Marathon Patent Group Reports 2016 Financial Results

LOS ANGELES, CA--(Marketwired - Mar 30, 2017) - Marathon Patent Group, Inc. (NASDAQ: MARA) ("Marathon" or the "Company"), an IP licensing and commercialization company, announced today its 2016 year-end financial results. Highlights included:

• 2016 revenue up 93% to $36.6 million

• Non-GAAP earnings of $8 million or $0.53 per weighted average basic share

• Approximately $5 million in cash as of December 31, 2016

• Reduced outstanding debt by $4.8 million since December 31, 2015

• 19 portfolios totaling 12,000 plus patents covering distinct technology areas; five portfolios in active licensing campaigns

• 14 portfolios have generated revenue to date

• Ten portfolios have generated a net positive cash flow in excess of their cost to acquire and enforce the portfolio

Commenting on the Company's 2016 financial results, Doug Croxall, Founder & Chief Executive Officer of Marathon, stated, "Marathon saw annual revenues almost double in 2016 compared to 2015 as a result of our continuing focus and discipline regarding appropriate license agreements versus the need to meet quarterly expectations."

"We remain optimistic with regard to the fundamental opportunity ahead of us. Currently, we manage a collective pool of quality assets that far surpasses any other time in our history, consisting of over 12,000 assets compared to just 330 this time last year," Croxall concluded.

2016 Year-End Results

Revenue increased approximately 93%, to $36.6 million for the year ended December 31, 2016 ("FY 2016"), compared to $19.0 million of revenue for the year ended December 31, 2015 ("FY 2015"). The increase in revenue in 2016 resulted primarily from licenses issued by our Dynamic Advances and Orthophoenix subsidiaries, with the Dynamic Advances settlement occurring shortly before commencement of the scheduled trial.

Revenues from the five largest licenses in 2016 accounted for approximately 97% of the Company's revenue for the year ended December 31, 2016 and revenues from the five largest licenses in 2015 accounted for approximately 62% of the Company's revenue for the year ended December 31, 2015.

Direct costs of revenues for the years ended December 31, 2016 and December 31, 2015 were approximately $19.1 million and $16.6 million, respectively. For the year ended December 31, 2016, this represented an increase of approximately $2.5 million, or 15%. Direct costs of revenue include contingent payments related to patent enforcement legal costs, patent enforcement advisors and inventors. Direct costs of revenue also includes various non-contingent costs associated with enforcing the Company's patent rights and otherwise in developing and entering into settlement and licensing agreements that generate the Company's revenue. Such costs include other legal fees and expenses, consulting fees, data management costs and other costs. Direct costs of revenues for 2016 were higher than in 2015 due to higher revenues in 2016. Direct costs of revenues in 2015 were a higher percentage of revenue than in 2016 based on a fixed fee engagement agreement with a law firm that represented one of the Company's subsidiaries in two United States trials during the year, an increase in enforcement activity in Germany and to a lesser extent France and preparation for a significant number of trials in both the United States and Germany in 2015 in the Company's Dynamic Advances, Signal IP and TLI subsidiaries.

Other operating expenses increased 18% to approximately $33.1 million in FY 2016 as compared to approximately $28.1 million in FY 2015. This increase in other operating expenses in 2016 compared to 2015 resulted from an increase in patent impairment expenses in the amount of approximately $6.2 million in 2016 compared to 2015 and goodwill impairment expenses in 2016 of approximately $4.3 million compared to no goodwill impairment expenses in 2015. These increases were partially offset by a decrease in patent amortization expenses of $3.3 million, a decrease of consulting and professional fees of $1.8 million and a decline of $0.3 million in other general and administrative expenses.

Operating expenses for the years ended December 31, 2016 and December 31, 2015 include non-cash operating expenses totaling approximately $25.8 million and $20.8 million, respectively. The results for the year ended December 31, 2016 represent an increase in non-cash operating expenses in the amount of approximately $5.0 million or 24%, compared to the non-cash operating expenses for the year ended December 31, 2015. When the Company acquires patents and patent rights, the Company capitalizes those assets and amortizes the costs over the remaining useful lives of the assets. All patent amortization expenses are non-cash expenses.

For the year ended December 31, 2016, net income on a Non-GAAP basis was $0.53 per basic common share compared to net loss per basic common share on a Non-GAAP basis of $(0.48) for the year ended December 31, 2015. On a diluted common share basis, net income on a Non-GAAP basis for the year ended December 31, 2016 was $0.49 per diluted common share compared to a net loss on a Non-GAAP basis of $(0.48) per diluted common share for the year ended December 31, 2015.

