SOURCE: Marathon Patent Group

November 14, 2016 16:00 ET

Marathon Patent Group Announces Third Quarter Financial Results

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

LOS ANGELES, CA--(Marketwired - Nov 14, 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 September 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 Sept 30, 2016 / Subsequent and Other Year to Date Events

  • YTD revenue of $36.5 million for the nine months ended September 30, 2016.

  • We generated total revenue of $43 thousand and $6.4 million for the three months ended September 30, 2016 and September 30, 2015, respectively.

  • Net operating loss was approximately $10.7 million (including non-cash expenses) for the three months ended September 30, 2016 compared to $3.1 million for the three months ended September 30, 2015. 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 $8.1 million and $3.8 million for the three months ended September 30, 2016 and September 30, 2015, respectively.

  • With 15,047,141 shares outstanding, on a per share basis, our GAAP net loss was $(0.42) per basic and diluted share for the three months ended September 30, 2016, compared to a GAAP net loss of $(0.15) per basic and diluted share for the three months ended September 30, 2015.

  • On a per share basis, our Non-GAAP net loss was $(0.21) per basic and diluted share for the three months ended September 30, 2016, compared to a Non-GAAP net loss of $(0.01) per basic and diluted share for the three months ended September 30, 2015.

Doug Croxall, Chief Executive Officer of Marathon, stated, "While pleased with our record year to date revenues, our third quarter was unsurprisingly very 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 concluded, "As discussed on our previous earnings call, we continue to refocus 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 November 14, 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, November 28, 2016 by dialing (844) 512-2921 in the U.S. and Canada and (412) 317-6671 internationally and entering the pin number: 13649802.

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.

           
  September 30, 2016     December 31, 2015  
ASSETS (Unaudited)     (Audited)  
Current Assets              
  Cash $ 1,294,950     $ 2,555,151  
  Accounts receivable - net of allowance for bad debt of $387,976 and $375,750 for September 30, 2016 and December 31, 2015   81,865       136,842  
  Bonds posted with courts   980,919       1,748,311  
  Prepaid expenses and other current assets, net of discounts of $2,483 for September 30, 2016 and $3,414 for December 31, 2015   153,388       338,598  
    Total current assets $ 2,511,122     $ 4,778,902  
               
Other assets:              
  Property and equipment, net of accumulated depreciation of $98,347 and $67,052 for September 30, 2016 and December 31, 2015 $ 38,389     $ 61,297  
  Intangible assets, net of accumulated amortization of $16,438,642 and $15,557,353 for September 30, 2016 and December 31, 2015   19,551,678       25,457,639  
  Deferred tax assets   11,918,920       12,437,741  
  Other non current assets, net of discounts of $2,969 and $4,831 for September 30, 2016 and December 31, 2015   201,031       9,169  
  Goodwill   4,483,129       4,482,845  
    Total other assets $ 36,193,147     $ 42,448,691  
               
    Total Assets $ 38,704,269     $ 47,227,593  
               
LIABILITIES AND STOCKHOLDERS' EQUITY              
Current liabilities:              
Accounts payable and accrued expenses $ 6,054,015     $ 6,534,825  
Clouding IP earn out - current portion   110,100       33,646  
Notes payable, net of discounts of $818,919 and $730,945 for September 30, 2016 and December 31, 2015   11,139,623       10,383,177  
Total current liabilities $ 17,303,738     $ 16,951,648  
               
Long-term liabilities              
  Notes payable, net of discount of $798,966 and $1,425,167 for September 30, 2016 and December 31, 2015 $ 6,456,740     $ 12,223,884  
  Clouding IP earn out   1,082,586       3,281,238  
  Deferred tax liability   438,709       1,044,997  
  Revenue share liability   1,000,000       1,000,000  
  Other long term liability   45,763       50,084  
    Total long-term liabilities $ 9,023,798     $ 17,600,203  
               
    Total Liabilities $ 26,327,536     $ 34,551,851  
               
Stockholders' Equity:              
Preferred stock Series B, $.0001 par value, 50,000,000 shares authorized: 782,004 issued and outstanding at September 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 September 30, 2016 and December 31, 2015   1,505       1,487  
Additional paid-in capital   44,901,535       43,217,513  
Accumulated other comprehensive income (loss)   (959,401 )     (1,265,812 )
Accumulated deficit   (31,539,066 )     (29,277,524 )
               
