S-1 1 q1101229_s1-marathon.htm Unassociated Document
 
As filed with the Securities and Exchange Commission on September 13, 2013.

SEC File No. 333-


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
______________________

MARATHON PATENT GROUP, INC.
(Exact name of registrant as specified in its charter)
 
Nevada
6794
01-0949984
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
 
(I.R.S. Employer Identification Number)
2331 Mill Road, Suite 100
Alexandria, VA 22314
Telephone: (703) 232-1701
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
 
 Doug Croxall
2331 Mill Road, Suite 100
Alexandria, VA 22314
Telephone: (703) 232-1701
 
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
 
Copies of all communications, including communications sent to agent for service, should be sent to:
 
Harvey J. Kesner, Esq.
Sichenzia Ross Friedman Ference LLP
61 Broadway, 32nd Floor
New York, New York 10006
Telephone: (212) 930-9700
Fax: (212) 930-9725
 
 
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Approximate date of commencement of proposed sale to the public:  As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.  x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):

Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
¨
Smaller reporting company
x
(Do not check if a smaller reporting company)
     

CALCULATION OF REGISTRATION FEE

TITLE OF EACH
CLASS OF SECURITIES
TO BE REGISTERED
AMOUNT TO BE
REGISTERED (1)
PROPOSED MAXIMUM OFFERING PRICE PER SHARE
(2)
PROPOSED MAXIMUM
AGGREGATE OFFERING PRICE
AMOUNT OF REGISTRATION FEE
Common Stock
 1,159,542
$5.90
$6,841,298
$933.15
Common Stock underlying Warrants
579,777
$5.90
$3,420,684
$466.58
Total
1,739,319
 
$10,261,982
$1,399.73

(1)  
Pursuant to Rule 416 under the Securities Act, the shares of common stock offered hereby also include an indeterminate number of additional shares of common stock as may from time to time become issuable by reason of stock splits, stock dividends, recapitalizations or other similar transactions.
 
(2)  
Estimated at $5.90 per share, the average of the high and low prices as reported on the OTCBB on September 12, 2013, for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act, and assumes a one-for-thirteen reverse stock split that we effectuated on July 18, 2013 (the “Reverse Split”).
 
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission acting pursuant to said Section 8(a), may determine.
 
 
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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED SEPTEMBER 13, 2013

PRELIMINARY PROSPECTUS

1,739,319 SHARES

MARATHON PATENT GROUP, INC.

Common Stock

This prospectus relates to the sale by the selling stockholders identified in this prospectus of up to 1,739,319 shares of our common stock, par value $0.0001, which includes 579,777 shares of common stock issuable upon the exercise of outstanding warrants.

There are no underwriting arrangements to sell the shares of common stock that are being offered by the selling stockholders hereunder. The prices at which the selling stockholders may sell shares will be determined by the prevailing market price for the shares or in privately negotiated transactions. We will not receive any proceeds from the sale of these shares by the selling stockholders.  All expenses of registration incurred in connection with this offering are being borne by us, but all selling and other expenses incurred by the selling stockholders will be borne by the selling stockholders.

Our common stock is quoted on the OTC Bulletin Board under the symbol “MARA”.  On September 12, 2013, the last reported sale price of our common stock as reported on the OTC Bulletin Board was $6.00 per share after giving effect to the Reverse Split (as defined below).

On July 18, 2013, we effectuated a 1-for-13 reverse stock split of our common stock (the “Reverse Split”). All share numbers and per share prices in this prospectus reflect the Reverse Split, unless otherwise indicated.

