SOURCE: Marathon Patent Group

Marathon Patent Group

August 14, 2017 16:00 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 14, 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 June 30, 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 June 30, 2017 / Subsequent Events

  • Total revenue of $369 thousand and $34.3 million for the three months ended June 30, 2017 and June 30, 2016, respectively.

  • Operating loss was approximately $2.9 million (including non-cash expenses) for the three months ended June 30, 2017 compared to operating income of $14.0 million for the three months ended June 30, 2016.

  • Our GAAP net loss was $(0.10) per basic and diluted share for the three months ended June 30, 2017, with 22,566,648 weighted average basic and diluted shares outstanding as of June 30, 2017, compared to GAAP income of $0.53 per basic share and $0.49 per diluted share for the three months ended June 30, 2016, with 14,994,697 weighted average basic shares and 16,031,564 weighted average diluted shares outstanding as of June 30, 2016, respectively.

  • On a per share basis, our Non-GAAP net loss was $(0.09) per basic and diluted share for the three months ended June 30, 2017, compared to Non-GAAP income of $1.10 per basic share and $1.03 per diluted share for the three months ended June 30, 2016, respectively.

  • Marathon entered into an agreement with DBD Credit Funding, LLC. whereby 100% of debt was cancelled, and the Company will receive a 45% residual revenue share once DBD recovers its costs and debt amounts in exchange for the assignment of three of the Company's portfolios to DBD.   

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 14, 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, August 28, 2017 by dialing (844) 512-2921 in the U.S. and Canada and (412) 317-6671 internationally and entering the pin number: 13668206.

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.

CONSOLIDATED BALANCE SHEETS        
         
June 30, 2017   December 31, 2016
         
ASSETS            
Current assets:            
  Cash   $ 1,095,721   $ 4,998,314
  Accounts receivable - net of allowance for bad debt of $387,976 as of June 30, 2017 and December 31, 2016     116,336     95,069
  Bonds posted with courts     375,603     -
  Note receivable     588,864     225,982
  Prepaid expenses and other current assets, net of discounts of $2,659 for June 30, 2017 and $3,724 for December 31, 2016     128,718     202,067
    Total current assets     2,305,242     5,521,432
             
Other assets:            
  Property and equipment, net of accumulated depreciation of $128,718 and $108,407 for June 30, 2017 and December 31, 2016     12,213     28,329
  Intangible assets, net of accumulated amortization of $12,691,608 and $11,323,185 for June 30, 2017 and December 31, 2016     11,358,722     12,314,628
  Deferred tax assets     -     -
  Other non current assets, net of discounts of $0 for June 30, 2017 and $797 for December 31, 2016     200,000     201,203
  Goodwill     224,353     222,843
    Total other assets     11,795,288     12,767,003
               
      Total Assets   $ 14,100,530   $ 18,288,435
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
Current liabilities:            
  Accounts payable and accrued expenses   $ 5,294,616   $ 7,217,078
  Clouding IP earn out - current portion     81,930     81,930
  Notes payable, net of discounts of $503,572 for June 30, 2017 and $852,404 for December 31, 2016     5,622,173     13,162,007
      10,998,719     20,461,015
             
Long-term liabilities            
  Notes Payable, net of discount of $1,302,129 for June 30, 2017 and $57,763 for December 31, 2016     11,499,723     4,670,502
  Clouding IP earn out     1,386,203     1,400,082
  Deferred tax Liability     -     -
  Revenue share liability     1,225,000     1,000,000
  Other long term liability     39,853     43,978
    Total long-term liabilities     14,150,779     7,114,562
               
      Total liabilities     25,149,498     27,575,577
             
Stockholders' Deficit:            
  Preferred stock Series B, $.0001 par value, 100,000,000 shares authorized: 782,004 issued and outstanding at June 30, 2017 and December 31, 2016     78     78
  Common stock, $.0001 par value; 200,000,000 shares authorized; 23,257,472 at June 30, 2017 and 18,552,472 at December 31, 2016     2,326     1,856
  Additional paid-in capital     53,950,993     49,877,710
  Accumulated other comprehensive (loss)     (933,245)     (1,060,390)
  Accumulated deficit     (63,749,987)     (57,942,548)
             
  Total Marathon Patent Group Stockholders' Deficit     (10,729,834)     (9,123,294)
             
Non-controlling Interests     (319,134)     (163,848)
             
Total Equity     (11,048,968)     (9,287,142)
             
Total liabilities and stockholders' equity   $ 14,100,530   $ 18,288,435
             
The accompanying notes are an integral part to these audited consolidated financial statements.
             