Investor 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 Thursday, March 30, 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 Thursday, April 13, 2017 by dialing (844) 512-2921 in the U.S. and Canada and (412) 317-6671 internationally and entering the pin number: 13658360.

About Marathon Patent Group, Inc.

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.

Safe Harbor Statement

This news release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are based upon our current expectations and speak only as of the date hereof. Our actual results may differ materially and adversely from those expressed in any forward-looking statements as a result of various factors and uncertainties, including the effect of the global economic downturn on technology companies, the ability to successfully develop licensing programs and attract new business, rapid technological change in relevant markets, changes in demand for current and future intellectual property rights, legislative, regulatory and competitive developments addressing licensing and enforcement of patents and/or intellectual property in general and general economic conditions. Our Annual Report on Form 10-K, recent and forthcoming Quarterly Reports on Form 10-Q, recent Current Reports on Forms 8-K and 8-K/A, and other filings with the Securities and Exchange Commission (the "SEC") discuss some of the important risk factors that may affect our business, results of operations and financial condition. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

The results achieved in the most recent quarter are not necessarily indicative of the results to be achieved by us in any subsequent quarters, as it is currently anticipated that Marathon Patent Group's financial results will vary, and may vary significantly, from quarter to quarter. This variance is expected to result from a number of factors, including risk factors affecting our results of operations and financial condition referenced above, and the particular structure of our licensing transactions, which may impact the amount of inventor royalties and contingent legal fees expenses we incur period to period.

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 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
				December 31, 2016				December 31, 2015
ASSETS
Current assets:
	Cash			$	4,998,314			$	2,555,151
	Accounts receivable - net of allowance for bad debt of $387,976 and $375,750 for December 31, 2016 and December 31, 2015				95,069				136,842
	Bonds posted with courts				-				1,748,311
	Prepaid expenses and other current assets, net of discounts of $3,724 for December 31, 2016 and $3,414 for December 31, 2015				428,049				338,598
		Total current assets			5,521,432				4,778,902
Other assets:
	Property and equipment, net of accumulated depreciation of $108,407 and $67,052 for December 31, 2016 and December 31, 2015				28,329				61,297
	Intangible assets, net				12,314,628				25,457,639
	Deferred tax assets				-				12,437,741
	Other non current assets, net of discounts of $797 and $4,831 for December 31, 2016 and December 31, 2015				201,203				9,169
	Goodwill				222,843				4,482,845
		Total other assets			12,767,003				42,448,691
		Total Assets		$	18,288,435			$	47,227,593
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
	Accounts payable and accrued expenses			$	7,217,078			$	6,534,825
	Clouding IP earn out - current portion				81,930				33,646
	Notes payable, net of discounts of $852,404 and $730,945 for December 31, 2016 and December 31, 2015				13,162,007				10,383,177
					20,461,015				16,951,648
Long-term liabilities
	Notes Payable, net of discount of $572,763 and $1,425,167 for December 31, 2016 and December 31, 2015				4,670,502				12,223,884
	Clouding IP earn out				1,400,082				3,281,238
	Deferred tax liability				-				1,044,997
	Revenue share liability				1,000,000				1,000,000
	Other long term liability				43,978				50,084
Total long-term liabilities					7,114,562				17,600,203
		Total liabilities			27,575,577				34,551,851
Stockholders' Equity (Deficit):
	Preferred stock Series B, $.0001 par value, 100,000,000 shares authorized: 782,004 issued and outstanding at December 31, 2016 and December 31, 2015				78				78
	Common stock, $.0001 par value; 200,000,000 shares authorized; 18,552,472 and 14,867,141 at December 31, 2016 and December 31, 2015				1,877				1,487
	Additional paid-in capital				49,877,689				43,217,513
	Accumulated other comprehensive loss				(1,060,390	)			(1,265,812	)
	Accumulated deficit				(57,942,548	)			(29,277,524	)
		Total Marathon Patent Group stockholders' equity (deficit)			(9,123,294	)			12,675,742
Non-controlling Interests					(163,848	)			-
Total Equity (Deficit)					(9,287,142	)			12,675,742
Total liabilities and stockholders' equity (deficit)				$	18,288,435			$	47,227,593