    Total Marathon Patent Group stockholders' equity $ 12,404,651     $ 12,675,742  
               
Noncontrolling interests   (27,918 )     -  
               
Total Stockholders' Equity $ 12,376,733     $ 12,675,742  
               
Total liabilities and stockholders' equity $ 38,704,269     $ 47,227,593  
               
               
                       
  For The Three     For The Three     For The Nine     For The Nine  
  Months Ended     Months Ended     Months Ended     Months Ended  
  September 30, 2016     September 30, 2015     September 30, 2016     September 30, 2015  
  (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
                       
Revenues 43,113     6,407,997     36,452,551     11,870,851  
                       
Expenses                      
  Cost of revenues 1,094,378     4,002,040     19,202,118     12,190,415  
  Amortization of patents and website 2,030,886     2,884,269     6,018,196     8,511,730  
  Compensation and related taxes 1,252,571     903,685     3,406,841     3,571,817  
  Consulting fees 257,420     643,702     903,032     1,869,326  
  Professional fees 432,496     882,213     1,336,201     2,230,748  
  General and administrative 183,771     177,494     612,284     681,951  
  Goodwill impairment -     -     83,000     -  
  Patent impairment 5,531,383     -     6,525,273     766,498  
    Total Operating Expenses 10,782,905     9,493,403     38,086,945     29,822,485  
                       
Operating loss (10,739,792 )   (3,085,406 )   (1,634,394 )   (17,951,634 )
                       
  Other income (expenses)                      
  Other expense (37,116 )   6,646     (68,647 )   14,085  
  Foreign exchange gain (loss) (175,850 )   (20,090 )   (238,073 )   (57,593 )
  Change in fair value adjustments of Clouding IP earn out 1,954,378     597,047     2,122,208     2,901,348  
  Interest Income 931     135     2,793     137  
  Interest expense. (649,065 )   (1,078,615 )   (2,500,321 )   (3,587,238 )
  Loss on debt extinguishment -     (654,000 )   -     (654,000 )
    Total Other income (expenses) 1,093,278     (1,148,877 )   (682,040 )   (1,383,261 )
  -     -              
Loss before (provision for) benefit from income taxes (9,646,514 )   (4,234,283 )   (2,316,434 )   (19,334,895 )
                       
(Provision for) benefit from income taxes 3,347,909     483,815     26,974     6,300,159  
                       
Net loss (6,298,605 )   (3,750,468 )   (2,289,460 )   (13,034,736 )
                       
Net loss attributible to noncontrolling interests 24,195     -     27,918     -  
  -     -              
Net loss attributable to Marathon Patent Group, Inc. common shareholders (6,274,410 )   (3,750,468 )   (2,261,542 )   (13,034,736 )
                       
Loss per common share:                      
Basic and fully diluted (0.42 )   (0.26 )   (0.15 )   (0.92 )
                       
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                   -  
Basic and fully diluted 15,047,141     14,376,118     14,944,852     14,094,891  
                       
Other comprehensive income (loss)                      
Foreign currency translation adjustments 209,159     45,628     306,415     (584,706 )
                       
                       
           
  For The Nine     For The Nine  
  Months Ended     Months Ended  
  September 30, 2016     September 30, 2015  
  (Unaudited)     (Unaudited)  
Cash flows from operating activities:              
Net loss attributable to Marathon Patent Group, Inc common shareholders $ (2,261,542 )   $ (13,034,736 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:              
  Depreciation   3,780       5,668  
  Amortization of patents and website   6,018,196       8,511,730  
  Allowance for doubtful accounts   12,226       -  
  Deferred tax asset   531,757       (5,579,418 )
  Deferred tax liability   (638,268 )     (709,280 )
  Impairment of intangible assets   6,525,273       766,498  
  Impairment of goodwill   83,000       -  
  Stock based compensation   1,541,615       1,961,505  
  Stock issued for services   136,000       1,084,834  
  Loss on debt exstinguishment   -       654,000  
  Non-cash interest, discount, and financing costs   952,231       1,926,865  
  Change in fair value of Clouding earnout   (2,122,198 )     (2,901,348 )
  Non-controlling interest   (27,918 )     -  
  Other non-cash adjustments   96,996       (13,244 )
Changes in operating assets and liabilities              
  Accounts receivable   43,763       (2,109,984 )
  Prepaid expenses and other assets   (6,652 )     60,938  
  Bonds posted with court   883,695       -  
  Accounts payable and accrued expenses   (557,832 )     6,454,467  
               
