Marathon Patent Group Announces Second Quarter Financial Results

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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