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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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