SOURCE: Marathon Patent Group

Marathon Patent Group

August 15, 2016 16:01 ET

Marathon Patent Group Announces Second Quarter Financial Results

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

LOS ANGELES, CA--(Marketwired - Aug 15, 2016) - Marathon Patent Group, Inc. (NASDAQ: MARA) ("Marathon" or "Company"), an IP licensing and commercialization company, today announced its operating results for the quarter ended June 30, 2016, as published in its Quarterly Report on Form 10-Q filed today with the Securities and Exchange Commission.

Operating Results for the Quarter Ended June 30, 2016 and Subsequent Events

  • Record Q2 revenue of $34.3 million for the three months ended June 30, 2016

  • Record Q2 non-GAAP net income of $16.5 million, compared to non-GAAP net loss of $4.5 million for Q2 2015

  • Record Q2 GAAP net profit of $7.9 million or $0.53 per basic share compared to a GAAP net loss of $4.5 million or $(0.32) per basic share for Q2 2015

  • Record six months revenue of $36.4 million. First half record operating income of $9.1 million

  • Debt reduction of $7.4M

  • Other operating expenses in Q2 2016 of approximately $4.9 million, a 20% decrease as compared to operating expenses of $6.1 million in Q2 2015 

  • Named Erich Spangenberg as Director of Acquisitions, Licensing, and Strategy primarily focusing on acquisitions, licensing, alliances and strategy for Marathon, with an emphasis on Marathon's expansion into Asia and Europe

  • Added Dr. David Liu to the management team with over 20 years of deep domain experience in the areas of memory and semiconductor technology

  • Entered into a strategic relationship with a large fund and a Fortune Global 50 company on August 11, 2016 to commercialize and monetize 10,000+ patents in a particular industry vertical

  • Entered into agreement with Siemens AG acquiring 307 patents, many deemed Standard Essential Patents

  • Secured a lead investor for 3D Nanocolor

Doug Croxall, Chief Executive Officer of Marathon, stated, "We are clearly pleased with year to date record financial results that we announced today, including improving our balance sheet and successfully retiring a large portion of debt."

Croxall concluded, "As discussed on our previous earnings call, we are refocusing our revenue generation on licenses that provide a recurring revenue feature. The recurring revenue may take the form of fixed quarterly or annual payments by licensees to Marathon and should help investors better model future revenue potential."

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, August 15, 2016 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) 407-4018 ten minutes prior to the scheduled start time. International calls should dial (201) 689-8471.

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, August 29, 2016 by dialing (877) 870-5176 in the U.S. and Canada and (858) 384-5517 internationally and entering the pin number: 13643010.

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 BALANCE SHEETS  
   
    June 30,     December 31,  
2016     2015  
ASSETS   (unaudited)        
Current assets:            
Cash   $ 7,158,779     $ 2,555,151  
Accounts receivable - net of allowance for bad debt of $387,976 and $375,750 for June 30, 2016 and December 31, 2015     128,337       136,842  
Bonds posted with courts     2,383,069       1,748,311  
Prepaid expenses and other current assets, net of discounts of $3,103 for June 30, 2016 and $3,414 for December 31, 2015     177,745       338,598  
      Total current assets     9,847,930       4,778,902  
                 
Other assets:                
Property and equipment, net of accumulated depreciation of $87,662 and $67,052 for June 30, 2016 and December 31, 2015     46,977       61,297  
Intangible assets, net of accumulated amortization of $18,013,247 and $15,557,353 for June 30, 2016 and December 31, 2015     23,488,453       25,457,639  
Deferred tax assets     8,893,421       12,437,741  
Other non current assets, net of discounts of $3,279 and $4,831 for June 30, 2016 and December 31, 2015     204,721       9,169  
  Goodwill     4,453,945       4,482,845  
    Total other assets     37,087,517       42,448,691  
                 
    Total Assets   $ 46,935,447     $ 47,227,593  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
Accounts payable and accrued expenses   $ 6,142,186     $ 6,534,825  
Clouding IP earn out - current portion     -       33,646  
Notes payable, net of discounts of $788,320 and $730,945 for June 30, 2016 and December 31, 2015     8,793,806       10,383,177  
      14,935,992       16,951,648  
                 
Long-term liabilities                
Notes payable, net of discount of $1,016,198 and $1,425,167 for June 30, 2016 and December 31, 2015     9,027,798       12,223,884  
Clouding IP earn out     3,147,054       3,281,238  
Deferred tax liability     789,690       1,044,997  
Revenue share liability     1,000,000       1,000,000  
Other long term liability     47,549       50,084  
Total long-term liabilities     14,012,091       17,600,203  
                 