Investing in our common stock is highly speculative and involves a high degree of risk. You should carefully consider the risks and uncertainties in the section entitled “Risk Factors” beginning on page 6 of this prospectus before making a decision to purchase our stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is                          , 2013
 
 
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TABLE OF CONTENTS

 
Page
Prospectus Summary
5
Risk Factors
6
Special Note Regarding Forward Looking Statements
15
Use of Proceeds
16
Market for Our Common Stock and Related Stockholder Matters
16
Management’s Discussion and Analysis of Financial Condition and Results of Operation
17
Business
29
Properties
34
Management
34
Executive Compensation
37
Certain Relationships and Related Transactions
40
Security Ownership of Certain Beneficial Owners and Management
42
Selling Stockholders
44
Description of Securities
51
Plan of Distribution
53
Legal Matters
54
Experts
54
Where You Can Find Additional Information
54
Index to Financial Statements
F-1

You should rely only on the information contained in this prospectus. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.
 
 
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Prospectus Summary

 
 
Our principal office is located at 2331 Mill Road, Suite 100, Alexandria, VA 22314. Our telephone number is (703) 232-1701. Our website is http://www.marathonpg.com/. Information on or accessed through our website is not incorporated into this prospectus and is not a part of this prospectus.
 
As used in this prospectus, unless otherwise specified, references to the “Company,” “we,” “our” and “us” refer to Marathon Patent Group, Inc. and, unless otherwise specified, its subsidiary.
 
         
 
The Offering
     
         
 
Common stock offered by the selling stockholders:
 
1,739,319 shares of common stock, consisting of 1,159,542 shares of common stock and 579,777 shares of common stock issuable upon the exercise of outstanding warrants sold to investors in the private placement conducted on May 31, 2013 and the conversion of certain legal fees on July 29, 2013, after giving effect to the Reverse Split.
 
         
 
Common stock outstanding before and after the offering:
 
5,333,824 (1) and 5,913,601 (2)
 
         
 
Use of proceeds:
 
We will not receive any proceeds from the sale of shares in this offering by the selling stockholders.
 
         
 
OTCBB symbol:
 
MARA
 
 
         
 
Risk factors:
 
You should carefully consider the information set forth in this prospectus and, in particular, the specific factors set forth in the “Risk Factors” section beginning on page 6 of this prospectus before deciding whether or not to invest in shares of our common stock.
 

(1) The number of shares before the offering is based on 5,333,824 shares outstanding as of September 12, 2013.
(2) The number of shares after the offering is based on 5,333,824 shares outstanding as of September 12, 2013, assuming all the warrants for which the underlying shares of common stock being offered (579,777) have been exercised.
 
 
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RISK FACTORS

There are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. If any of these risks actually occur, our business, financial condition or results of operation may be materially adversely affected. In such case, the trading price of our common stock could decline and investors could lose all or part of their investment.

Risks Related to Our Company

We have changed the focus of our business to acquiring, developing and monetizing patents through licensing and enforcement. We may not be able to successfully monetize the patents which we acquire and thus we may fail to realize all of the anticipated benefits of such acquisition.

There is no assurance that we will be able to successfully acquire, develop or monetize our patent portfolio. The acquisition of the patents could fail to produce anticipated benefits, or could have other adverse effects that we do not currently foresee. Failure to successfully monetize these patent assets may have a material adverse effect on our business, financial condition and results of operations.

In addition, the acquisition of patent portfolios is subject to a number of risks, including, but not limited to the following:

 
• There is a significant time lag between acquiring a patent portfolio and recognizing revenue from those patent assets. During that time lag, material costs are likely to be incurred that would have a negative effect on our results of operations, cash flows and financial position; and

 
• The integration of a patent portfolio will be a time consuming and expensive process that may disrupt our operations. If its integration efforts are not successful, our results of operations could be harmed. In addition, we may not achieve anticipated synergies or other benefits from such acquisition.

Therefore, there is no assurance that the monetization of our patent portfolios will generate enough revenue to recoup our investment.

We are presently reliant exclusively on the patent assets we acquired from other companies. If we are unable to license or otherwise monetize such assets and generate revenue and profit through those assets or by other means, there is a significant risk that our business would fail.

