Marathon Patent Group Announces Third Quarter Financial Results and Provides Update on Patent Litigation with Amazon.com

Los Angeles, California, UNITED STATES


Year Over Year Revenues Increase 108% While Loss Per Share Decreases

LAS VEGAS, Nov. 13, 2018 (GLOBE NEWSWIRE) -- Marathon Patent Group, Inc. (NASDAQ:MARA) ("Marathon" or "Company"), today announced its operating results for the three months ended September 30, 2018, as published in its Quarterly Report on Form 10-Q filed today with the Securities and Exchange Commission.

Operating Results for the Three Months Ended September 30, 2018

  • Total revenue increased 108% to $338,673 for the three months ended September 30, 2018 compared to $162,713 for the three months ended September 30, 2017.

  • Operating loss improved to $1.5 million (including non-cash expenses) for the three months ended September 30, 2018 compared to an operating loss of $3.9 million for the three months ended September 30, 2017.

  • GAAP net loss improved to $(0.06) per basic and diluted share for the three months ended September 30, 2018 compared to $(1.06) for the three months ended September 30, 2017.

  • The Company had approximately $3.2 million of cash and cash equivalents as of September 30, 2018.

Minority Owned Special Purpose Entity/Plaintiff Files Suit Against Amazon.

As previously announced, Marathon transferred ownership of various patents to a special purpose entity in which it owns a 30% interest.  The transfers resulted in the cancellation of certain indebtedness owed to Fortress Investment Group, LLC.  According to various court filings in the case, plaintiffs filed an action was commenced against Amazon claiming that its Alexa software violates certain claims in the patents.  If plaintiffs are successful, and if the recoveries or settlement proceeds are sufficient following litigation expenses and recovery of amounts due in connection with the cancelled loan, the special purpose entity could be entitled to a portion of the net proceeds.  There can be no assurance that the plaintiff will be successful or that any recoveries will exceed amounts due under the debt settlement arrangements or that the Company’s 30% interest in the SPE will have any value even if the plaintiffs are successful in their case against Amazon.

Merrick Okamoto, Chief Executive Officer, stated, “We’re pleased to have shown financial improvement for the quarter, including doubling revenues and significantly reducing losses on a per share basis. Looking forward, our management is actively reviewing potential acquisition opportunities. If a successful agreement is reached with a targeted acquisition, we will promptly announce the terms and closing conditions to our shareholders.”      

Investor Notice

Investing in our securities involves a high degree of risk. Before making an investment decision, you should carefully consider the risks, uncertainties and forward-looking statements described under "Risk Factors" in Item 1A of our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2017. If any of these risks were to occur, our business, financial condition or results of operations would likely suffer. In that event, the value of our securities could decline, and you could lose part or all of your investment. The risks and uncertainties we describe are not the only ones facing us. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. In addition, our past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results in the future. See "Safe Harbor" below.

Forward-Looking Statements

Statements made in this press release include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements can be identified by the use of words such as “may,” “will,” “plan,” “should,” “expect,” “anticipate,” “estimate,” “continue,” or comparable terminology. Such forward-looking statements are inherently subject to certain risks, trends and uncertainties, many of which the Company cannot predict with accuracy and some of which the Company might not even anticipate and involve factors that may cause actual results to differ materially from those projected or suggested. Readers are cautioned not to place undue reliance on these forward-looking statements and are advised to consider the factors listed above together with the additional factors under the heading “Risk Factors” in the Company's Annual Reports on Form 10-K, as may be supplemented or amended by the Company's Quarterly Reports on Form 10-Q. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events, new information or otherwise.


