Frank Knuettel - Chief Financial Officer Doug Croxall – Chairman and Chief Executive Officer Craig Etchegoyen - Chief Executive Officer, Uniloc USA, Inc..

Mike Latimore - Northland Capital Markets William Gibson - ROTH Capital Partners Mark Argento - Lake Street Capital Markets David Hoff - Private Investor Robert Sterling - Sterling Capital Jon Hickman - Ladenburg Thalmann Bob Prag - DCG Hugh Cohen - Applied Financial Research Mike Grossman - Private Investor.

Greetings and welcome to the Marathon Patent Group second quarter 2015 results conference call. At this time, all participants are in a listen-only mode. A questions-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to Mr.

Frank Knuettel, Marathon Patent Group's Chief Financial Officer. Thank you Mr. Knuettel. You may now begin..

Thank you, operator. Good morning and welcome to Marathon Patent Group's 2015 second quarter results conference call. With me today are Marathon's Founder and Chief Executive Officer, Doug Croxall, Marathon's General Counsel, Rich Chernicoff and Uniloc's Co-Founder and CEO, Craig Etchegoyen.

Before we proceed with the call, please remember that our prepared remarks and responses to questions may contain forward-looking statements.

Words such as may, will, expect, intend, plan, believe, seek, could, estimate, judgment, targeting, should, anticipate, goal and variations of these words and similar expressions are intended to identify forward-looking statements.

Actual results could differ materially from these implied by such forward-looking statements due to a variety of factors including but not limited to, the effect of the global economic downturn on technology companies, the ability to successfully develop licensing programs and attract new business, rapid technological change in relevant markets, changes in demand for current and future intellectual property rights and legislative regulatory and competitive developments addressing licensing and enforcement of patents and/or intellectual property in general and general economic conditions.

Our Annual Report on Form 10-K, recent and forthcoming quarterly reports on Form 10-Q, recent current reports on forms 8-K and 8-K Amended and other SEC filings discuss some of the potential risk factors that may affect our business, results of operations and financial conditions.

We undertake no obligation to revise or update publicly any forward-looking statements for any reason. Although the company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, they give no assurance that the expectations will be attained.

The company undertakes no obligation to update any forward-looking statement whether as a result of new information, future events or otherwise. In addition, certain of the financial information presented in this call references non-GAAP financial measures.

The company's earnings release which was issued this past Friday and is available on the company's website presents reconciliations to the appropriate GAAP measure and an explanation of why the company believes such non-GAAP financial measures are useful to investors. Finally, this conference call is being webcast.

The webcast is available at the Investor Relations section of our website at marathonpg.com. With that, it's now my pleasure to turn the call over to Marathon's Founder and CEO, Doug Croxall..

Thanks, Frank. Thank you, everyone, for joining us this morning to discussion Marathon's financial and operational results for the second quarter of 2015 as well as what we believe to be a transformative merger with Uniloc. With me today is Rich Chernicoff, Marathon's General Counsel.

Rich will address any legal or procedural questions with regard to the proposed structure and timing of the merger. Also Craig Etchegoyen, the CEO of Uniloc is with us and he has a few prepared remarks. We are going to run this call a little bit differently than our past earnings call.

Frank will lead with a review of the second quarter, then I will discuss Marathon's operations as well as proposed merger with Uniloc. Craig will also have a few remarks and then we will open up the call to investor questions.

Frank, why don't you lead us off?.

Thanks, Doug. We report second quarter 2015 revenues of $1.4 million, falling short of our expectations. This is comprised of revenues from eight license agreements, recurring royalties from our Medtech portfolio and Opus subscription fees. For the quarter, we reported a GAAP net loss of $4.5 million or $0.32 per share.

Beyond the general increase compensation and G&A costs associated with managing our growing business, I would like to highlight a few items of note relative to this quarter's loss. First we incurred higher cost of revenues associated with numerous trials, one specifically where we had fixed fee price agreement.