At the commencement of our current line of business in 2012, we acquired a portfolio of patent assets from Sampo IP LLC (“Sampo”), a company affiliated with our Chief Executive Officer, Douglas Croxall, that we plan to license or otherwise monetize. On April 16, 2013, we acquired US Patent 5,331,637 from Mosaid Technologies Incorporated, a Canadian corporation. On April 22, 2013, we acquired a foundational patent portfolio through a merger between Cyberfone Acquisition Corp., a Texas corporation and our wholly owned subsidiary and Cyberfone Systems LLC, a Texas limited liability company (“Cyberfone Systems”). If our efforts to generate revenue from these assets fail, we will have incurred significant losses and may be unable to acquire additional assets. If this occurs, our business would likely fail. We did not obtain any independent valuation with respect to the portfolios we acquired.

Our limited operating history makes it difficult to evaluate our current business and future prospects.

We are a development stage company. We have, prior to the acquisition of Sampo, been involved in unrelated businesses. Our efforts to license existing patents and develop new patents are still in development. Therefore, we not only have no operating history in executing our business model which includes, among other things, creating, prosecuting, licensing, litigating or otherwise monetizing our patent assets. Our lack of operating history makes it difficult to evaluate our current business model and future prospects.
 
 
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In light of the costs, uncertainties, delays and difficulties frequently encountered by companies in the early stages of development with no operating history, there is a significant risk that we will not be able to:

• implement or execute our current business plan, or demonstrate that our business plan is sound; and/or

• raise sufficient funds in the capital markets to effectuate our business plan.

If we cannot execute any one of the foregoing or similar matters relating to our operations, our business may fail.

We may commence legal proceedings against certain companies, and we expect such litigation to be time-consuming and costly, which may adversely affect our financial condition and our ability to operate our business.

To license or otherwise monetize our patent assets, we may commence legal proceedings against certain companies, pursuant to which we may allege that such companies infringe on one or more of our patents. Our viability could be highly dependent on the outcome of the litigation, and there is a risk that we may be unable to achieve the results we desire from such litigation, which failure would harm our business to a great degree. In addition, the defendants in the litigations are likely to be much larger than us and have substantially more resources than we do, which could make our litigation efforts more difficult.

We anticipate that these legal proceedings may continue for several years and may require significant expenditures for legal fees and other expenses. Disputes regarding the assertion of patents and other intellectual property rights are highly complex and technical. Once initiated, we may be forced to litigate against others to enforce or defend our intellectual property rights or to determine the validity and scope of other parties’ proprietary rights. The defendants or other third parties involved in the lawsuits in which we are involved may allege defenses and/or file counterclaims in an effort to avoid or limit liability and damages for patent infringement. If such defenses or counterclaims are successful, they may preclude our ability to derive licensing revenue from the patents. A negative outcome of any such litigation, or one or more claims contained within any such litigation, could materially and adversely impact our business. Additionally, we anticipate that our legal fees and other expenses will be material and will negatively impact our financial condition and results of operations and may result in our inability to continue our business.

We may seek to internally develop additional new inventions and intellectual property, which would take time and be costly. Moreover, the failure to obtain or maintain intellectual property rights for such inventions would lead to the loss of our investments in such activities.

Part of our business may include the internal development of new inventions or intellectual property that we will seek to monetize. However, this aspect of our business would likely require significant capital and would take time to achieve. Such activities could also distract our management team from its present business initiatives, which could have a material and adverse effect on our business. There is also the risk that our initiatives in this regard would not yield any viable new inventions or technology, which would lead to a loss of our investments in time and resources in such activities.

In addition, even if we are able to internally develop new inventions, in order for those inventions to be viable and to compete effectively, we would need to develop and maintain, and we would be heavily reliant upon, a proprietary position with respect to such inventions and intellectual property. However, there are significant risks associated with any such intellectual property we may develop principally including the following:
 
 
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• patent applications we may file may not result in issued patents or may take longer than we expect to result in issued patents;

• we may be subject to interference proceedings;

• we may be subject to opposition proceedings in the U.S. or foreign countries;

• any patents that are issued to us may not provide meaningful protection;

• we may not be able to develop additional proprietary technologies that are patentable;

• other companies may challenge patents issued to us;
 
• other companies may have independently developed and/or patented (or may in the future independently develop and patent) similar or alternative technologies, or duplicate our technologies;

• other companies may design around technologies we have developed; and

• enforcement of our patents would be complex, uncertain and very expensive.

