marathon Patent Group Announces First Quarter Financial Results

Conference Call Scheduled Today at 4:30 p.m. Eastern Time

LOS ANGELES, CA--(Marketwired - May 15, 2017) - Marathon Patent Group, Inc. (NASDAQ: MARA) ("Marathon" or "Company"), an IP licensing and commercialization company, today announced its operating results for the three months ended March 31, 2017, as published in its Quarterly Report on Form 10-Q filed today with the Securities and Exchange Commission.

Operating Results for the Quarter Ended March 31, 2017 / Subsequent Events

  • Total revenue of $78 thousand and $2.1 million for the three months ended March 31, 2017 and March 31, 2016, respectively.

  • Net operating loss was approximately $2.8 million (including non-cash expenses) for the three months ended March 31, 2017 compared to a net operating loss of $4.9 million for the three months ended March 31, 2016. The net operating loss includes non-cash operating expenses, which primarily relate to share based compensation and amortization and impairment of patents, in the amounts of $0.7 million and $3.0 million for the three months ended March 31, 2017 and March 31, 2016, respectively.

  • Our GAAP net loss was $(0.19) per basic and diluted share for the three months ended March 31, 2017, with 19,059,559 weighted average basic and diluted shares outstanding as of March 31, 2017, compared to a GAAP net loss of $(0.26) per basic and diluted share for the three months ended March 31, 2016, with 14,967,141 weighted average basic and diluted shares outstanding as of March 31, 2016.

  • On a per share basis, our Non-GAAP net loss was $(0.13) per basic and diluted share for the three months ended March 31, 2017, compared to a Non-GAAP net loss of $(0.16) per basic and diluted share for the three months ended March 31, 2016.

  • Entered into agreement related to a payoff of the debt held by DBD Credit Funding, LLC.

Doug Croxall, Chief Executive Officer of Marathon, stated, "As expected, our first quarter was unsurprisingly light. While there were revenue opportunities, we remain unwilling to compromise what we believe to be reasonable licenses to try and impact a particular quarter. It's for that reason we've always advised that our financial performance should be evaluated on an annual basis, as opposed to quarterly.

Croxall added, "On Friday May 12, 2017, we filed a Form 8K with the SEC which represents the initial step in our debt restructuring plan. We entered into an agreement with DBD Credit Funding, LLC, a subsidiary of Fortress Investment Group, under which we can pay them the principal owed of $15,763,240 plus accrued interest on or before August 15, 2017. Upon payment of the note principal and interest obligation, DBD's ongoing entitlement to additional payments based upon revenues will be reduced to five (5%) percent of the gross revenues received from only the patent portfolios the Company currently owns or licenses. We are particularly pleased with the agreement and the amendment is expected to have no negative impact on our normal course of operations already being in line with our existing operating plan."

Conference Call
Marathon will host a corresponding conference call to discuss the results with Chief Executive Officer Doug Croxall and Chief Financial Officer Frank Knuettel II on Monday May 15, 2017 at 4:30 PM ET/1:30 PM PT. To participate in the conference call, investors from the U.S. and Canada should dial (877) 407-0792 ten minutes prior to the scheduled start time. International calls should dial (201) 689-8263.

In addition, the call will be broadcast live over the Internet and can be accessed through the Investor Relations section of the Company's website at www.marathonpg.com. The broadcast will be archived online upon completion of the conference call. A telephonic replay of the conference call will also be available until 11:59 p.m. ET on Monday, May 29, 2017 by dialing (844) 512-2921 in the U.S. and Canada and (412) 317-6671 internationally and entering the pin number: 13661788.

About Marathon Patent Group
Marathon is an IP licensing and commercialization company. The Company acquires and manages IP rights from a variety of sources, including large and small corporations, universities and other IP owners. Marathon has a global focus on IP acquisition and management. The Company's commercialization division is focused on the full commercialization lifecycle which includes discovering opportunities, performing due diligence, providing capital, managing development, protecting and developing IP, assisting in execution of the business plan, and realizing shareholder value. To learn more about Marathon Patent Group, visit www.marathonpg.com.

Safe Harbor Statement
Certain statements in this press release constitute "forward-looking statements" within the meaning of the federal securities laws. Words such as "may," "might," "will," "should," "believe," "expect," "anticipate," "estimate," "continue," "predict," "forecast," "project," "plan," "intend" or similar expressions, or statements regarding intent, belief, or current expectations, are forward-looking statements. While the Company believes these forward-looking statements are reasonable, undue reliance should not be placed on any such forward-looking statements, which are based on information available to us on the date of this release. These forward looking statements are based upon current estimates and assumptions and are subject to various risks and uncertainties, including without limitation those set forth in the Company's filings with the Securities and Exchange Commission (the "SEC"), not limited to Risk Factors relating to its patent business contained therein. Thus, actual results could be materially different. The Company expressly disclaims any obligation to update or alter statements whether as a result of new information, future events or otherwise, except as required by law.