 

   
   
MARATHON PATENT GROUP, INC. AND SUBSIDIARIES  
                             
                             
    For The     For The     For The     For The  
Three Months     Three Months     Six Months     Six Months  
    Ended     Ended     Ended     Ended  
    June 30, 2017     June 30, 2016     June 30, 2017     June 30, 2016  
                         
Revenues   $   368,800     $ 34,349,762     $ 446,937     $ 36,409,438  
                                   
Expenses                                  
  Cost of revenues       1,024,078       15,467,763       1,479,486       18,107,740  
  Amortization of patents and website       639,887       1,961,411       1,345,846       3,987,310  
  Compensation and related taxes       760,542       1,120,924       1,846,088       2,154,270  
  Consulting fees       85,580       364,836       56,801       645,612  
  Professional fees       645,144       498,212       1,070,830       903,705  
  General and administrative       142,281       223,130       386,286       428,513  
  Goodwill impairment       -       83,000       -       83,000  
  Patent impairment       -       620,696       -       993,890  
    Total operating expenses       3,297,512       20,339,972       6,185,337       27,304,040  
                                   
Operating income (loss) from operations       (2,928,712 )     14,009,790       (5,738,400 )     9,105,398  
                                   
Other income (expenses)                                  
  Other income (expense)       913,357       (17,745 )     898,532       (31,532 )
  Foreign exchange gain (loss)       102,913       (69,201 )     17,050       (62,223 )
  Change in fair value adjustment of Clouding IP earn out       -       169,172       13,879       167,830  
  Warrant income (expense)       208,301       -       (4,907 )     -  
  Interest income       621       931       1,862       1,862  
  Interest expense       (564,680 )     (844,407 )     (1,133,499 )     (1,851,256 )
    Total other income (expenses)       660,512       (761,250 )     (207,083 )     (1,775,319 )
                                   
Loss before benefit for income taxes       (2,268,200 )     13,248,540       (5,945,483 )     7,330,079  
                                   
Income tax expense       (17,242 )     (5,345,983 )     (17,242 )     (3,320,935 )
                                   
Net income (loss)       (2,285,442 )     7,902,557       (5,962,725 )     4,009,144  
                                   
Net loss attributable to non-controlling interests       84,650       3,722       155,286       3,722  
                                   
Net income (loss) attributable to common shareholders   $   (2,200,792 )   $ 7,906,279     $ (5,807,439 )   $ 4,012,866  
                                   
Income (loss) per common share:                                  
Basic   $   (0.10 )   $ 0.53     $ (0.28 )   $ 0.27  
Fully Diluted   $   (0.10 )   $ 0.49     $ (0.28 )   $ 0.25  
                                   
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                                  
Basic       22,566,648       14,994,697       20,822,791       14,980,919  
Fully Diluted       22,566,648       16,031,564       20,822,791       16,017,786  
                                   
Net loss   $   (2,200,792 )   $ 7,906,279     $ (5,807,439 )   $ 4,012,866  
Other Comprehensive Loss:                                  
Unrealized gain (loss) on foreign currency translation       126,062       (150,171 )     127,144       97,256  
Comprehensive loss       (2,074,730 )     7,756,108       (5,680,295 )     4,110,122  
Less: comprehensive income related to non-controlling interest       84,650       3,722       155,286       3,722  
Comprehensive loss attributable to Marathon Patent Group, Inc.   $   (1,990,080 )   $ 7,759,830     $ (5,525,009 )   $ 4,113,844  
                                   
                                   
The accompanying notes are an integral part to these audited consolidated financial statements.  
                                   