As the first of the two trials associated with this agreement has passed, with the second trial in this quarter, we expect to see some decline barring changes in revenue driving higher contingent fees in our cost of revenues this quarter and further again thereafter.

Second, we had considerably higher patent amortization expenses than in the comparable period in 2014 as we have continued to build our portfolio of patent assets. Third, we had a higher professional fees associated with the numerous transactions we have been working on, the merger with Uniloc included.

Fourth, we took an impairment charge to the value of Clouding IP patents an amount of $0.8 million and $2.3 million reduction in the Clouding IP earnout. More on both of those in a moment. On a non-GAAP basis, we reported a loss of $4.45 million or $0.32 per share.

Non-cash recoveries through our GAAP loss included patent amortization expenses, non-cash compensation expenses, non-cash interest and the impairment of value of the Clouding patents, offset by the $2.3 million reduction in the Clouding IP earnout liability and an increase in the deferred tax asset. Touching on a couple of the major items.

As previously mentioned, relative to the longer time of the monetization than previously expected, we performed an analysis on the current level of the Clouding IP earnout liability and determined that the value of the liability has declined by $2.3 million as the case is taking longer to bring to fruition.

For the same reason, after our analysis, we determined the value of the Clouding IP patents was impaired and took a charge in the amount of $0.8 million. Both of these are non-cash items and as a reminder the Clouding IP earnout is only payable to the extent the Clouding portfolio yields net revenues.

On the heels of the trial loss associated with the Bridgestone patents, we determined that it was important to manage our assets a little more closely and entered into a restructuring agreement with the sellers of the Medtech portfolio whereby we delayed full repayment of the note in exchange for the issuance of common stock.

That concludes my prepared remarks for this morning. I would like now to turn the call over to Doug..

Thanks, Frank. So second quarter revenue clearly fell short of our expectations. Despite short-term disappointment, we remain on track for numerous potentially sizable revenue events over the balance of the year and going forward.

We still expect the investments made to-date, many of them resulting in higher short-term expenses, to generate meaningful return on investment. We will still remain confident that our topline revenue of 2015 will surpass 2014 as we continue to believe that we have multiple potential eight figure licensing opportunities ahead of us.

I want to quickly touch on a few things. The first is regarding our stock performance. We are keenly aware of shareholders' disappointment with this performance year-to-date. As a large shareholder myself, I share that disappointment. We are actively taking steps to create shareholder value as our goals are aligned with yours.

It is for this reason that I am very excited about the announced transaction with Uniloc. The merger of Marathon and Uniloc combines two quantitative IP monetization companies forming what we believe to be one of the largest and most experienced publicly traded patent licensing company.

On an unaudited pro forma basis, the combined company has generated approximately $93.6 million in unaudited licensing revenues over the last 30 months of operations and approximately $37.5 million in unaudited licensing revenue over the last 12 months.

Together, we have 119 active defendants and 101 scheduled trials projected through 2017 with up to potentially an additional 150 companies that we believe will need a license to various patents owned by the combined company. Marathon's business model of generating patent licensing revenues and earnings is based on diversification, scale and quality.

This merger allows for both companies to achieve greater diversification and scale as well as increasing the overall quality of the underlying patent asset base. More importantly than achieving that critical mass of diversification and scale is the ability to maintain that level of diversification and scale.

Uniloc's proprietary quantitative and qualitative patent analytics platform allows our combined team of professionals to not only achieve that level of critical mass, but also to maintain that level and more importantly to grow the quality of the patent asset base to a level, we believe, not yet seen in our industry.

The patent monetization industry has been under significant pressure over the last few years.

The frequency and success of defendants' challenges of patents in the IPR process, the success of Section 101 challenges on patent eligibility by defendants as well as the overall attitude by elected officials about our industry have created obstacles to many companies in our industry and opportunities for others.

In order to succeed in patent monetization, a company must move beyond simply having a good portfolio of patents and a good litigation team. Automation and intelligence must become the bedrock of developing that patent portfolio for ensuring success with a particular licensing campaign.