MARATHON PATENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)

      
   September 30,   December 31,  
  2018   2017  
   (Unaudited)    
  ASSETS     
  Current assets:     
 Cash and cash equivalents$  3,188,780  $  14,948,529  
 Accounts receivable - net of allowance for bad debt of $0 and $387,976 for September 30, 2018 and December 31, 2017,
respectively
   102,098     6,826  
 Prepaid expenses and other current assets   550,184     92,855  
  Total current assets    3,841,062     15,048,210  
      
  Other assets:     
 Property and equipment, net of accumulated depreciation of $1,517,694 and $134,513 for September 30, 2018 and
December 31, 2017, respectively
   3,855,812     10,011  
 Intangible assets, net of accumulated amortization of $47,451 for September 30, 2018   1,162,549     -   
  Total other assets    5,018,361     10,011  
  TOTAL ASSETS $   8,859,423   $   15,058,221   
      
  LIABILITIES AND STOCKHOLDERS’ EQUITY     
      
  Current liabilities:     
 Accounts payable and accrued expenses$  1,329,165  $  1,961,784  
 Litigation liability   -      2,150,000  
 Warrant liability   145,124     1,794,396  
 Convertible notes payable, net of discounts of $2,290,028 for December 31, 2017     1,763,920  
      
  Total current liabilities    1,474,289     7,670,100  
      
      
  Long-term liabilities     
 Convertible notes payable, net of discounts of $0 for September 30, 2018   999,106     -   
  Total long-term liabilities    999,106     -   
  Total liabilities    2,473,395     7,670,100  
      
  Commitments and Contingencies     
      
  Stockholders' Equity:     
 Preferred stock, $0.0001 par value, 50,000,000 shares authorized, 0 and 5,513 issued and outstanding at September 30, 2018
and December 31, 2017, respectively
   -      1  
 Common stock, $0.0001 par value; 200,000,000 shares authorized; 25,519,940 and 12,477,781 issued and outstanding at
September 30, 2018 and December 31, 2017, respectively
   2,552     1,248  
 Additional paid-in capital   104,530,234     97,113,723  
 Accumulated other comprehensive loss   (450,719)    (450,734) 
 Accumulated deficit   (97,696,039)    (89,276,117) 
  Total stockholders’ equity    6,386,028     7,388,121  
  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $   8,859,423   $   15,058,221   
      


MARATHON PATENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)

          
   For the three months ended   For the nine months ended  
   September 30,   September 30,  
   2018   2017   2018   2017  
  Revenues         
  Cryptocurrency mining revenue $  338,672  $  -   $  1,200,171  $  -   
  Other revenue    -      162,713     66,970     609,650  
  Total revenues    338,672     162,713     1,267,141     609,650  
          
  Operating costs and expenses         
  Cost of revenue    1,132,570     64,836     2,331,909     1,544,322  
  Amortization of patents    -      457,419     -      1,803,264  
  Compensation and related taxes    137,338     1,871,946     803,309     3,718,034  
  Consulting fees    347,500     133,018     573,286     189,819  
  Professional fees    126,446     616,125     1,157,246     1,686,955  
  General and administrative    89,859     213,130     1,212,469     599,416  
  Patent impairment    -      723,218     -      723,218  
  Break-up fee -  issuance of shares to GBV    -      -      2,850,000     -   
  Total operating expenses    1,833,713     4,079,692     8,928,219     10,265,028  
  Operating loss    (1,495,041)    (3,916,979)    (7,661,078)    (9,655,378) 
  Other income (expenses)         
  Other income    125,125     2,252,886     108,670     3,151,418  
  Foreign exchange gain (loss)    (8,003)    (480,240)    (31,096)    (463,191) 
  Loss on debt extinguishment    -      (283,237)    -      (283,237) 
  Loss on sale of company    -      (1,519,875)    -      (1,519,875) 
  Realized gain (loss) on sale of digital currencies    8,760     -      (73,533)    -   
  Change in fair value adjustment of Clouding IP earn out    -      754,321     -      768,200  
  Change in fair value of warrant liability    45,595     (1,909,879)    1,593,481     (1,914,786) 
  Amortization of debt discount    -      -      (2,290,028)    -   
  Interest income    2,553     931     2,553     2,793  
  Interest expense    (19,446)    (1,283,223)    (68,891)    (2,416,722) 
  Loss before income taxes    (1,340,457)    (6,385,295)    (8,419,922)    (12,330,778) 
  Income tax expense    -      (12,191)    -      (29,433) 
  Net loss    (1,340,457)    (6,397,486)    (8,419,922)    (12,360,211) 
  Net loss attributable to non-controlling interests    -      (280,000)    -      (124,714) 
  Net loss attributable to common stockholders $  (1,340,457) $  (6,677,486) $  (8,419,922) $  (12,484,925) 
          
