MARATHON PATENT GROUP, INC. AND SUBSIDIARIES

PRO FORMA COMBINED FINANCIAL INFORMATION

(UNAUDITED)
 
 
 
 

 
MARATHON PATENT GROUP, INC. AND SUBSIDIARIES

Index to Unaudited Pro Forma Combined Financial Information


   
Pages
     
     
Unaudited Pro Forma Combined Balance Sheet – March 31, 2013
  
2
     
Unaudited Pro Forma Combined Statement of Operations – March 31, 2013
  
3
     
Unaudited Pro Forma Combined Statement of Operations – December 31, 2012
  
4
     
Notes to Unaudited Pro Forma Combined Financial Information
  
5

1
 
 
 
 

MARATHON PATENT GROUP, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET

   
Marathon Patent Group, Inc.
                                      
 
  
and Subsidiaries
    
CyberFone Systems, LLC
                                
   
March 31, 2013
    
March 31, 2013
          
Pro Forma Adjustments
    
Pro Forma
  
   
Historical
    
Historical
          
Dr
          
Cr.
    
Balances
  
   
(Unaudited)
    
(Unaudited)
                            
(Unaudited)
  
ASSETS
                                          
CURRENT ASSETS:
                                          
  Cash
   $ 2,916,476     $ 2,390,207           $ -       (1 )   $ 2,890,207     $ 2,416,476  
  Accounts receivable - current portion
     -       690,000             -       (1 )     690,000       -  
  Marketable securities - available for sale securities
     6,250       -             -               -       6,250  
  Prepaid expenses
     30,666       -             -               -       30,666  
  Assets of discontinued operations - current portion
     53,395       -             -               -       53,395  
                                                       
        Total Current Assets
     3,006,787       3,080,207             -               3,580,207       2,506,787  
                                                       
                                                       
Goodwill
     -       -       (1 )     2,114,735               -       2,114,735  
Accounts receivable - long term portion
     -       180,000               -       (1 )     180,000       -  
Property and equipment, net
     9,722       -               -               -       9,722  
Intangible assets, net
     474,605       1,165,265               -               -       1,639,870  
Assets of discontinued operations - long term portion
     230,088       -               -               -       230,088  
                                                         
        Total Assets
   $ 3,721,202     $ 4,425,472             $ 2,114,735             $ 3,760,207     $ 6,501,202  
                                                         
LIABILITIES AND STOCKHOLDERS' EQUITY
                                          
                                                         
CURRENT LIABILITIES:
                                                        
    Accounts payable and accrued expenses
   $ 153,169     $ 319,774       (1 )   $ 319,774             $ -     $ 153,169  
    Liabilities of discontinued operations
     30,664       -               -               -       30,664  
    Note payable
     -       -               -       (1 )     500,000       500,000  
 
                                                        
        Total  Liabilities
     183,833       319,774               319,774               500,000       683,833  
                                                         
Commitments and Contingencies
                                                        
                                                         
STOCKHOLDERS' EQUITY:
                                                        
                                                         
Preferred stock, $.0001 par value, 50,000,000 shares
                                                        
authorized: none issued and outstanding
     -       -               -               -       -  
Common stock, ($.0001 par value; 200,000,000 shares authorized;
                                                        
45,546,345  shares issued and outstanding prior to acquisition; 51,546,345 shares
                                                        
issued and outstanding after the acquisition)
     4,555       -               -       (1 )     600       5,155  
Additional paid-in capital
     11,192,230       -               -       (1 )     2,279,400       13,471,630  
Accumulated other comprehensive income - marketable securities available for sale
     (6,250 )     -               -               -       (6,250 )
Retained earnings (accumulated deficit)
     (7,642,670 )     4,105,698       (1 )     4,105,698               -       (7,642,670 )
                                                         
    Total Marathon Patent Group, Inc. equity
     3,547,865       4,105,698               4,105,698               2,280,000       5,827,865  
                                                         
    Non-Controlling Interest in Subsidiary
     (10,496 )     -               -               -       (10,496 )
                                                         
        Total Stockholders' Equity
     3,537,369       4,105,698               4,105,698               2,280,000       5,817,369  
                                                         
        Total Liabilities and Stockholders' Equity
   $ 3,721,202     $ 4,425,472             $ 4,425,472             $ 2,780,000     $ 6,501,202  

See accompanying notes to unaudited pro forma combined financial information.

2
 
 
 
 

 
MARATHON PATENT GROUP, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

   
Marathon Patent Group, Inc.
                          
   
and Subsidiaries
    
CyberFone Systems, LLC
                    
                               
   
For the Three Months
    
For the Three Months
                    
   
Ended March 31,
    
Ended March 31,
                    
   
2013
    
2013
    
Pro Forma Adjustments
    
Pro Forma
  
               
Dr
    
Cr.
    
