Jason Assad – Investor Relations Doug Croxall – Founder, Chairman and Chief Executive Officer Frank Knuettel – Chief Financial Officer.

Mike Latimore – Northland Capital Markets Joseph Delahoussaye – Private Investor.

Welcome to Marathon Patent Group’s Second Quarter 2017 Financial Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. At this time, I would like to turn the conference over to Jason Assad, Investor Relations with Marathon Patent Group. Please go ahead..

Thank you, operator. Good afternoon and welcome to Marathon Patent Group’s 2017 second quarter results conference call. With us today are Marathon’s Founder and Chief Executive Officer, Doug Croxall; and Chief Financial Officer, Frank Knuettel.

Before I turn the call over to management, please remember that certain statements contained in the release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements contained in this release relate to, among other things, 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; legislative, regulatory and competitive developments addressing licensing and enforcement of patents and/or intellectual property in general; and general economic conditions.

They’re generally identified by words such as believes, may, expects, anticipates, should and similar expressions. Readers should not place undue reliance on such forward-looking statements which are based upon the Company’s beliefs and assumptions as of the date of this release.

The Company’s actual results could differ materially due to risk factors and other items described in more detail in the Risk Factors section of the Company’s annual reports filed with the SEC, copies of which may be obtained at sec.gov. Subsequent events and developments may cause these forward-looking statements to change.

The company specifically disclaims any obligation or intention to update or revise these forward-looking statements as a result of changed events or circumstances that occur after the date of this release, except as required by applicable law.

In addition, certain of the financial information presented in this call references non-GAAP financial measures.

The Company’s earnings release was issued this afternoon 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 link is available in the Investor Relations section of our website at marathonpg.com. With that, I’d like to now turn the call over to Marathon’s CEO, Doug Croxall.

Doug?.

Thanks, Jason, and thank you, everyone, for joining us this afternoon to discuss Marathon Patent Group’s second quarter 2017 operating results. We are going to handle the call a little differently than we have in the past. We believe there will be quite a few questions.

So I prepared brief remarks and I want to ensure that we have enough adequate time to address your questions afterwards. On August 3, 2017, Marathon entered into an agreement with DBD Credit Funding, which charts the course for a retirement of 100% of our long-term debt as well as providing an arrangement with DBD for three of our portfolios.

Under the restructuring agreement, Marathon’s existing debt obligation of approximately $16 million will be assumed by a newly formed entity controlled by DBD, and Marathon will be released from further obligation for the debt and funding of the actions related to the transferred portfolios.

The completion of the transaction is subject to a number of conditions including a vote of shareholders. The restructuring agreement importantly not only allows for the elimination of the DBD debt, but also provides Marathon with a 45% residual revenue share once DBD recovers its costs, management fees and debt amounts.

Until the restructuring agreement is completed however, which we expect to occur sometime in the third or fourth quarter, will continue to be obligated – we will be continued to be obligated to pay any recoveries to DBD in accordance with our pre-existing arrangements.

The three portfolios being transferred are Magnus IP, Traverse Technologies and Dynamic Advances. The company will retain ownership of its remaining portfolios and we expect to continue enforcing those portfolios.

In addition to continuing the IP monetization business through our remaining portfolios and the carried interest in the three portfolios contributed to the new entity, we also intend to consider and pursue other strategic alternatives. That concludes my prepared remarks.

With that, I’d now like to turn the call over to Frank, our CFO, for a brief overview of 2017 second quarter financial results. Immediately, after we will open up the call for an extended Q&A session.

Frank?.

Thanks, Doug. Our second quarter revenues from two newly issued licenses, which accounted for approximately 72% of our total revenues for the quarter were approximately $369,000.

And revenues from five largest licenses representing revenues of approximately $34.3 million accounting for approximately 99% of the Company’s revenues for the three months ended June 30, 2016.

Direct cost of revenues in Q2 2017 was approximately $1 million, as compared to direct cost of revenues in Q2 2016 of approximately $15.5 million, a decrease of 93%. Direct cost of revenue includes both contingent and non-contingent payments to patent enforcement counsel and patent enforcement advisors and inventors.

The decline in the direct cost of revenues for the second quarter of 2017 relative to the second quarter of 2016 was associated with non-contingent counsel expenses – with low contingent counsel expenses and lower expert and non-contingent counsel expenses during the reporting period.

The company reported other operating expenses in Q2 2017 of approximately $2.3 million, a 47% decrease as compared to other operating expenses of $4.9 million in Q2 2016.

These expenses primarily consisted of amortization of patents, general expenses, compensation to our officers, directors and employees, professional fees and consulting incurred in connection with the day-to-day operation of our business.

Total other operating expenses declined for the three months ended June 30, 2017, relative to the same period in the prior year, and almost every segment of our business, including patent amortization and impairment, compensation and third-party consulting fees.

The only component that’s saw an increase year-over-year – the only component that saw increase in the year-over-year basis was professional fees, largely results of the April financing and the amendment to our loan agreement with DBD.

Non-cash other operating expenses for the three months ended June 30, 2017, and June 30, 2016 include non-cash operating expenses totaling $783,000 and $3.3 million, respectively. The biggest component of which in both periods was patent amortization and impairment.

We reported a net loss of $2.2 million for the three months ended June 30, 2017, and net income was $7.9 million for the three months ended June 30, 2016.

On a non-GAAP basis, the company’s – the company recorded a non-GAAP loss of $2.1 million for the three months ended June 30, 2017, compared to non-GAAP income in the amount of $16.5 million for the three months ended June 30, 2016.

The full reconciliation of GAAP to non-GAAP financials can be found in both the financial tables at the end of our first quarter results press release issued today as well as in the quarterly report filed today on form Form 10-Q with the SEC.