We cannot be certain that patents will be issued as a result of any future applications, or that any of our patents, once issued, will provide us with adequate protection from competing products. For example, issued patents may be circumvented or challenged, declared invalid or unenforceable, or narrowed in scope. In addition, since publication of discoveries in scientific or patent literature often lags behind actual discoveries, we cannot be certain that we will be the first to make our additional new inventions or to file patent applications covering those inventions. It is also possible that others may have or may obtain issued patents that could prevent us from commercializing our products or require us to obtain licenses requiring the payment of significant fees or royalties in order to enable us to conduct our business. As to those patents that we may license or otherwise monetize, our rights will depend on maintaining our obligations to the licensor under the applicable license agreement, and we may be unable to do so. Our failure to obtain or maintain intellectual property rights for our inventions would lead to the loss of our investments in such activities, which would have a material and adverse effect on us.

Moreover, patent application delays could cause delays in recognizing revenue from our internally generated patents and could cause us to miss opportunities to license patents before other competing technologies are developed or introduced into the market.

New legislation, regulations or court rulings related to enforcing patents could harm our business and operating results.

If Congress, the United States Patent and Trademark Office or courts implement new legislation, regulations or rulings that impact the patent enforcement process or the rights of patent holders, these changes could negatively affect the Company’s business model. For example, limitations on the ability to bring patent enforcement claims, limitations on potential liability for patent infringement, lower evidentiary standards for invalidating patents, increases in the cost to resolve patent disputes and other similar developments could negatively affect the Company’s ability to assert its patent or other intellectual property rights.

In addition, on September 16, 2011, the Leahy-Smith America Invents Act (the “Leahy-Smith Act”), was signed into law. The Leahy-Smith Act includes a number of significant changes to United States patent law. These changes include provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. The U.S. Patent Office is currently developing regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act recently became effective. Accordingly, it is too early to tell what, if any, impact the Leahy-Smith Act will have on the operation of the Company’s business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of the Company’s issued patents, all of which could have a material adverse effect on the Company’s business and financial condition.
 
 
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On February 27, 2013, US Representatives DeFazio and Chaffetz introduced HR845.  In general, the bill known as the SHIELD Act (“Saving High-tech Innovators from Egregious Legal Disputes”), seeks to assess legal fee liability to plaintiffs in patent infringement actions for defendants costs.  In the event that the bill becomes law, the potential obligation to pay the legal fees of defendants in patent disputes could have a material adverse effect on the Company’s business or financial condition.

On June 4, 2013, the Obama Administration issued executive actions and legislative recommendations. The legislative measures recommended by the Obama Administration include requiring patentees and patent applicants to disclose the “Real Party-in-Interest”, giving district courts more discretion to award attorney’s fees to the prevailing party, requiring public filing of demand letters such that they are accessible to the public, and protecting consumers against liability for a product being used off-the shelf and solely for its intended use.

The executive actions includes ordering the USPTO to make rules to require the disclosure of the Real Party-in-Interest by requiring patent applicants and owners to regularly update ownership information when they are involved in proceedings before the USPTO (e.g. specifying the “ultimate parent entity”) and requiring the USPTO to train its examiners to better scrutinize functional claims to prevent allowing overly broad claims.

It is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any of the proposals will become enacted as laws. Compliance with any new or existing laws or regulations could be difficult and expensive, affect the manner in which the Company conducts its business and negatively impact the Company’s business, prospects, financial condition and results of operations.

Our acquisitions of patent assets may be time consuming, complex and costly, which could adversely affect our operating results.