The combined Marathon and Uniloc team, along with its patent analytics technology, position us for that success. A transaction like this does not occur overnight, nor does it occur out of desperation. We first met with Uniloc in March of this year.

Regardless of our second quarter results or our stock price, management of Uniloc and Marathon believe that this merger is in the best interest of our shareholders and positions both companies for greater success over the long-term.

Both Uniloc and Marathon have offices in Los Angeles as well as in Dallas, Texas and both companies are managed with a relatively small number of employees. We will have some economies of scale, but rather limited.

Together we possess a balanced portfolio of licensing and litigation opportunities focused on both large and middle-market infringers and an acquired and internally developed portfolio consisting of 662 patents across 26 patent families.

Most importantly, the combined company achieved scale and diversification with expected gross margin improvement in future cases due to the economies of scale of Uniloc's relationship with law firms that work on a contingency basis.

In summary, while we are disappointed with our second quarter performance, we have always known and repeatedly stated that guidance on a quarterly basis is and will always be difficult. We continue to stand by our previous comments to our own revenue expectations for this year.

While pointing out that today's merger result in a greater scale and diversification is expected to further reduce dependence on a large binary licensing or litigation outcome while creating a more predictable revenue trajectory. With the combined 101 trial dates through 2017, I remain very optimistic about the future.

The Marathon team is excited and looking forward to working with Craig and the entire Uniloc team. That concludes my prepared remarks. With that, I would now like to turn the call over to Craig Etchegoyen, the CEO of Uniloc.

Craig?.

Thank you, Doug. Hello everyone. My name is Craig Etchegoyen and I am the CEO of Uniloc. Many of you may wonder why Uniloc decided to pursue this merger with Marathon. It is my belief and that of my board the merger with Marathon is the best possible strategy for continuing to build our company.

The approach with Doug and his team have built Marathon and the shared strategy of conducting licensing campaigns and litigation make the two companies a unique fit [indiscernible].

Marathon's appreciation for our analytics system and our combined release of its ability to help drive potential underlines the shared vision of how to succeed in the future. Thank you for allowing me to speak today and I look for to meeting with and speaking with many of you in the future.

Doug?.

Thanks, Craig. Operator, at this point, I would like to open the call to questions..

[Operator Instructions]. Our first question is from Mike Latimore of Northland Capital Markets. Please go ahead..

Thanks a lot. Good morning, guys. I guess on the merger here, does the combined portfolio or litigation activity, does is skew a little bit more international now or is it still a normal similar mix of U.S.

and international, as Marathon does?.

No. It's still -- we don't pick up any international suits with Uniloc. Uniloc has, I think always had their cases tried in Eastern District of Texas. I am going to brag a little bit. They are undefeated at trial and have never lost a motion to transfer from the Eastern District of Texas.

Uniloc has been around, if you do some research on the company, it's been private. So it's difficult to find too much information, but they have been around for a long time. They have been at this game longer than I have and been very successful. But no, we don't pick up any international cases..

I believe Uniloc, didn't they invent some of their own patents originally? Is that right?.

Yes, they did.

And Craig is -- how many patents, Craig?.

I have about 156 worldwide patents and applications..

So they are a pretty prolific inventor..

Is that continuing now? Or are you more in the patent acquisition mode?.

So it's a very interesting mix between the way Marathon has built its portfolio and the way Uniloc has. As you know, we are primarily opportunistic buyers, which is great, but there is the buy and build strategy that we are deploying in the combination.

Marathon will look for a portfolio, look for infringement, make an acquisition below what we think we will drive in revenues with the asset base. Uniloc's strategy is slightly different. They are a little bit more patient than we are.

When they make a purchase, they will do it with the mindset that there is opportunity to build additional assets around the core purchased assets, either through open applications or filing their own patents. They have a system for helping them develop and design a campaign strategy.