                                   
               
MARATHON PATENT GROUP, INC. AND SUBSIDIARIES              
CONSOLIDATED STATEMENTS OF CASH FLOWS              
               
    For The Six     For The Six  
    Months Ended     Months Ended  
    June 30, 2017     June 30, 2016  
Cash flows from operating activities:              
Net loss   $ (5,807,439 ) $ 4,012,866  
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:              
  Depreciation     948     2,710  
  Amortization of patents and website     1,345,846     3,987,310  
  Deferred tax asset     -     3,547,856  
  Deferred tax liability     -     (275,490 )
  Impairment of intangible assets     -     993,890  
  Impairment of goodwill     -     83,000  
  Stock based compensation     183,356     1,062,200  
  Stock issued for services     -     136,000  
  Non-cash interest, discount, and financing costs     59,607     664,182  
  Change in fair value of Clouding earn out     (13,879 )   (167,830 )
  Allowance for doubtful accounts     -     12,226  
  Non-controlling interest     (155,286 )   (3,722 )
  Other non-cash adjustments     (120,703 )   (104,899 )
Changes in operating assets and liabilities              
  Accounts receivable     (21,267 )   (2,718 )
  Bonds posted with courts     (375,603 )   (518,455 )
  Prepaid expenses and other assets     (289,533 )   165,301  
  Other non current assets     1,203     -  
  Accounts payable and accrued expenses     (1,922,462 )   (469,660 )
                 
    Net cash provided by (used) in operating activities     (7,115,212 )   13,124,767  
               
Cash flows from investing activities:              
  Acquisition of patents     -     (1,150,000 )
  Purchase of property, equipment, and other intangible assets     (4,194 )   (6,291 )
    Net cash used in investing activities     (4,194 )   (1,156,291 )
               
Cash flows from financing activities:              
  Payment on note payable in connection with the acquisition of Medtech and Orthophoenix     -     (2,953,779 )
  Payment on Fortress note payable       -     (3,973,854 )
  Payment on 3Dnano license note payable       (100,000 )   -  
  Cash received upon issuance of equity (net of issuance costs)       3,753,063     -  
  Issuance of Warrants       137,334     -  
  Medtronic note payable       600,000     -  
  3Dnano convertible notes payable       50,000     -  
  Payments on Siemen's notes payable       (1,000,000 )   -  
  Payments on notes payable to vendors       (125,000 )   -  
  Payments on notes payable, net       (103,000 )   (437,070 )
    Net cash provided (used in) by financing activities       3,212,397     (7,364,703 )
               
Effect of exchange rate changes on cash     4,416     (145 )
               
Net decrease in cash     (3,902,593 )   4,603,628  
               
Cash at beginning of period     4,998,314     2,555,151  
               
Cash at end of period   $ 1,095,721   $ 7,158,779  
               
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:              
  Cash paid for:              
    Interest expense   $ 456,917     1,187,074  
    Taxes paid   $ 17,242     27,682  
    Loan fees   $ -   $ -  
    Cash invested in 3DNano   $ -   $ 115,000  
               
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:        
Revenue share liability incurred in conjunction with note payable   $ 225,000   $ -  
Warrant issued in conjunction with common stock issuance   $ 257,957   $ -  
Note payable issued in conjunction with the acquisition of Munitech patents   $ -   $ 1,750,000  
Convertible debt warrant repricing   $ -   $ 6,425  
               
The accompanying notes are an integral part to these audited consolidated financial statements.  
               
                 
    Non-GAAP Reconciliation
    For the Three Months Ended June 30, 2017   For the Three Months Ended June 30, 2016   For the Six Months Ended June 30, 2017   For the Six Months Ended June 30, 2016
Net income (loss) attributable to Common Shareholders   $ (2,200,792)   $ 7,906,279   $ (5,807,439)   $ 4,012,866
Non-GAAP                        
Amortization of intangible assets & depreciation     640,364     1,961,411     1,346,794     3,987,310
Equity-based compensation     141,931     647,764     183,356     1,192,797
Impairment of intangible assets     -     703,696     -     1,076,890
Change in the fair value of the clouding IP liability     -     (169,172)     (13,879)     (167,830)
Warrant < Income > Expense, net     (208,301)     -     4,907     -
Non-cash Other < Income > expense, net     (913,357)     -     (898,532)     -
Non-cash interest expense     449,998     58,492     685,209     664,182
Deferred tax benefit     -     5,345,983     -     3,320,935
Other     1,526     13,284     2,535     14,936
Non-GAAP earnings (loss)   $ (2,088,631)   $ 16,467,737   $ (4,497,049)   $ 14,108,086
                         
                         

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