Marathon Patent Group Announces Third Quarter Financial Results and Provides Update on Patent Litigation with Amazon.com
November 13 2018 - 8:30AM
Year Over Year Revenues Increase 108% While Loss Per
Share Decreases
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
SUBSIDIARIESCONSOLIDATED 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 andDecember 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, 2018and 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 atSeptember 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
SUBSIDIARIESCONSOLIDATED 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
SUBSIDIARIESCONSOLIDATED 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
MARA (NASDAQ:MARA)
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From Aug 2024 to Sep 2024
MARA (NASDAQ:MARA)
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From Sep 2023 to Sep 2024