 
 
MARATHON PATENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
  March 31,     December 31,  
  2017     2016  
               
ASSETS              
Current assets:              
Cash $ 493,452     $ 4,998,314  
Accounts receivable - net of allowance for bad debt of $387,976 for March 31, 2017 and December 31, 2016, respectively   103,397       95,069  
Bonds posted with courts   351,647       -  
Note Receivable   588,864       225,982  
Prepaid expenses and other current assets, net of discounts of $3,279 for March 31, 2017 and $3,724 for December 31, 2016   226,088       202,067  
Total current assets   1,763,448       5,521,432  
               
Other assets:              
Property and equipment, net of accumulated depreciation of $118,420 and $108,407 for March 31, 2017 and December 31, 2016   20,414       28,329  
Intangible assets, net of accumulated amortization of $12,028,755 and $11,323,189 for March 31, 2017 and December 31, 2016   11,683,170       12,314,628  
Other non current assets, net of discounts of $797 for March 31, 2017 and December 31, 2016, respectively   200,000       201,203  
Goodwill   224,353       222,843  
    Total other assets   12,127,937       12,767,003  
               
    Total Assets $ 13,891,385     $ 18,288,435  
               
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)              
Current liabilities:              
  Accounts payable and accrued expenses $ 6,117,663     $ 7,217,078  
  Clouding IP earn out - current portion   81,930       81,930  
  Notes payable, net of discounts of $440,219 and $852,404 for March 31, 2017 and December 31, 2016   3,666,278       13,162,007  
    9,865,871       20,461,015  
               
Long-term liabilities              
Notes Payable, net of discount of $572,763 and $57,763 for March 31, 2017 and December 31, 2016   12,685,536       4,670,502  
Clouding IP earn out   1,386,203       1,400,082  
Revenue share liability   1,225,000       1,000,000  
Other long term liability   255,400       43,978  
Total long-term liabilities   15,552,139       7,114,562  
               
    Total liabilities   25,418,010       27,575,577  
               
Stockholders' equity (deficit):              
Preferred stock Series B, $.0001 par value, 100,000,000 shares authorized: 782,004 issued and outstanding at March 31, 2017 and December 31, 2016   78       78  
Common stock, $.0001 par value; 200,000,000 shares authorized; 19,302,472 and 18,552,472 issued at March 31, 2017 and December 31, 2016   2,627       1,877  
Additional paid-in capital   51,313,656       49,877,689  
Accumulated other comprehensive loss   (1,059,308 )     (1,060,390 )
Accumulated deficit   (61,549,194 )     (57,942,548 )
               
    Total Marathon Patent Group stockholders' equity (deficit)   (11,292,141 )     (9,123,294 )
               
Noncontrolling Interests   (234,484 )     (163,848 )
               
Total stockholders' equity (deficit)   (11,526,625 )     (9,287,142 )
               
Total liabilities and stockholders' equity (deficit) $ 13,891,385     $ 18,288,435  
               
               

The accompanying notes are an integral part to these unaudited consolidated condensed financial statements.

 
 
MARATHON PATENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
  For The Three     For The Three  
  Months Ended     Months Ended  
  March 31, 2017     March 31, 2016  
               
Revenues $ 78,137     $ 2,059,676  
               
Expenses              
  Cost of revenues   451,762       2,639,976  
  Amortization of patents and website   705,958       2,025,899  
  Compensation and related taxes   1,085,546       1,033,346  
  Consulting fees   (28,779 )     280,776  
  Professional fees   425,686       405,493  
  General and administrative   247,652       217,010  
  Patent impairment   -       373,195  
    Total operarating expenses   2,887,825       6,975,695  
               
Operating loss from continuing operations   (2,809,688 )     (4,916,019 )
               
Other income (expenses)              
  Other income (expense)   (14,825 )     (2,159 )
  Foreign exchange gain (loss)   (85,862 )     6,978  
  Change in fair value adjustment of Clouding IP earn out   13,879       (1,342 )
  Warrant expense   (213,208 )     -  
  Interest income   1,241       931  
  Interest expense   (568,819 )     (1,006,850 )
    Total other expenses   (867,594 )     (1,002,442 )
               
Loss from continuing operations before benefit for income taxes   (3,677,282 )     (5,918,461 )
               
Income tax benefit   -       2,025,048  
               
Net loss   (3,677,282 )     (3,893,413 )
               
Net (income) loss attributable to noncontrolling interests   70,636       -  
               
Net loss $ (3,606,646 )   $ (3,893,413 )
               
Loss per common share:              
Basic and fully diluted $ (0.19 )   $ (0.26 )
               
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:              
Basic and fully diluted   19,059,559       14,967,141  
               
Net loss attributable to common shareholders $ (3,606,646 )   $ (3,893,413 )
Other comprehensive loss:              
  Unrealized gain on foreign currency translation   1,083       247,427  
Comprehensive loss   (3,605,563 )     (3,645,986 )
Less: comprehensive income related to non-controlling interest   70,636       -  
Comprehensive loss attributable to Marathon Patent Group, Inc. $ (3,534,927 )   $ (3,645,986 )
               
               

The accompanying notes are an integral part to these unaudited consolidated condensed financial statements.