And so they do buying but they also have skill sets in building assets around the core purchased product. So yes, they do have the ability to develop and build a portfolio either from scratch or from a core set of assets that are purchased..

Got it. And then, Doug, historically you have talked about, a subset of your patents being one that have fairly large potential outcome, I think four to five was the number there.

With Uniloc, does that number double or how much do the bigger opportunities increase with the Uniloc merger?.

It's probably more than double..

Okay..

One thing, Mike, there is a lot -- when we buy our portfolio, we have a pretty good roadmap of what to expect internally. As Craig develops his portfolios, that roadmap can expand. We think we are picking up a pretty good bench of home run hitters as well..

Okay. Then I get to the last, I mean just on Marathon specifically, you talked about the opportunity to grow in 2015 versus 2014.

Maybe just can you highlight what you see potentially transpiring in the second half of the year here?.

From a revenue perspective?.

Yes..

Well, we definitely see opportunities in the Dynamic Advances portfolios as well as Signal IP. We remain hopeful with the TPMS patents, both in the U.S. and in Germany. So as far as we are concerned, our game plan and our strategy for revenue in 2015 hasn't changed. So we are still very positive.

When we add Uniloc to the mix, which may not be until the end of this year or early next year, once we get through the SEC review process and the solicitation process, that base expands dramatically..

All right. Great. Thanks a lot and good luck..

Thank you..

Thank you. The next question is from William Gibson of ROTH Capital Partners. Please go ahead..

One of the things I noticed was a real focus on Centurion, which seems to be technology, but what does that mean for Opus Analytics? And is this something where the two go back and forth between the two companies? Or how is that going to play out?.

So Opus and Centurion do slightly different things.

And the value, I touched on it in my prepared remarks Bill, but the value of going forward with this merger and frankly the way to be successful, really successful in this industry, it's not good enough anymore, just to have a good patent and find a really good litigator and have 10 defendants in some jurisdiction.

You need to be able to run through the minefield and not step on a mine. And part of the value of what Centurion provides, is a big data approach to applying patent monetization. And where Opus is an analytic scoring platform, Centurion goes well beyond that. It's a strategic development platform.

It can take an asset, say here are the weaknesses that you could expect to see through an IPR process or 101 process, here is how we avoid losing in those processes and here is how we build this portfolio for the long-term to survive over through the typical defendants challenges and through and into a licensing campaign.

And the ability to expand that core portfolio into other areas of business in which we feel we can expand the licensing opportunities. So one has got a lot more -- the Centurion platform has a lot more sophistication to it and it has different strategic advantages to the patent owner than Opus would.

And how those two systems will work together in the future and what the consumer facing set of features will be, is to be determined. We have got four or five months until and when the company hopefully is combined, but that's on the target list of things to resolve before the combination occurs..

Okay.

And then just one last question and that relates to, it sounds like there is the potential to pick up more favorable contingency law [terms] [ph] or legal and I was just wondering how that comes about? And does that alienate the firms you are using now?.

No, I do not think so. I mean we are constantly looking for good relationships on the litigation side and the representation side and Craig and his team, both internal at Uniloc and external with his law firms, has got a really good success record.

And they have got a really good strategy, pricing strategy and revenue sharing strategy with those teams. We look forward to taking advantage of those as well going forward with Marathon. So I think that as the market changes, the value chain in patent licensing and litigation also needs to change.

So I don't think it's going to upset the ones we work with and I actually think it will provide a pretty good opportunity for the litigation teams that we work with to work in a different setting that actually will be more profitable for them as well..

Good. Thank you..

Thank you. The next question is from Mark Argento of Lake Street Capital Markets. Please go ahead..

Good morning, gentlemen? Thanks and congrats on the announcement. What do guys think about the broader environment right now? Obviously still very difficult for IP companies, licensing, broadly speaking.

Can you talk a little bit about really putting the two companies together, how you think about positioning, are there other opportunities above and beyond just traditional litigation in terms of business opportunities for the combined entity?.