  Net cash provided by (used in) operating activities   11,214,122       (2,921,505 )
               
Cash flows from investing activities:              
  Acquisition of patents   (3,552,656 )     -  
  Purchase of property, equipment, and other intangible assets   (8,387 )     (22,520 )
    Net cash provided by (used in) investing activities   (3,561,043 )     (22,520 )
               
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  
  Repayment of notes payable   (5,379,105 )     -  
  Cash received upon exercise of warrants   -       18,751  
  Repayment of convertible notes payable   -       (5,050,000 )
  Payment on note payable   (578,804 )     (42,500 )
    Net cash provided (used in) by financing activities   (8,911,688 )     1,266,251  
               
Effect of exchange rate changes on cash   (1,592 )     4,044  
               
Net decrease in cash   (1,260,201 )     (1,673,730 )
               
Cash at beginning of period   2,555,151       5,082,569  
               
Cash at end of period $ 1,294,950     $ 3,408,839  
               
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:              
  Cash paid for:              
  Interest expense $ 1,391,567     $ 1,660,372  
  Taxes paid $ 36,218     $ 54,437  
    Loan fees $ -     $ 400,000  
Cash invested in 3DNano $ 115,000     $ -  
Cash invested in PG Technologies $ 1,000,000     $ -  
               
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  
Note payable issuance in conjunction with the acquisition of GE patent $ 1,000,000     $ -  
Non-cash interest increase in debt assumed in the Orthophoenix acquisition $ -     $ 750,000  
Note payable issuance in conjunction with the acquisition of BATO patent $ -     $ 10,000,000  
Note payable issuance in conjunction with the acquisition of Seimens patent $ 1,755,635     $ -  
Note payable issuance in conjunction with the acquisition of 3Dnano Liscense $ 200,000     $ -  
Conversion from AP to NP $ -     $ 705,093  
               
               
   
  Non-GAAP Reconciliation  
  For the Three Months Ended September 30, 2016     For the Three Months Ended September 30, 2015     For the Nine Months Ended September 30, 2016     For the Nine Months Ended September 30, 2015  
Net income (loss) attributable to Marathon Patent Group, Inc. common shareholders   (6,274,410 )     (3,750,468 )     (2,261,542 )     (13,034,736 )
Non-GAAP                              
  Amortization of intangible assets   2,030,886       2,884,269       6,018,196       8,511,730  
  Equity-based compensation   478,819       901,446       1,677,616       3,111,498  
  Impairment of Intellectual Property   5,531,383       -       6,608,273       766,498  
  Change in Earn Out Liability   (1,954,378 )     (597,047 )     (2,122,208 )     (2,901,348 )
  Non-cash interest expense   288,049       301,544       952,231       1,926,866  
  Deferred tax (benefit) / Tax expense   (3,347,909 )     (483,815 )     (26,974 )     (6,300,159 )
  Loss on note payable   -       654,000       -       654,000  
  Clawback on Medtronic debt   -       -       -       750,000  
  Other   12,468       1,631       28,448       14,458  
Non-GAAP net income (loss)   (3,235,092 )     (88,440 )     10,874,040       (6,501,193 )
                               
Weighted average common shares outstanding:                              
  Basic   15,047,141       14,376,118       14,944,852       14,094,891  
  Fully diluted   15,047,141       14,376,118       15,984,269       14,094,891  
                               
Non-GAAP net income (loss) per common share - basic and diluted                              
  Basic $ (0.21 )   $ (0.01 )   $ 0.73     $ (0.46 )
  Fully diluted $ (0.21 )   $ (0.01 )   $ 0.68     $ (0.46 )
                               

Contact Information