   
   
MARATHON PATENT GROUP, INC. AND SUBSIDIARIES  
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS  
(Unaudited)  
  For The Three     For The Three  
  Months Ended     Months Ended  
  March 31, 2017     March 31, 2016  
Cash flows from operating activities:              
Net loss $ (3,606,646 )   $ (3,893,413 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:              
  Depreciation   471       1,652  
  Amortization of patents and website   705,958       2,025,899  
  Deferred tax asset   -       (1,934,419 )
  Deferred tax liability   -       (76,463 )
  Impairment of intangible assets   -       373,195  
  Stock based compensation   41,424       550,436  
  Non-cash interest, discount, and financing costs   52,733       605,690  
  Change in fair value of Clouding earnout   (13,879 )     1,342  
  Non-controlling interest   (70,636 )     -  
  Other non-cash adjustments   67,164       (33,607 )
Changes in operating assets and liabilities:              
  Accounts receivable   (8,328 )     (15,275 )
  Bonds posted with courts   (351,647 )     359,960  
  Prepaid expenses and other assets   (386,903 )     192,352  
  Other non current assets   1,203       2,069  
  Accounts payable and accrued expenses   (1,099,415 )     1,953,751  
               
  Net cash provided by (used in) operating activities   (4,668,501 )     113,169  
               
Cash flows from investing activities:              
  Purchase of property, equipment, and other intangible assets   (2,097 )     (2,097 )
  Net cash provided by (used in) investing activities   (2,097 )     (2,097 )
               
Cash flows from financing activities:              
  Cash received upon issuance of common stock   1,262,865       -  
  Issuance of Warrants   132,427       -  
  Proceeds from Fortress note payable   4,500,000       -  
  Payment on Fortress note payable   (4,500,000 )     (1,184,600 )
  Payments on Seimens notes payable   (1,000,000 )     -  
  Payments on 3D Nano notes payable, gross   (100,000 )     -  
  Payments on notes payable to vendors   (25,000 )     (63,840 )
  Payments on notes payable, net   (103,000 )     -  
  Net cash provided (used in) by financing activities   167,292       (1,248,440 )
               
Effect of exchange rate changes on cash   (1,556 )     2,607  
               
Net decrease in cash   (4,504,862 )     (1,134,761 )
               
Cash at beginning of period   4,998,314       2,555,151  
               
Cash at end of period $ 493,452     $ 1,420,390  
               
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:              
  Cash paid for:              
    Interest expense $ 333,608     $ 401,159  
    Taxes paid $ -     $ 7,999  

The accompanying notes are an integral part to these unaudited consolidated condensed financial statements.

  Non-GAAP Reconciliation  
  For the Quarter Ended
March 31, 2017
    For the Quarter Ended
March 31, 2016
 
Net loss attributable to Marathon Patent Group, Inc. common shareholders (3,606,646 )   (3,893,413 )
Non-GAAP          
  Amortization of intangible assets 705,958     2,025,899  
  Equity-based compensation 41,424     551,033  
  Impairment of intellectual property -     373,195  
  Change in earn out liability (13,879 )   1,342  
  Warrant income (expense) 213,208     -  
  Non-cash interest expense 235,211     605,690  
  Deferred tax (benefit) / tax expense -     (2,025,048 )
  Other 1,480     1,652  
Non-GAAP net income (loss) (2,423,244 )   (2,359,650 )
           
           

The below is a reconciliation to our US GAAP loss per common share, basic and diluted.

  Non-GAAP Reconciliation  
  For the Quarter Ended
March 31, 2017
    For the Quarter Ended
March 31, 2016
 
Non-GAAP net loss $ (2,423,244 )   $ (2,359,650 )
Denominator              
  Weighted average common shares - Basic and Diluted   19,059,559       14,967,141  
Non-GAAP loss per common share:              
  Non-GAAP loss - Basic and Diluted $ (0.13 )   $ (0.16 )
               
The below is a reconciliation to our US GAAP loss per common share - basic and diluted:              
Net loss attributable to Common Shareholders $ (3,606,646 )   $ (3,893,413 )
Denominator              
    Weighted average common shares - Basic and Diluted   19,059,559       14,967,141  
GAAP earnings (loss) per common share:              
  GAAP earnings (loss) - Basic and Diluted $ (0.19 )   $ (0.26 )
                 
                 

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