Marathon Patent Group Announces Third Quarter Financial Results

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

LOS ANGELES, CA -- (Marketwired) -- 11/14/16 -- 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 )

Marathon Patent Group
Jason Assad
678-570-6791
Email Contact

Source: Marathon Patent Group

Released November 14, 2016