Business context and reporting period
This is Marathon Patent Group, Inc.’s annual Form 10-K for the fiscal year ended December 31, 2018—not a standalone fourth-quarter report. The company, now identified in the request metadata as MARA Holdings, reported a shift toward cryptocurrency mining while continuing to hold and monetize patent assets. Mining at its Quebec facility began in 2018; the planned merger with Global Bit Ventures (GBV) was terminated.
Financial performance and position
| Metric | 2018 | 2017 |
|---|---|---|
| Revenue | $1.56 million, including $1.50 million from cryptocurrency mining | $0.52 million; no mining revenue reported |
| Cost of revenue | $3.35 million | $3.47 million |
| Operating loss | $12.08 million | $14.18 million |
| Net loss | $12.81 million; $0.60 per diluted share | $31.33 million; $4.80 per diluted share |
| Cash used in operating activities | $8.24 million | $10.81 million |
| Cash and cash equivalents at year-end | $2.55 million | $14.95 million |
| Net working capital | $0.7 million | $7.4 million |
Revenue rose approximately 201%, but cost of revenue exceeded revenue, producing a gross loss of about $1.79 million. Total assets were $5.19 million and stockholders’ equity was $2.92 million at year-end. Cash used in investing activities was $4.16 million; financing activities provided no cash in 2018, compared with $20.45 million provided in 2017.
Year-end current liabilities included $999,106 of convertible notes, due April 30, 2019, with $144,981 of accrued interest disclosed. Separately, the filing states indebtedness of $2,270,318 as of March 25, 2019; it does not clearly reconcile that subsequent-date figure to the year-end balance-sheet amount. No off-balance-sheet arrangements were reported.
Material changes versus the prior year
- Cryptocurrency mining became the main reported revenue source. The company acquired and installed 1,400 Antminer S9 machines, with total capitalized equipment and installation costs of approximately $5.25 million.
- The company recorded a $2.22 million mining-equipment impairment, citing the decline in bitcoin values, and $2.00 million of equipment depreciation.
- Net loss narrowed from $31.33 million to $12.81 million. The prior-year result included substantial warrant-liability fair-value expense and other unusual gains and losses; 2018 also included a $2.85 million noncash GBV termination fee.
- Cash fell by $12.40 million, and working capital declined by $6.6 million. Common shares outstanding increased from 12.48 million to 25.52 million, reflecting conversions, issuances and the GBV termination fee.
Outlook, risks, contingencies and unusual items
Management provided no specific revenue or earnings guidance. It said existing cash might not fund operations for the next 12 months and that additional financing or strategic alternatives may be needed; financing may be unavailable or dilutive. The auditor’s opinion includes a going-concern explanatory paragraph, citing recurring losses and substantial doubt about the company’s ability to continue as a going concern.
- Controls: Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end because of a material weakness involving segregation of accounting duties and evidence of control review. Management described planned remediation; the filing does not establish that the weakness was remediated.
- Business and market risks: Results are exposed to digital-asset price volatility, mining economics, technology and network changes, cybersecurity and custody risks, and uncertain securities, investment-company, money-transmission and tax treatment. The company said its digital assets were uninsured and not covered by FDIC or SIPC protections.
- Contingencies: The Feinberg securities and fraud claims were refiled in an amended complaint after the original complaint was dismissed; defendants had not yet responded. The Ramirez case was settled and dismissed with prejudice. The company held a 30% interest in an entity involved in patent litigation against Amazon, with no assurance of proceeds or value to the company.
- Other items: The GBV merger termination fee was paid in 3 million common shares valued at $2.85 million. The company also acquired patent rights for $250,000 cash and 250,000 shares valued at $960,000.
Important facts for investors to verify
- Reconcile the $999,106 year-end convertible-note balance and accrued interest with the filing’s $2.27 million indebtedness figure as of March 25, 2019, and verify subsequent repayment, conversion or refinancing.
- Review cash burn, available liquidity, financing plans and management’s assumptions supporting its going-concern assessment.
- Assess mining revenue and unit economics against power, facility, depreciation and equipment-impairment costs, including subsequent asset utilization and cryptocurrency prices.
- Check progress in remediating the disclosed material weakness and whether later filings report effective controls.
- Monitor the amended Feinberg complaint, the Amazon patent litigation and potential outcomes, costs and recoveries.
- Review dilution from outstanding options, warrants and convertible securities, as well as the effect of equity issuances and any later reverse stock split.