Exhibit 99.3
 
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS:

On October 10, 2014, Marathon Patent Group, Inc. (the “Company”) entered into an interest sale agreement (the “Interest Sale Agreement”) with MedTech Development, LLC (“MedTech”) and MedTech Group Acquisition Corp., (“MGA Corp.”), a wholly-owned subsidiary of the Company.  Pursuant to the Interest Sale Agreement, MGA Corp. agreed to acquire from MedTech certain subsidiaries of MedTech (the “Acquisition”) consisting of 100% of the limited liability membership interests of OrthoPhoenix, LLC (“Orthophoenix”) and TLIF, LLC (“TLIF”) as well as 100% of the shares of MedTech Development Deutschland GmbH (“MedTech GmbH,” and together with Orthophoenix and MedTech GmbH, the “Subsidiaries”).  As a result, MGA Corp. became the sole interest holder of Orthophoenix and TLIF as well as the sole shareholder and owner of MedTech GmbH.  Each of the Subsidiaries owns certain medical technology patents, including pending litigation, settlement and licensing rights that are being acquired by the Company in the transaction.

In connection with the Interest Sale Agreement, the Company is obligated to pay to MedTech $1 million at closing and $1 million on each of the following nine (9) month anniversary dates of the closing (the “Purchase Payments”).  The Subsidiaries are also obligated to make certain additional payments (“Participation Payments”) to MedTech from recoveries following the receipt by the Subsidiaries of 200% of the Purchase Payments, plus recovery of out of pocket expenses in connection with patent claims.  The Participation Payments may be paid, at the election of Marathon, in common stock of Marathon at the market price on the date of issuance.

In connection with the transaction, the Company entered into a promissory note, common interest agreement and in the event of issuance of common stock to MedTech, will enter into a lockup and registration rights agreement.  Approximately forty-five (45%) of MedTech is owned or controlled by Erich Spangenberg or family members or associates.

The Company accounted for the acquisition as a business combination in accordance with ASC 805 “Business Combinations”. MGA Corp. acquired 100% of the limited liability membership interests of Orthophoenix and TLIF as well as 100% of the shares of MedTech GmbH. We are presenting the historical financial statements of MGA Corp. for the period ended September 30, 2014 and the year ended December 31, 2013 as part of this pro-forma disclosure.
 
These unaudited pro forma condensed combined financial statements are presented for illustrative purposes only, and the unaudited pro forma condensed combined financial statements should be read in conjunction with the accompanying notes and with the historical financial statements and related notes thereto. The unaudited pro forma condensed consolidated balance sheet is prepared as though the transactions occurred at the close of business on September 30, 2014. The pro forma statements of operations give effect to the transactions as thought they occurred on January 1, 2013. Such information is not necessarily indicative of the operating results or financial position that would have occurred had the acquisition been completed on January 1, 2013 or what results would be for any future periods.
 

 
 
 

Marathon Patent Group, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
As of September 30, 2014
 
 
  
Marathon
Patent Group,
Inc.
  
MGA Corp.
    
Combined Before Pro Forma Adjustments
    
Pro Forma
Adjustments
  
Marathon
Patent Group, Inc.
Pro Forma
  
                                 
ASSETS
                                
Current Assets
                                
Cash
     5,556,584       47,789       5,604,373       (1,047,789 )
 (a)
     4,556,584  
Accounts Receivable - net
     10,510,000       -       10,510,000       -         10,510,000  
Prepaid expenses and other current assets
     340,456       -       340,456       -         340,456  
Total current assets
     16,407,040       47,789       16,454,829       (1,047,789 )       15,407,040  
                                           
Other Assets
                                          
Property and equipment, net
     13,026       -       13,026       -         13,026  
Intangible assets, net
     33,514,365       8,252,772       41,767,137       5,020,358  
 (b)
     46,787,495  
Goodwill
     1,949,401       -       1,949,401       2,221,918  
 (c)
     4,121,319  
Deferred Tax Asset
     1,606,800       -       1,606,800       -         1,606,800  
Other assets
     -       -       -       -  
 
     -  
Total other assets
     37,083,592       8,252,772       45,336,364       7,242,276         52,578,640  
                                           
Total Assets
     53,490,632       8,300,561       61,791,193       6,194,487         67,985,680  
                                           
LIABILITIES AND STOCKHOLDERS' EQUITY
                            
Liabilities
                                          
Accounts payable and acrued expenses
     5,665,707       191,281       5,856,988       (191,281 )
 (d)
     5,665,707  
Clouding IP earn out
     13,115,000       -       13,115,000       -  
 
     13,115,000  
Note payable
     6,062,500       8,921,918       14,984,418       9,000,000  
 (e)
     23,984,418  
Income Tax Payable
     467,997       -       467,997       -         467,997  
Other current liabilities
     -       -       -       -         -  
Total Liabilities
     25,311,204       9,113,199       34,424,403       8,808,719         43,233,122  
                                           
Stockholders' Equity
     -                                    
Preferred stock
     140       -       140       -         140  
Common stock
     580       -       580       -  
 
     580  
Additional paid-in capital
     35,709,773       -       35,709,773       -  
 
     35,709,773  
Other equity
     -       -       -       -  
 
     -  
Accumulated deficits
     (7,531,065 )     (812,638 )     (8,343,703 )     (2,614,232 ) 
 (f)
     (10,957,935 )
Total stockholder's equity
     28,179,428       (812,638 )     27,366,790       (2,614,232 )       24,752,558  
                                           
Total Liabilities and Stockholder's Equity
     53,490,632       8,300,561       61,791,193       6,194,487         67,985,680  

 
 
 
 
Marathon Patent Group, Inc.
Unaudited Pro Forma Condensed Combined Statements of Operation
For the period ended September 30, 2014

   
Marathon Patent Group, Inc.
    