    Total liabilities     28,948,083       34,551,851  
                 
Stockholders' Equity:                
Preferred stock Series B, $.0001 par value, 50,000,000 shares authorized: 782,004 and 782,004 issued and outstanding at June 30, 2016 and December 31, 2015     78       78  
Common stock, $.0001 par value; 200,000,000 shares authorized; 15,047,141 and 14,867,141 at June 30, 2016 and December 31, 2015     1,505       1,487  
Additional paid-in capital     44,422,717       43,217,513  
Accumulated other comprehensive income (loss)     (1,168,556 )     (1,265,812 )
Accumulated deficit     (25,264,658 )     (29,277,524 )
                 
Total Marathon Patent Group, Inc. stockholders' equity     17,991,086       12,675,742  
                 
Noncontrolling Interest     (3,722 )     -  
                 
Total Stockholders' Equity     17,987,364       12,675,742  
                 
Total liabilities and stockholders' equity   $ 46,935,447     $ 47,227,593  
The accompanying notes are an integral part to these unaudited consolidated financial statements.
 
   
MARATHON PATENT GROUP, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF OPERATIONS  
                 
  For The   For The   For The   For The  
Three Months   Three Months   Six Months   Six Months  
  Ended   Ended   Ended   Ended  
  June 30, 2016   June 30, 2015   June 30, 2016   June 30, 2015  
  (unaudited)   (unaudited)   (unaudited)   (unaudited)  
Revenues $ 34,349,762   $ 1,368,986   $ 36,409,438   $ 5,462,855  
                         
Expenses                        
  Cost of revenues   15,467,763     3,860,210     18,107,740     8,188,375  
  Amortization of patents and website   1,961,411     3,029,000     3,987,310     5,627,461  
  Compensation and related taxes   1,120,924     1,087,058     2,154,270     2,668,132  
  Consulting fees   364,836     329,081     645,612     1,225,624  
  Professional fees   498,212     578,920     903,705     1,348,535  
  General and administrative   223,130     284,976     428,513     504,457  
  Goodwill impairment   83,000     -     83,000     -  
  Patent impairment   620,696     766,498     993,890     766,498  
    Total operating expenses   20,339,972     9,935,743     27,304,040     20,329,082  
                         
Operating income (loss) from continuing operations   14,009,790     (8,566,757 )   9,105,398     (14,866,227 )
                         
Other income (expenses)                        
  Other income (expense)   (17,745 )   7,439     (31,532 )   7,439  
  Foreign exchange gain (loss)   (69,201 )   1,899     (62,223 )   (37,503 )
  Change in fair value adjustment of Clouding IP earn out   169,172     2,304,301     167,830     2,304,301  
  Interest income   931     -     1,862     2  
  Interest expense   (844,407 )   (1,577,083 )   (1,851,256 )   (2,508,623 )
    Total other income (expenses)   (761,250 )   736,556     (1,775,319 )   (234,384 )
                         
Income (loss) before income tax benefit (expense)   13,248,540     (7,830,201 )   7,330,079     (15,100,611 )
                         
Income tax benefit (expense)   (5,345,983 )   3,327,505     (3,320,935 )   5,816,344  
                         
Net income (loss)   7,902,557     (4,502,696 )   4,009,144     (9,284,267 )
                         
Net (income) loss attributable to noncontrolling interests   3,722     -     3,722     -  
                         
Net income (loss) attrributable to Marathon Patent Group, Inc. common shareholders $ 7,906,279   $ (4,502,696 ) $ 4,012,866   $ (9,284,267 )
                         
Income (loss) per common share:                        
Basic $ 0.53   $ (0.32 ) $ 0.27   $ (0.67 )
Fully Diluted $ 0.49   $ (0.32 ) $ 0.25   $ (0.67 )
                         
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                        
Basic   14,994,697     13,998,563     14,980,919     13,937,872  
Fully Diluted   16,031,564     13,998,563     16,017,786     13,937,872  
                         
Other income (loss)                        
  Foreign currency translation adjustments $ (150,171 ) $ 319,905   $ 97,256   $ (630,334 )
The accompanying notes are an integral part to these unaudited consolidated financial statements.
 
   
MARATHON PATENT GROUP, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
             
    For The     For The  
Six Months Ended     Six Months Ended  
    June 30, 2016     June 30, 2015  
Cash flows from operating activities:   (unaudited)     (unaudited)  
Net income (loss)   $ 4,009,144     $ (9,284,267 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:                
  Depreciation     2,710       3,758  
  Amortization of patents and website     3,987,310       5,627,461  
  Deferred tax asset     3,547,856       (5,307,139 )
  Deferred tax liability     (275,490 )     (509,207 )
  Impairment of intangible assets     993,890       766,498  
  Impairment of goodwill     83,000       -  
  Stock based compensation     1,062,200       1,413,724  
  Stock issued for services     136,000       750,334  
  Non-cash interest, discount, and financing costs     664,182       1,625,322  
  Change in fair value of Clouding earnout     (167,830 )     (2,304,301 )
  Allowance for doubtful accounts     12,226       -  
  Other non-cash adjustments     (104,899 )     14,980  
Changes in operating assets and liabilities                
  Bonds posted with courts     (518,455 )     -  
  Accounts receivable     (2,718 )     (487,328 )
  Prepaid expenses and other assets     165,301       51,455  
  Accounts payable and accrued expenses     (469,660 )     2,046,662  
                 