  Net loss per share, basic and diluted: $  (0.06) $  (1.06) $  (0.42) $  (2.24) 
  Weighted average shares outstanding, basic and diluted:    24,321,788     6,270,299     19,893,901     5,564,465  
          
          
  Net loss attributable to common stockholders $  (1,340,457) $  (6,677,486) $  (8,419,922) $  (12,484,925) 
  Other comprehensive income:         
  Unrealized gain on foreign currency translation    -      482,622     15     609,768  
  Comprehensive loss attributable to Marathon Patent Group, Inc. $  (1,340,457) $  (6,194,864) $  (8,419,907) $  (11,875,157) 
          


MARATHON PATENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

      
   For the nine months ended  
   September 30,  
   2018   2017  
  CASH FLOWS FROM OPERATING ACTIVITIES     
  Net loss $  (8,419,922) $  (12,484,925) 
  Adjustments to reconcile net loss to net cash (used in) operating activities:     
  Depreciation    1,405,147     1,248  
  Amortization of patents and website    48,222     1,803,264  
  Realized loss on sale of digital currencies    73,533     -   
  Change in fair value of warrant liability    (1,593,481)    4,017,729  
  Impairment of intangible assets    -      704,678  
  Stock based compensation    496,435     1,523,187  
  Amortization of debt discount    2,290,028     -   
  Bad debt allowance    6,826     -   
  Non-cash interest, discount, and financing costs    -      (4,397,381) 
  Change in fair value of Clouding earnout    -      (768,200) 
  Break-up fee -  issuance of shares to GBV    2,850,000     -   
  Non-controlling interest    -      (27,435) 
  Other non-cash adjustments    -      182,024  
  Changes in operating assets and liabilities:     
  Accounts receivables    (102,098)    (28,561) 
  Digital currencies    (1,098,073)    -   
  Proceeds from sale of digital currencies    1,024,540     -   
  Litigation liability    (2,150,000)    -   
  Prepaid expenses and other assets    (457,329)    (269,693) 
  Other non current assets    -      201,203  
  Accounts payable and accrued expenses    (631,873)    (5,262,242) 
  Net cash used in operating activities    (6,258,045)    (14,805,104) 
  CASH FLOWS FROM INVESTING ACTIVITIES     
  Acquisition of patents    (250,000)    -   
  Disposal of patents    -      2,771,757  
  Purchase of property and equipment    (5,251,719)    (6,291) 
  Net cash (used in) provided by investing activities    (5,501,719)    2,765,466  
  CASH FLOWS FROM FINANCING ACTIVITIES     
  Payment on note payable    -      (2,741,286) 
  Proceeds received on issuance of notes payable    -      6,100,000  
  Proceeds received on private placement    -      5,158,906  
  Proceeds received on exercise of warrants    -      2,549,084  
  Net cash provided by financing activities    -      11,066,704  
      
  Effect of foreign exchange rate changes    15     16,509  
      
  Net decrease  in cash and cash equivalents    (11,759,749)    (956,425) 
  Cash and cash equivalents — beginning of period    14,948,529     4,998,314  
  Cash and cash equivalents — end of period $  3,188,780  $  4,041,889  
      
  SUPPLEMENTAL CASH FLOW INFORMATION     
  Cash paid for interest expense $  -   $  368,923  
  Cash paid during the year for income taxes $  -   $  29,433  
      
  Supplemental schedule of non-cash investing and financing activities:     
  Common stock issued for acquisition of patents $  960,000  $  -   
  Conversion of Series E Preferred Stock to common stock $  551  $  -   
  Common stock issued for note conversion $  3,055,588  $  -   
  Restricted stock issuance $  44  $  -   
  Revenue share liability incurred in conjunction with note payable $  -   $  225,000  
  Warrant issued in conjunction with common stock issuance $  -   $  257,957  
  Warrants exercised into common shares $  55,791  $  -   
      

CONTACT INFORMATION

Name: Jason Assad
Phone: 678-570-6791
Email: Jason@marathonpg.com