Yes. There definitely are. So look the environment is challenging. That's not news to anybody who is listening on this call or working in this industry, but where challenges exist for others, we think that that's an opportunity for those who are able to work within that industry.

And again, there's a few points that I want to definitely get across on this call. One is the ability to use intelligence and automation to be successful in this industry. We don't need to have 60 people working in this, in our combined, our individual or our combined entity to reach that scale and maintain that scale and even grow beyond that scale.

So we think that there is great opportunity within the existing business model. We know that there has been some success at Uniloc in spinning out and developing commercialize products. They have spun out two different companies.

We at Marathon have looked at opportunities in what we call the commercialization of space where there is a set of assets and maybe a team of executives that can actually build and commercialize the IP into a product.

And so as we move forward, we will look at some of those opportunities and some of those might make sense to bring in-house as a wholly-owned sub within the combined company, only to be spun out later. We also think that the Centurion system at Uniloc probably has some capabilities well beyond just patent monetization.

We think that the information and output that that system possesses or could create would be applicable in other verticals including potentially the insurance and revenue protection on behalf of certain operating company. So we definitely see a plan well beyond patent monetization.

It's anywhere from a two to five year plan and we think that the combined company has opportunities over and above just simply licensing and litigating its IP..

That's helpful. Shifting gears in regards to the case flow. I know you guys are have been pretty active. Obviously, you have a pretty good pipeline over the next 12 to 24 months.

Can you talk a little bit about Uniloc, how that overlays your existing legal calendar?.

Yes, Just by the nature of how the asset base is pulled together, typically Marathon has bought, I think 40% or 50% of our assets were acquired after some form of litigation had already commenced.

So we typically have a quicker time to trial calendar than Uniloc does or any company would who actually develops their own portfolio and then pursues a licensing or litigation campaign. So by definition of the business model, we tend to get to trial a little faster, but that's because we are buying something that has already commenced in litigation.

So when you look at the calendars, the two different litigation calendars, while we have more litigation upfront, Uniloc has a larger total number of cases spread over a slightly longer period of time. And again, that's just a function of the way that we build our portfolios, the differences in buy versus build..

Great. Thanks, guys. Congrats, again..

Thanks, Mark..

Thank you. The next question is from David Hoff, a private investor. Please go ahead..

Hi Doug. Good morning. A couple of quick questions. Can you give me a status update on the litigation in Germany? I know there has been a few outstanding actions.

I know TLI, communications, Medtech and the automotive portfolio? Where we stand and what to look forward for the rest of the year?.

Yes. Actually, so TLI is pretty active. We have got on September 17. We actually have two trials, one against Apple and in the afternoon against Google. And then we also have trials on October 22 against Facebook and Instagram. So pretty active. And I think Yahoo and Flickr is going to be heard at the same time. So pretty active on TLI.

I had hoped to have something to announce prior to this call from settlement and licensing perspective, but things can take longer than that expected, as we all know, but definitely moving in the right direction there. As far as TPMS, still moving forward. Nothing has changed. Still trying to get the injunction placed against Schrader.

Medtech, I believe we have an infringement trial late September against two smaller defendants and I think we have the appeal infringement against Stryker and that's late October, I believe. So moving forward, TLI is probably the most active of all those cases and still saying the course on TPMS and on Medtech..

Okay. Thank you.

I guess with Uniloc, do you have some kind of percentage breakout? You have used baseball terms in the past? Is there any kind of percentage you might have that are like the singles or doubles and then home runs?.

I don't have those percentages right now. I am not sure Craig is a baseball fan, frankly. I know he likes to surf. But look over the course of the next month or two, we will be refining the IR deck and adding more detail to both, as our portfolio develops as well as Uniloc's.

But right now, it would be a little premature to assign singles, doubles, home run to their portfolio. But we will try to get apples-to-apples for everybody in the near future..

Okay. I have one last quick question. There was a settlement in Signal IP and it also had a license with Loopback.

Is there still a lot of patents and licensing opportunities in that portfolio?.