    Net cash provided by (used in) operating activities     13,124,767       (5,592,048 )
                 
Cash flows from investing activities:                
  Acquisition of patents     (1,150,000 )     -  
  Purchase of property, equipment, and other intangible assets     (6,291 )     (20,668 )
    Net cash provided by (used in) investing activities     (1,156,291 )     (20,668 )
                 
Cash flows from financing activities:                
  Payment on note payable in connection with the acquisition of Medtech and Orthophoenix     (2,953,779 )     (4,200,000 )
  Payment on note payable in connection with the acquisition of Orthophoenix     -       (5,000,000 )
  Payment on note payable in connection with the acquisition of Sarif     -       (276,250 )
  Payment on note payable in connection with the acquisition of IP Liquidity     -       (1,109,375 )
  Payment on note payable in connection with the acquisition of Dynamic Advances     -       (2,624,375 )
  Payment on MdR Escrow TLI     -       (50,000 )
  Cash received upon issuance of notes payable (net of issuance costs)     -       19,600,000  
  Payment on Fortress note payable     (3,973,854 )     -  
  Cash received upon exercise of warrants     -       18,751  
  Repayment of convertible notes payable     -       (5,050,000 )
  Payment on note payable     (437,070 )     705,093  
    Net cash provided by (used in) financing activities     (7,364,703 )     2,013,844  
                 
Effect of exchange rate changes on cash     (145 )     3,545  
                 
Net increase (decrease) in cash     4,603,628       (3,595,327 )
                 
Cash at beginning of period     2,555,151       5,082,569  
                 
Cash at end of period   $ 7,158,779     $ 1,487,242  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                
Cash paid for:                
  Interest expense   $ 1,187,074     $ 805,106  
  Taxes paid   $ 27,682     $ 14,662  
  Loan fees   $ -     $ 400,000  
  Cash invested in 3DNano   $ 115,000     $ -  
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:                
Common stock issued in conjunction with note payable   $ -     $ 1,000,000  
Warrant issued in conjunction with note payable   $ -     $ 318,679  
Revenue share liability incurred in conjunction with note payable   $ -     $ 1,000,000  
Convertible debt warrant repricing   $ 6,425     $ -  
Note payable issuance in conjunction with the acquisition of Munitech patents   $ 1,750,000     $ -  
Non-cash interest increase in debt assumed in the Orthophoenix acquisition   $ -     $ 750,000  
Note payable issuance in conjunction with the acquisition of BATO patents   $ -     $ 10,000,000  
The accompanying notes are an integral part to these unaudited consolidated financial statements.
 
   
    Non-GAAP Reconciliation  
    For the Three Months Ended June 30, 2016     For the Three Months Ended June 30, 2015     For the Six Months Ended June 30, 2016     For the Six Months Ended June 30, 2015  
Net income (loss)   $ 7,906,279     $ (4,502,696 )   $ 4,012,866     $ (9,284,267 )
Non-GAAP                                
  Amortization of intangible assets     1,961,411       3,029,000       3,987,310       5,627,461  
  Equity-based compensation     647,764       750,968       1,192,797       2,210,051  
  Impairment of intellectual property     703,696       766,498       1,076,890       766,498  
  Change in earn out liability     (169,172 )     (2,304,301 )     (167,830 )     (2,304,301 )
  Non-cash interest expense     58,492       1,089,798       664,182       1,703,517  
  Deferred tax (benefit) / tax expense     5,345,983       (3,327,505 )     3,320,935       (5,816,344 )
  Other     13,284       1,852       14,936       3,758  
Non-GAAP net income (loss)   $ 16,467,737     $ (4,496,386 )   $ 14,102,086     $ (7,093,627 )
                                 
Weighted average common shares outstanding - basic     14,994,697       13,998,563       14,980,919       13,937,872  
Weighted average common shares outstanding - diluted     16,031,564       13,998,563       16,017,786       13,937,872  
Non-GAAP net income (loss) per common share - basic   $ 1.10     $ (0.32 )   $ 0.94     $ (0.51 )
Non-GAAP net income (loss) per common share - diluted   $ 1.03     $ (0.32 )   $ 0.88     $ (0.51 )
                                 

Contact Information

  • CONTACT INFORMATION
    Marathon Patent Group
    Jason Assad
    678-570-6791
    Email Contact