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

MARATHON PATENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
				For The				For The
				Year Ended				Year Ended
				December 31, 2016				December 31, 2015
Revenues				$	36,629,276			$	18,977,794
Expenses
	Cost of revenues				19,064,473				16,603,792
	Amortization of patents and website				7,453,004				10,825,164
	Compensation and related taxes				5,483,031				5,419,252
	Consulting fees				1,279,092				2,324,248
	Professional fees				1,797,922				2,548,492
	General and administrative				840,179				1,143,869
	Goodwill impairment				4,336,307				-
	Patent impairment				11,958,882				5,793,409
		Total operarating expenses			52,212,890				44,658,226
Operating loss from continuing operations					(15,583,614	)			(25,680,432	)
Other income (expenses)
	Other income (expense)				(57,454	)			170,706
	Foreign exchange gain (loss)				(367,847	)			(61,868	)
	Change in fair value adjustment of Clouding IP earn out				1,832,872				6,137,116
	Interest income				4,353				1,068
	Interest expense				(3,140,375	)			(4,245,982	)
	Loss on debt extinguishment				-				(1,416,915	)
		Total other income (expenses)			(1,728,451	)			584,125
Loss before benefit for income taxes					(17,312,065	)			(25,096,307	)
Income tax benefit (expense)					(11,516,807	)			8,156,448
Net loss					(28,828,872	)			(16,939,859	)
Net income (loss) attributable to non-controlling interests					163,848				-
Net loss attributable to common shareholders				$	(28,665,024	)		$	(16,939,859	)
Loss per common share:
Basic and fully diluted				$	(1.89	)		$	(1.19	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and fully diluted					15,178,056				14,208,787

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

MARATHON PATENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
			For The				For The
			Year Ended				Year Ended
			December 31, 2016				December 31, 2015
Net loss attributable to Marathon Patent Group, Inc.			$	(28,828,872	)		$	(16,939,859	)
Other Comprehensive Loss:
	Unrealized gain (loss) on foreign currency translation			205,422				(877,455	)
Comprehensive loss attributable to Marathon Patent Group, Inc.			$	(28,623,450	)		$	(17,817,314	)

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

MARATHON PATENT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

																	Accumulated
	Preferred										Add'l						Other						Total
	Stock/Units					Common Stock					Paid						Comprehensive			Non-			Stockholders'
			Par					Par			in			Accumulated			Income			Controlling			Equity
	Shares		Value			Shares		Value			Capital			Deficit			(Loss)			Interest			(Deficit)
BALANCE - December 31, 2014	932,000		$	93		13,791,460		$	1,379		$	36,977,169		$	(12,337,665	)	$	(388,357	)	$	-		$	24,252,619
Equity compensation expense	-			-		-			-			2,490,175			-			-						2,490,175
Issue common stock for services	-			-		210,000			21			900,479			-			-						900,500
Exercise stock options and warrants	-			-		31,276			4			18,745			-			-						18,749
Warrant issued in conjunction with debt financing	-			-		-			-			318,679			-			-						318,679
Common stock issud in conjunction with debt restructuring	-			-		200,000			20			653,980			-			-						654,000
Common stock issued in conjunction with debt financing	-			-		134,409			13			999,987			-			-						1,000,000
Conversion of series B Preferred Stock	(199,996	)		(20	)	199,996			20			-			-			-						-
Series B Preferred Stock compensation expense	50,000			5		-			-			345,329			-			-						345,334
Issue common stock in litigation settlement	-			-		300,000			30			512,970			-			-						513,000
Currency translation loss	-			-		-			-			-			-			(877,455	)					(877,455	)
Net Loss	-			-		-			-			-			(16,939,859	)		-			-			(16,939,859	)
BALANCE -December 31, 2015	782,004			78		14,867,141			1,487			43,217,513			(29,277,524	)		(1,265,812	)		-			12,675,742
Equity compensation expense	-			-		-			-			1,817,344			-			-			-			1,817,344
Common stock issued for services	-			-		180,000			18			135,982			-			-						136,000
Issue common stock	-			-		3,481,997			349			4,653,731			-									4,654,080
Issue warrants						-			-			50			-									50
Warrant exercise to purchase common stock	-			-		23,334			23			46,644			-									46,667
Convertible debt warrant repricing	-			-		-			-			6,425			-			-						6,425
Currency translation loss	-			-		-			-			-			-			205,422						205,422
Net Loss	-			-		-			-			-			(28,665,024	)		-			(163,848	)		(28,828,872	)
BALANCE -December 31, 2016	782,004		$	78		18,552,472		$	1,877		$	49,877,689		$	(57,942,548	)	$	(1,060,390	)	$	(163,848	)	$	(9,287,142	)

The accompanying notes are an integral part of these audited consolidated financial statements.