Acquisitions of patent or other intellectual property assets, which are and will be critical to our business plan, are often time consuming, complex and costly to consummate. We may utilize many different transaction structures in our acquisitions and the terms of such acquisition agreements tend to be heavily negotiated. As a result, we expect to incur significant operating expenses and will likely be required to raise capital during the negotiations even if the acquisition is ultimately not consummated. Even if we are able to acquire particular patent assets, there is no guarantee that we will generate sufficient revenue related to those patent assets to offset the acquisition costs. While we will seek to conduct confirmatory due diligence on the patent assets we are considering for acquisition, we may acquire patent assets from a seller who does not have proper title to those assets. In those cases, we may be required to spend significant resources to defend our interest in the patent assets and, if we are not successful, our acquisition may be invalid, in which case we could lose part or all of our investment in the assets.

We may also identify patent or other intellectual property assets that cost more than we are prepared to spend with our own capital resources. We may incur significant costs to organize and negotiate a structured acquisition that does not ultimately result in an acquisition of any patent assets or, if consummated, proves to be unprofitable for us. These higher costs could adversely affect our operating results, and if we incur losses, the value of our securities will decline.

In addition, we may acquire patents and technologies that are in the early stages of adoption in the commercial, industrial and consumer markets. Demand for some of these technologies will likely be untested and may be subject to fluctuation based upon the rate at which our licensees will adopt our patents and technologies in their products and services. As a result, there can be no assurance as to whether technologies we acquire or develop will have value that we can monetize.
 
 
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In certain acquisitions of patent assets, we may seek to defer payment or finance a portion of the acquisition price. This approach may put us at a competitive disadvantage and could result in harm to our business.

We have limited capital and may seek to negotiate acquisitions of patent or other intellectual property assets where we can defer payments or finance a portion of the acquisition price. These types of debt financing or deferred payment arrangements may not be as attractive to sellers of patent assets as receiving the full purchase price for those assets in cash at the closing of the acquisition. As a result, we might not compete effectively against other companies in the market for acquiring patent assets, many of whom have greater cash resources than we have. In addition, any failure to satisfy our debt repayment obligations may result in adverse consequences to our operating results.

Any failure to maintain or protect our patent assets or other intellectual property rights could significantly impair our return on investment from such assets and harm our brand, our business and our operating results.

Our ability to operate our business and compete in the intellectual property market largely depends on the superiority, uniqueness and value of our acquired patent assets and other intellectual property. To protect our proprietary rights, we rely on and will rely on a combination of patent, trademark, copyright and trade secret laws, confidentiality agreements with our employees and third parties, and protective contractual provisions. No assurances can be given that any of the measures we undertake to protect and maintain our assets will have any measure of success.

Following the acquisition of patent assets, we will likely be required to spend significant time and resources to maintain the effectiveness of those assets by paying maintenance fees and making filings with the United States Patent and Trademark Office. We may acquire patent assets, including patent applications, which require us to spend resources to prosecute the applications with the United States Patent and Trademark Office. Further, there is a material risk that patent related claims (such as, for example, infringement claims (and/or claims for indemnification resulting therefrom), unenforceability claims, or invalidity claims) will be asserted or prosecuted against us, and such assertions or prosecutions could materially and adversely affect our business. Regardless of whether any such claims are valid or can be successfully asserted, defending such claims could cause us to incur significant costs and could divert resources away from our other activities.

Despite our efforts to protect our intellectual property rights, any of the following or similar occurrences may reduce the value of our intellectual property:

 
• our applications for patents, trademarks and copyrights may not be granted and, if granted, may be challenged or invalidated;

 
• issued trademarks, copyrights, or patents may not provide us with any competitive advantages when compared to potentially infringing other properties;

 
• our efforts to protect our intellectual property rights may not be effective in preventing misappropriation of our technology; or

 
• our efforts may not prevent the development and design by others of products or technologies similar to or competitive with, or superior to those we acquire and/or prosecute.