Balances
  
   
(Unaudited)
    
(Unaudited)
                
(Unaudited)
  
                               
Net revenues
   $ -     $ 5,900,000     $ -     $ -     $ 5,900,000  
                                         
                                         
Operating Expenses:
                                        
   Cost of revenues
     -       3,032,681       -       -       3,032,681  
   Compensation and related taxes
     426,675       -       -       -       426,675  
   Consulting fees
     45,224       -       -       -       45,224  
    Professional fees
     158,472       -       -       -       158,472  
   General and administrative expenses
     84,006       1,626       -       -       85,632  
                                         
    Total Operating Expenses
     714,377       3,034,307       -       -       3,748,684  
                                         
Loss from Operations
     (714,377 )     2,865,693       -       -       2,151,316  
                                         
Other Income (Expense)
                                        
   Interest income
     291       -       -       -       291  
   Interest expense
     (230 )     -       -       -       (230 )
                                         
   Total Other (Expense) - net
     61       -       -       -       61  
                                         
Loss from continuing operations before provision for income taxes
     (714,316 )     2,865,693       -       -       2,151,377  
                                         
Provision for income taxes
     -       -       -       -       -  
                                         
Loss from continuing operations
     (714,316 )     2,865,693       -       -       2,151,377  
                                         
Discontinued operations:
                                        
   Gain (loss) from discontinued operations, net of tax
     108,780       -       -       -       108,780  
                                         
Net loss
     (605,536 )     2,865,693       -       -       2,260,157  
                                         
Less: Net loss attributable to non-controlling interest
     -       -       -       -       -  
                                         
Net loss attributable to Marathon Patent Group, Inc.
   $ (605,536 )   $ 2,865,693     $ -     $ -     $ 2,260,157  
                                         
Loss per common share, basic and diluted:
                                        
  Loss from continuing operations
   $ (0.02 )                           $ 0.05  
  Loss from discontinued operations
     0.00                               0.00  
    $ (0.02 )                           $ 0.05  
                                         
Weighted average shares outstanding:
                                        
     Basic and Diluted
     45,546,345                               45,546,345  

See accompanying notes to unaudited pro forma combined financial statements.

3
 
 
 
 

 
MARATHON PATENT GROUP, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

   
Marathon Patent Group, Inc.
                          
   
and Subsidiaries
    
CyberFone Systems, LLC
                    
                               
   
For the Year
    
For the Year
                    
   
Ended December 31,
    
Ended December 31,
                    
   
2012
    
2012
    
Pro Forma Adjustments
    
Pro Forma
  
               
Dr
    
Cr.
    
Balances
  
   
(Unaudited)
    
(Unaudited)
                
(Unaudited)
  
                               
Net revenues
   $ -     $ 8,184,950     $ -     $ -     $ 8,184,950  
                                         
                                         
Operating Expenses:
                                        
   Cost of revenues
     -       5,006,426       -       -       5,006,426  
   Compensation and related taxes
     2,676,462       -       -       -       2,676,462  
   Consulting fees
     2,042,144       -       -       -       2,042,144  
    Professional fees
     510,112       -       -       -       510,112  
   General and administrative expenses
     312,244       13,786       -       -       326,030  
                                         
    Total Operating Expenses
     5,540,962       5,020,212       -       -       10,561,174  
                                         
Loss from Operations
     (5,540,962 )     3,164,738       -       -       (2,376,224 )
                                         
Other Income (Expense)
                                        
    Other income
     125,000       -                       125,000  
    Realized loss other than temporary decline - available for sale
     (112,500 )     -                       (112,500 )
   Interest income
     978       -       -       -       978  
   Interest expense
     (153 )     -       -       -       (153 )
                                         
   Total Other (Expense) - net
     13,325       -       -       -       13,325  
                                         
Loss from continuing operations before provision for income taxes
     (5,527,637 )     3,164,738       -       -       (2,362,899 )
                                         
Provision for income taxes
     -       -       -       -       -  
                                         
Loss from continuing operations
     (5,527,637 )     3,164,738       -       -       (2,362,899 )
                                         
Discontinued operations:
                                        
   Gain (loss) from discontinued operations, net of tax
     (1,410,671 )     -       -       -       (1,410,671 )
                                         
Net loss
     (6,938,308 )     3,164,738       -       -       (3,773,570 )
                                         
Less: Net loss attributable to non-controlling interest
     10,496       -       -       -       10,496  
                                         
Net loss attributable to Marathon Patent Group, Inc.
   $ (6,927,812 )   $ 3,164,738     $ -     $ -     $ (3,763,074 )
                                         
Loss per common share, basic and diluted:
                                        
  Loss from continuing operations
   $ (0.15 )                           $ (0.07 )
  Loss from discontinued operations
     (0.04 )                             (0.04 )
    $ (0.19 )                           $ (0.11 )
                                         
Weighted average shares outstanding:
                                        
     Basic and Diluted
     36,238,712                               36,238,712  

See accompanying notes to unaudited pro forma combined financial statements.