If you mean Loopback, the answer is yes. So just to clarify, when we bought the assets from Delphi, the purchase was done by Loopback. We then split the portfolio, not quite in half. I think we took seven assets and put them in Signal IP and left approximately 10 assets in Loopback.

So as common, in discussions with potential licensees, they often want not just a patent suit portfolio, but a license, I should say but a portfolio license, which would include the assets sitting in Loopback. And there is, we think, additional licensing opportunity with those assets. And so hopefully that clarifies..

Okay. That's it for me. Thank you..

Thanks, David..

Thank you. The next question is from Robert Sterling of Sterling Capital. Please go ahead..

Good morning, gentlemen. Congratulations on the announcement. A quick question.

Are there any contingencies to a closing here, Doug?.

I am sorry.

Can you say that again?.

Are there any contingencies to a closing? I mean, anything that would detail the merger?.

Well, look, so I got my General Counsel on standby here. So let me take a crack at that. And Rich, if I am missing, can jump in. We filed an 8-K on Friday. And in that 8-K, we had a summary of the merger agreement as well as the merger agreement.

So there are standard conditions to closing, which is I think the question that you are asking and if I am --.

So anything that's not standard? Is there anything that -- and I haven't read the agreement, but is there anything that you would say, well, it depends on, if we make the settlement with Apple, we are going to do this and that? Or whatever?.

No..

That's not boilerplate, that you wouldn't expect?.

No..

Okay. Second question.

What about working capital going forward?.

Meaning?.

Meaning the combined companies, are you going to combine your working capital, your bank lines or working capital lines that you have?.

Post-merger?.

Yes..

Yes. We share the same lender, Fortress. And we have been in discussions with Fortress. They are supportive of the combination. And so yes, there will be more detail shed on that as we get closer to the proxy solicitation period. But it's our expectation that working capital lines and everything else will be combined..

Okay. Excellent. Thank you..

Sure..

Thank you. The next question is from Jon Hickman of Ladenburg Thalmann. Please go ahead..

Hi Doug. Most of my questions have been answered, just one.

If you could comment a little bit on the second quarter? You said, revenue generated, was it due to licensing discussions or just lower outcomes of those discussions?.

Not only -- I don't think it was just a result of fewer discussions. As I have said in the past, signing a settlement and license agreement is simply a process and a signature. Whether that happens prior to June 30 or after June 30, frankly, we don't control when the other side decides to sign or is willing to sign or is able to sign.

And one of the things that we don't do is come into the end of a quarter and start calling around desperately asking for discounts in order to get a deal closed. We have pretty strict discipline as it comes to the pricing of a license and we will adhere to that discipline regardless of the day of the week or that the day of the month.

So just because deals didn't get signed in Q2, it doesn't mean that they went away. It just means they got kicked out to a different quarter. But not a result of lack of discussions or anything like that..

Okay.

And then in future periods, will you be able to --or in coming months, I guess, would you be able to give us some more detail about what Centurion, the features and functionality of Centurion?.

Yes, we will. I do think the revised IR deck, which is available on the Marathon website, it was also included in the 8-K filed on Friday, there are two slides in there that speak to kind of the laymans or the high-level functionality of Centurion, but we will definitely give more detail over the future..

Okay. Thank you.

Thanks, Jon..

Thank you. Our next question is from Bob Prag of DCG. Please go ahead..

Hi. Thanks. Just a couple of quick questions. How much cash is expected to come with the merger, one? Two, can you give us a little bit of update on where the process is with Apple and if there a court date yet? And then three, if you are able to articulate with the outcome of the U.S.

trial with Schrader and overall scheme of that particular defendant, comment on how that outcome effects of that outcome their posture or your posture, whatever you can get on that, the outcome of that trial?.

Okay. Let me take those in reverse order. So the U.S. trial versus Schrader was in June. The jury found the patent valid but non-infringement. The attorneys for Bridgestone -- we are not the plaintiff in that case, right. Bridgestone is. So I will speak kind of on the plaintiff's behalf here. We haven't filed our appeal with the Federal Circuit yet.