MARATHON PATENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
				For The				For The
				Year Ended				Year Ended
				December 31, 2016				December 31, 2015
Cash flows from operating activities:
Net loss				$	(28,828,872	)		$	(16,939,859	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
		Depreciation			4,262				7,578
		Amortization of patents and website			7,453,004				10,825,164
		Provision for allowance for doubtul accounts			12,226				375,750
		Deferred tax asset			12,437,741				(7,618,580	)
		Deferred tax liability			(1,044,998	)			(660,455	)
		Impairment of intangible assets			11,958,882				5,793,409
		Impairment of goodwill			4,336,307				-
		Stock based compensation			1,817,344				2,490,175
		Stock issued for services			136,000				1,245,834
		Loss on debt extinguishment			-				1,416,915
		Non-cash interest, discount, and financing costs			1,223,341				2,220,992
		Change in fair value of Clouding earnout			(1,832,872	)			(6,137,116	)
	Other non-cash adjustments				121,617				260,938
Changes in operating assets and liabilities
Accounts receivable					29,547				(295,608	)
Prepaid expenses and other assets					(81,486	)			(116,791	)
Bonds posted with courts					1,748,311				(45,915	)
Accounts payable and accrued expenses					682,253				4,216,331
		Net cash provided by (used in) operating activities			10,172,607				(2,961,238	)
Cash flows from investing activities:
Acquisition of patents					(3,681,358	)			-
Purchase of property, equipment, and other intangible assets					(8,388	)			(58,386	)
		Net cash used in investing activities			(3,689,746	)			(58,386	)
Cash flows from financing activities:
Payment on note payable in connection with the acquisition of Medtech and Orthophoenix					(2,953,779	)			(4,318,287	)
Payment on note payable in connection with the acquisition of Orthophoenix					-				(5,500,000	)
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
Cash received upon issuance of common stock (net of issuance costs)					4,654,130				-
Repayment of notes payable					(5,379,103	)			-
Cash received upon exercise of warrants					46,667				18,751
Repayment of convertible notes payable					-				(5,050,000	)
Payments on notes payable, net					(375,805	)			(181,626	)
		Net cash provided (used in) by financing activities			(4,007,890	)			508,838
Effect of exchange rate changes on cash					(31,808	)			(16,632	)
Net increase (decrease) in cash					2,443,163				(2,527,418	)
Cash at beginning of period					2,555,151				5,082,569
Cash at end of period				$	4,998,314			$	2,555,151
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
	Cash paid for:
		Interest expense		$	1,917,034			$	1,982,140
		Taxes paid		$	43,052			$	168,378
		Loan fees		$	-			$	400,000
Cash invested in 3DNano				$	788,097			$	-
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				$	944,296			$	-
Non-cash interest increase in debt assumed in the Orthophoenix acquisition				$	-			$	750,000
Common stock issued in conjunction with debt exstinguishment				$	-			$	654,000
Note payable issuance in conjunction with the acquisition of Seimens patent				$	1,672,924			$	-
Note payable issuance in conjunction with the acquisition of 3D Nano License				$	100,000			$	-
Conversion of AP to notes payable				$	-			$	705,093

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

			Non-GAAP Reconciliation
			For the Year Ended December 31, 2016			For the Year Ended December 31, 2015
Net income (loss) attributable to Marathon Patent Group, Inc. common shareholders			(28,665,024	)		(16,939,859	)
Non-GAAP
	Amortization of intangible assets		7,453,004			10,825,164
	Equity-based compensation		1,953,343			3,801,166
	Impairment of Intellectual Property		11,958,882			5,793,409
	Impairment of Goodwill		4,336,307			-
	Change in Earn Out Liability		(1,832,872	)		(6,137,116	)
	Non-cash interest expense		1,223,341			2,220,992
	Deferred tax (benefit) / Tax expense		11,516,807			(8,156,448	)
	Loss on debt restructuring and exstinguishment		-			1,416,915
	Other		60,816			383,328
Non-GAAP net income (loss)			8,004,604			(6,792,449	)
Weighted average common shares outstanding:
	Basic		15,178,056			14,208,787
	Fully diluted		16,289,903			14,208,787
Non-GAAP net income (loss) per common share - basic and diluted
	Basic		0.53			(0.48	)
	Fully diluted		0.49			(0.48	)