4
 
 
 
 
 
MARATHON PATENT GROUP, INC. AND SUBSIDIARIES
Notes to Unaudited Pro Forma Combined Financial Information

The following unaudited pro forma combined financial information is presented to illustrate the estimated effects of our acquisition of CyberFone Systems, LLC (“CyberFone Systems”). On April 22, 2013, CyberFone Acquisition Corp. (“Acquisition Corp.”), a Texas corporation and newly formed wholly owned subsidiary of the Company entered into a merger agreement (the “Agreement”) with CyberFone Systems, TechDev Holdings LLC (“TechDev”) and The Spangenberg Family Foundation for the Benefit of Children’s Healthcare and Education (“Spangenberg Foundation”).  TechDev and Spangenberg Foundation owned 100% of the membership interests of CyberFone Systems (collectively, the “CyberFone Sellers”).

Pursuant to the terms of the Merger Agreement, CyberFone Systems merged with and into Acquisition Corp with CyberFone Systems surviving the merger as the wholly owned subsidiary of the Company (the “Merger”). In connection with the merger, the Company (i) issued 6,000,000 shares of common stock to the CyberFone Sellers (the “Merger Shares”), (ii) paid the CyberFone Sellers $500,000 cash and (iii) issued a $500,000 promissory note to TechDev (the “Note”).  The Note is non-interest bearing and becomes due June 22, 2013, subject to acceleration in the event of default.  The Company may prepay the Note at any time without premium or penalty. On June 21, 2013, we paid $500,000 to TechDev in satisfaction of the note. The transaction resulted in a business combination and caused CyberFone Systems to become a wholly-owned subsidiary of the Company. Pursuant to ASC 805 “Business Combinations”, the Company shall apply push–down accounting and adjust to fair value all of the assets and liabilities directly on the financial statements of the wholly-owned subsidiary, CyberFone Systems.

The Unaudited Pro Forma Combined Financial Information has been prepared using the purchase method of accounting for the CyberFone Systems acquisition. We have derived our historical financial data for the three months ended March 31, 2013 from our unaudited financial statements and our historical financial data for the year ended December 31, 2012.   The unaudited pro forma combined balance sheet is prepared as though the transactions occurred at the close of business on March 31, 2013. The pro forma combined statement of operations gives effect to the transactions as though they occurred on January 1, 2012.

The information presented in the unaudited pro forma combined financial information does not purport to represent what our financial position would have been had the transaction occurred as of the dates indicated, nor is it indicative of our future financial position for any period. You should not rely on this information as being indicative of the historical results that would have been achieved had the companies always been consolidated or the future results that the consolidated company will experience after the transaction.

The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable under the circumstances. The unaudited pro forma combined financial information should be read in conjunction with the historical financial statements and related notes of the Company.

5
 
 
 
 

 
Unaudited pro forma adjustments reflect the following transaction:

1)
    
 
    
    Goodwill
2,114,735
  
    Accounts payable and accrued expenses - CyberFone Systems
319,774
  
    Retained earnings – CyberFone Systems
4,105,698
  
        Cash
  
500,000
        Note payable
  
500,000
        Common stock, at par
  
600
        Additional paid-in capital
  
2,279,400
        Cash – CyberFone Systems
  
2,390,207
        Accounts receivable – current portion- CyberFone Systems
  
690,000
        Accounts receivable – long term portion- CyberFone Systems
  
180,000
 
This adjustment reflects the effect of applying purchase accounting to the acquisition of CyberFone Systems. In connection with the merger, the Company (i) issued 6,000,000 shares of common stock to the CyberFone Sellers, (ii) paid the CyberFone Sellers $500,000 cash and (iii) issued a $500,000 promissory note to TechDev. The Company valued these common shares at the fair market value on the date of grant at $0.38 per share or $2,280,000. In addition, the adjustment reflects the elimination of CyberFone System’s certain assets and liabilities as of March 31, 2013 not assumed by the Company on the date of acquisition on April 22, 2013.
 

6