We ended the second quarter of 2017 with cash totaling $1.1 million as compared to $5.0 million as of December 31, 2016. As of June 30, 2017, we had approximately 22.6 million weighted average basic shares outstanding versus approximately 16 million weighted average basic shares outstanding as of June 30, 2016. Thank you for all of your attention.

Operator, you may now open the call for questions..

We’ll now begin the question-and-answer session. [Operator Instructions] The first question is from Mike Latimore of Northland Capital Markets. Please go ahead..

Hi, great. Thanks a lot. Hi, guys. In terms of the just your patent monetization efforts, I assume that continues as planned here. And maybe just talk a little about your strategy.

And what are some of the prospects – best prospects you’re seeing in the next six months or so?.

Mike, this is Doug. So yes, we are continuing to monetize the – what we kind of call internally as the non-designated portfolios. But I wouldn’t expect results in the future likely we’ve been able to post in the past. And to the extent the three portfolios have already been designated to be exchanged for the debt.

We really – we are receiving – if there are any interest its typically inbound, but we’re not making any outbound efforts at this point in anticipation that those will be transferred to the new entity..

Got it.

And then, just in terms of interest expense and share count, next couple of quarters what should we think about that?.

So with respect to the interest expense, on the assumption that shareholders improve the exchange referenced in the DBD transaction, the interest will decline to – essentially to zero upon the completion of that transaction, which we anticipate happening sometime in the late third quarter or possibly early fourth.

With respect to share count, we had 24.3 million shares outstanding as of the end of last week. And any future transactions will have an impact on that, but we haven’t announced it and are not disclosing any at this time..

Okay, thanks..

[Operator Instructions] The next question is from Joseph Delahoussaye, Private Investor..

Yes. Hi, guys. Thanks for taking my call. In the past quarterly calls you talked about how you’re saying, I guess, fruitful market for being able to buy portfolios and patents at fairly attractive prices.

Are you still in the mode of looking to acquire additional portfolios? Or has something clearly shifted with the whole strategic alternatives sort of backdrop to the business case now?.

Well, we have not made any new acquisitions. And I wouldn’t say that we’ve completely changed our business strategy, but we are clearly open to other opportunities. We really haven’t had a lot of time to focus on what else Marathon could be doing. We’ve been pretty busy with the restructuring.

But, look, I still think there is very many attractive acquisition opportunities out there with our balance sheet we simply can’t – we simply can’t afford them. And as far as what we might do in the future, the patent licensing space has obviously been very difficult, doesn’t make it impossible. But it’s been very difficult.

We are also open to looking at other business strategies that might enhance shareholder value..

I see. Okay. And the revised, I guess, employment agreement or I guess consulting agreement with Erich Spangenberg.

Can you talk about that a little bit? I’m in such a very small portfolio of assets to, I guess, and force, it just looks really odd for, I guess, a very large shareholder of the company to, I guess, be let go by the company, but then still employed for seemingly healthy, I guess, compensation salary as a consultant.

Just anything you can add there?.

I think the documents pretty much speak for themselves. I’m not sure there is really anything to add other than the fact that Erich recognizes that our capital is pretty scarce. And with the juxtaposition of the portfolios to the new entity, the efforts that we really need from Erich are probably no longer needed.

And the consulting agreement is really interim phase to kind of help with lot of the transitioning that may occur after shareholders vote to pass the restructuring agreement..

Okay.

You’d see, I guess, still working on opportunities to bring business to Marathon?.

To an extent. Correct..

Okay. That’s all I have for now. I’ll get back in queue. [Indiscernible].

Thank you, Joe..

The next question is from Matt Rothman. Please go ahead..

Hey, guys. Thanks for taking my call.

You did mention GE, what’s the current status of that portfolio?.

We never really owned GE, right. We had a right to help monetize that portfolio and frankly the status hasn’t changed. But, again, without the proper capital resources, it’s difficult to do anything with that opportunity. But it’s still an opportunity..

But if I recall correctly, there were certain loan payments had to be made every quarter. I think those already started there, I think it was $250,000 per quarter.

Has Marathon made those payments? Or they’ll continue to make those payments going forward?.

Actually we have not started – they don’t start until I think Q3..

Q2. Q2 2018..

Q2..

So to be clear, in terms of monetization opportunity, the GE portfolio can still be monetized by Marathon?.

It’s currently an opportunity, correct..

Are you projecting any revenue in 2017 or 2018 from GE?.

No..

Thank you. In terms – just going back to Erich Spangenberg is – for the consultant period.

Is there a finite time line for his consulting shift?.

No..

No, I guess, I’m confused because you just said that Erich recognized that the resources of the company were scarce, I presume you meant monetarily, but I think you’re still paying them same monthly salary as we’d making.

And without the monetization opportunities, it’s not clear to me why we keep him one of the consultants and pay him the same salary recognizing the company doesn’t have the money to kind of just giving away at this point?.

No, we’re not giving anything away. And you asked me a question if there was a finite period. There isn’t. It’s consulting agreement, which either party can terminate. And when the work is completed, I suspect both parties will mutually walk away from the consulting agreement, which is not at that point right now..

Got it. Understood, thanks.

And then, Signal IT, is there anything further there? Are there any settlements haven’t been kind of from the balance sheet yet? Or is that all wrapped up now?.

Yes. That’s all wrapped up..

Got it. Okay, that’s all. Thanks, guys..

Sure..

This concludes the question-and-answer session. I would like to turn the conference back over to Doug Croxall for any closing remarks..

Appreciate everyone’s time today. If you have any questions or if there is any follow-up questions please do not hesitate to contact myself, Jason and Frank. And we look forward to talking to you in the near future..

This concludes today’s conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day..