MGA Corp.
    
Combined Before Pro Forma Adjustments
    
Pro Forma Adjustments
    
Marathon Patent Group, Inc. Pro Forma
  
                               
Revenues
     20,059,972       293,468       20,353,440       -       20,353,440  
                                         
Cost of revenues (cost of revenue is exclusive of patent amortization expenses)
     8,448,954       801,918       9,250,872       -       9,250,872  
                                         
Gross Profit
     11,611,018       (508,450 )     11,102,568       -       11,102,568  
                                         
Expenses
                                        
Amortiztion of intangibles
     2,872,638       1,647,284       4,519,922       1,713,435   (g)      6,233,357  
Compensation and related taxes
     2,266,283       -       2,266,283       -       2,266,283  
Consulting fees
     1,550,155       -       1,550,155       -       1,550,155  
Professional fees
     933,751       -       933,751       -       933,751  
General and adminsitrative
     380,400       -       380,400       -       380,400  
Total operating expenses
     8,003,227       1,647,284       9,650,511       1,713,435       11,363,946  
                                         
Operating income (loss) from continuing operations
     3,607,791       (2,155,734 )     1,452,057       (1,713,435 )      (261,378 ) 
                                         
Other income
                                        
Other income
     1,486,223       -       1,486,223       -       1,486,223  
Other expense
     (3,441,764 )     (742,341 )     (4,184,105 )     -       (4,184,105 )
                                         
Net Income (Loss)
     1,652,250       (2,898,075 )     (1,245,825 )     (1,713,435 )      (2,959,260 )
                                         
Net income (loss) per share - basic
     0.30                               (0.53 )
Net income (loss) per share - diluted
     0.21                               (0.53 )
Weighted average number of shares outstanding during the period - basic
     5,598,687                               5,598,687  
Weighted average number of shares outstanding during the period - dilluted
     7,983,227                               7,983,227  

 
 
 
 
Marathon Patent Group, Inc.
Unaudited Pro Forma Condensed Combined Statements of Operation
For the year ended December 31, 2013

   
Marathon
Patent Group,
Inc.
    
MGA Corp.
    
Combined Before Pro Forma Adjustments
    
Pro Forma Adjustments
    
Marathon
Patent Group, Inc.
Pro Forma
  
                               
Revenues
     3,418,371       337,355       3,755,726       -       3,755,726  
                                         
Cost of revenues (cost of revenue is exclusive of patent amortization expenses)
     957,040       487,588       1,444,628       -       1,444,628  
                                         
Gross Profit
     2,461,331       (150,233 )     2,311,098       -       2,311,098  
                                         
Expenses
                                        
Amortiztion of intangibles
     1,038,505       2,099,944       3,138,449       1,713,435   (g)     4,851,884  
Compensation and related taxes
     2,997,053       -       2,997,053       -       2,997,053  
Consulting fees
     901,686       -       901,686       -       901,686  
Professional fees
     655,202       -       655,202       -       655,202  
General and adminsitrative
     544,338       1,093       545,431       -       545,431  
Total operating expenses
     6,136,784       2,101,037       8,237,821       1,713,435       9,951,256  
                                         
Operating income (loss) from continuing operations
     (3,675,453 )     (2,251,270 )     (5,926,723 )     (1,713,435 )      (7,640,158 )
                                         
Other income
                                        
Other income
     265,012       -       265,012       -       265,012  
Other expense
     (39,894 )     (685,927 )     (725,821 )     -       (725,821 )
                                         
Net Loss
     (3,450,335 )     (2,937,197 )     (6,387,532 )     (1,713,435 )      (8,100,967 )
                                         
Net loss per share - basic
     (0.75 )                             (1.76 )
Weighted average number of shares outstanding during the period - basic and diluted
     4,604,193                               4,604,193  

 
 
 
 
Marathon Patent Group, Inc.
Significant Notes and Assumptions to the Pro Forma Condensed Combined Financial Statements

Note 1 – Acquisition Consideration and Fair Value of Clouding IP Assets

The Company accounted for the acquisition as a business combination in accordance with ASC 805 “Business Combinations”. The Company determined the fair value of the assets purchases, and the net purchase price paid by the Company was subsequently allocated to assets acquired and liabilities assumed on the records of the Company as follows:

Intangible assets
  
$
16,700,000
  
Goodwill
    
2,221,918
  
Net purchase price
  
$
18,921,918
  

Total consideration paid of the following:
 
Cash
   $ 1,000,000  
Promissory Note
     17,921,918  
Net purchase price
   $ 18,921,918  

Note 2 – Pro Forma Presentation Adjustments

The adjustments included in the column under the heading “Pro Forma Adjustments” in the unaudited pro forma condensed combined financial statements are as follows:

(a)  
To record the cash portion of the consideration for the acquisition, net of cash retained by MedTech.

(b)  
To record the fair value of the MGA Corp. assets acquired.   The Company determined that the fair value of the assets owned by the Subsidiaries were $16,700,000 at the time of the acquisition.

(c)  
To reflect the fair value of the goodwill associated with the acquisition of the assets of the Subsidiaries.

(d)  
To eliminate accounts payable retained or settled by MedTech prior to the closing date.

(e)  
To record the issuance of a note payable to MedTech in the amount of $9.0 million as part of the purchase consideration of the Subsidiaries and the assumption of a note payable in the amount of $8.9 million.

(f)  
To eliminate Medtech’s parent company investment in the Subsidiaries.

(g)  
To record patent amortization of the step up in value of the patents.