That's because Bridgestone and their attorneys filed, what's called JMOL, judgment as a matter of law proceeding. We filed our, or Bridgestone I should say, filed about three, four weeks ago, I believe. Then there will be a response from Schrader and then we will reply to that response. The judge will take that into consideration.

We should have some kind of ruling from the judge, I would estimate October timeframe. Depending on the outcome of that, we could either see a retrial or not. And if we don't, then I suspect there will be an appeal filed with the Federal Circuit. So it is what it is. That's the status of Schrader in the U.S.

Dynamic Advances versus Apple, that's the natural language processing patent. That case is before the judge. We have submitted and argued all of our summary judgment motions, as has the other side. We expect to see -- the trial date will get set once the judge rules on the summary judgment motions.

Hard to say when we will get that ruling, but I would say as soon as this week to as late as mid-September. And as far as the combined balance sheet of the two companies, we are precluded from announcing anything regarding that at this point, but clearly as the proxy solicitation materials come out, it will be pretty obvious to everybody.

One of the things that's attractive to us, in addition to what we have already outlined today, is their balance sheet. So we realize that our cash balance would be nice to see it higher than what it is today.

We have a pretty sizable line standing behind the company, but frankly, the performance of Uniloc recently and their ability to generate free cash and pay down their debt is attractive to us. So I can't get into specifics on the cash balance, but suffice to say it's something that also attracted us to this deal..

Okay. Thank you..

No problem..

Thank you. Our next question is from Hugh Cohen of Applied Financial Research. Please go ahead..

Hi there. I just had some questions. I want to start with the period between now and the merger.

If there was some sort of big settlement with Marathon, how is that money distributed? Is that anyway going to Uniloc? Is that a combined company? How is this working before the merger?.

So I would just think along the lines of nothing changes. Marathon is going to operate its business, as it always has, just as Uniloc will. While we operate, obviously we speak daily and start planning for what we hope to be a successful merger late this year or early next year.

So there are operational discussions that we have back and forth and planning discussions we have back and forth. But as far as operating the businesses, we have to operate under both scenarios, as though we do combine towards the end of the year and the potential outcome that we don't.

But any revenue that we generate or earnings that we generate stay a part of Marathon. We do not owe anything to Uniloc in this interim period of time and they don't owe anything to us. So hopefully that answers your question. It wouldn't effect the exchange ratio that's used.

But we are going to continue to operator our business as though we were going to stay independent..

I am asking a different question.

So if you were to get a massive set of money somehow, prior to settlement, can you declare a dividend before the merger or not?.

No. I don't know if we can or we can't, but we most likely wouldn't..

Thanks.

Second question, is there a lockup with either of the parties or both of the parties? Or can there be a selling of Marathon stock in a massive way here?.

Well, I don't know about a massive way. There is no lockup as part of the merger agreement. Craig and his CFO, Drake Turner, represent about 25% of the outstanding shares at Uniloc. So executives of a public company are subject to limitations on how much they can sell and when they can sell it.

So there is an effective lockup in place, just not complete lockup. But there is an effective prohibition of selling whenever you want, if you are an executive, but there is no lockup as a part of this deal.

But we also don't expect shareholders to hit the exits on day one and it's incumbent upon us over the next four or five months to not only meet with and communicate with the Marathon shareholder base, but also with the Uniloc shareholder base..

One of the questions I have had for a while, I surmise that there may be some restrictions on insider buying.

Am I right about that? Or if you elaborate on that if that's possible?.

Yes. We get this question a lot. It's really tough for us to buy, based on the amount of material nonpublic information that we have. And we have spoken to a number of different SEC attorneys and all have come back with the same feedback that it would not be wise to see insiders buying. It's almost impossible.

There is not a week, almost a day that goes buy where there is not a conversation that is material and nonpublic. So we are unfortunately prohibited. Trust me, at the stock-price right now, I would love to come in and pick up shares.

But obviously over the last three or four months, we have been working pretty rigorously not only on settlements, but also on this transaction. It's been very difficult, if not impossible..

Another question. You have given information on combined revenues.

But I haven't seen anything which would give expenses or earnings? Is any information on that forthcoming?.

So I am comfortable giving combined revenue, because that's a pretty easy number to get right to be accurate. When you start to combine the income statement, balance sheet and cash flow statements, it tends to be more difficult, because those are not necessarily completed by a CPA and therefore audited.

However, when the proxy comes out relatively soon, the numbers in the proxy will give you full detail of all three financial statements on a combined pro forma basis..

Just one or two more, if I may. We had about $1.5 million in cash, if I recall, what I saw on the balance sheet.

Are we going to have to do any financings before the merger? Or are we going to be comfortable through the merger?.

We think we will be comfortable through the merger..

And one last question that I have and I appreciate your time. If we were to win a lawsuit in a quarter and that lawsuit gets appealed post the quarter, so we don't get the money, we have a verdict, we have an award, but it's appealed after the quarter.

How is that going to be done on our books? Is that going to be in accounts receivable? Or is it not going to show up as revenue? How is that done accounting wise? Is the question clear?.

Yes. Sorry, this is Frank Knuettel. If we have a jury verdict and no resolution, i.e. in the form of a license agreement, we will not book any revenue nor will we book in accounts receivable. It is only upon a final judgment, i.e.

of the Supreme Court or upon resolution through some form of a license agreement that we will book the revenue in whatever receivable might be related to it..

Thank you very much..

Thank you. The next question is from Mike Grossman, a private investor. Please go ahead..

Good morning. Good morning, Craig. I just have some, I guess three questions.

Does this merger represent a cash conversion?.

No..

After the combined companies, what will be the respective titles for the gentleman on call?.

So that's covered in one of our press releases as well, but I can walk through that for you. This is Doug. I will remain the CEO.

Craig will be the Chief Intellectual Property Officer, Frank, who is the CFO of Marathon currently will transition, Drake Turner, who is the CFO of Uniloc will become the CFO of the combined public entity and Frank will transition to Chief Operating Officer..

For the Uniloc shareholders, the Uniloc shares will convert at what ratio into Marathon shares?.

I am sorry.

Could you repeat that question?.

If I do the math on the privately held Uniloc shareholders and the existing shares for Marathon, given I believe that the Uniloc shareholders will have 55%, I believe of Marathon, is what I read, so that would mean that there will have to be some kind of a split of the privately held shares of Uniloc. And my math says, it's 5:1..

Yes. There is a share exchange on the Uniloc private shareholder side of a little more than 5:1..

Okay.

And the last question is, given the potential of the combined entity, would management still be open to get a third party coming in to acquire all of Marathon?.

I mean, that's pretty speculative. Look, here is the situation. If some party, whoever that might be, made an offer for the combined company, we would do what any management team would do, which is take it to the Board of Directors, confer with them and then proceed according to the direction of the Board.

But certainly we would be open to conversations. But again, it's really subject to the Board's direction and discretion..

Thank you very much..

Sure..

Thank you. The next question is from William Gibson of ROTH Capital Partners. Please go ahead..

Yes, just one.

How many employees does Uniloc have?.

So they have approximately seven employees, split between the Los Angeles/Irvine office and Dallas or Plano, Texas, I should say. Mostly in Texas..

Good. All right. I appreciate that. Thank you..

No problem..

Thank you. We have no further questions at this time. I would like to turn the conference back to management for any closing comments..

Thank you, operator. Well thanks, everybody for your time this morning. We know that there are probably questions that haven't been asked and therefore haven't been answered. We will be pretty active over the coming months in communicating with our shareholders, both on the Marathon side and on the Uniloc side.

We appreciate your time today and we look forward to speaking to all of you in the near future. Thank you..

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time and thank you for your participation..