Moreover, we may not be able to effectively protect our intellectual property rights in certain foreign countries where we may do business in the future or from which competitors may operate. If we fail to maintain, defend or prosecute our patent assets properly, the value of those assets would be reduced or eliminated, and our business would be harmed.
 
 
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Weak global economic conditions may cause infringing parties to delay entering into licensing agreements, which could prolong our litigation and adversely affect our financial condition and operating results.

Our business plan depends significantly on worldwide economic conditions, and the United States and world economies have recently experienced weak economic conditions. Uncertainty about global economic conditions poses a risk as businesses may postpone spending in response to tighter credit, negative financial news and declines in income or asset values. This response could have a material negative effect on the willingness of parties infringing on our assets to enter into licensing or other revenue generating agreements voluntarily. Entering into such agreements is critical to our business plan, and our failure to do so could cause material harm to our business.

We are a development stage company with no historically significant income and there is a significant doubt about our ability to continue our activities as a going concern.

We are still a development stage company. Our operations are subject to all of the risks inherent in development stage companies that do not have significant revenues or operating income. Our potential for success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with a new business. We cannot provide any assurance that our business objectives will be accomplished.  All of our audited consolidated financial statements, since inception, have contained a statement by our management that raises significant doubt about us being able to continue as a going concern unless we are able to raise additional capital. Our consolidated financial statements do not include any adjustment relating to the recovery and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should our operations cease.

If we are unable to adequately protect our intellectual property, we may not be able to compete effectively.

Our ability to compete depends in part upon the strength of our proprietary rights that we own or may hereafter acquire in our technologies, brands and content. We rely on a combination of U.S. and foreign patents, copyrights, trademark, trade secret laws and license agreements to establish and protect our intellectual property and proprietary rights. The efforts we take to protect our intellectual property and proprietary rights may not be sufficient or effective at stopping unauthorized use of our intellectual property and proprietary rights. In addition, effective trademark, patent, copyright and trade secret protection may not be available or cost-effective in every country in which our services are made available. There may be instances where we are not able to fully protect or utilize our intellectual property in a manner that maximizes competitive advantage. If we are unable to protect our intellectual property and proprietary rights from unauthorized use, the value of our products may be reduced, which could negatively impact our business. Our inability to obtain appropriate protections for our intellectual property may also allow competitors to enter our markets and produce or sell the same or similar products. In addition, protecting our intellectual property and other proprietary rights is expensive and diverts critical managerial resources. If any of the foregoing were to occur, or if we are otherwise unable to protect our intellectual property and proprietary rights, our business and financial results could be adversely affected.

If we are forced to resort to legal proceedings to enforce our intellectual property rights, the proceedings could be burdensome and expensive. In addition, our proprietary rights could be at risk if we are unsuccessful in, or cannot afford to pursue, those proceedings. We also rely on trade secrets and contract law to protect some of our proprietary technology. We will enter into confidentiality and invention agreements with our employees and consultants. Nevertheless, these agreements may not be honored and they may not effectively protect our right to our un-patented trade secrets and know-how. Moreover, others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets and know-how.
 
 
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Risks Relating to Our Common Stock

Our management will be able to exert significant influence over us to the detriment of minority stockholders.

Our executive officers and directors beneficially own approximately 13.43% of our outstanding common stock as of September 12, 2013. These stockholders, if they act together, will be able to exert significant influence on our management and affairs and all matters requiring stockholder approval, including significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing our change in control and might affect the market price of our common stock.

Exercise of warrants will dilute your percentage of ownership.

We have issued options and warrants to purchase our common stock to our officers, directors, consultants and certain shareholders.   In the future, we may grant additional stock options, warrants and convertible securities. The exercise or conversion of stock options, warrants or convertible securities will dilute the percentage ownership of our other stockholders. The dilutive effect of the exercise or conversion of these securities may adversely affect our ability to obtain additional capital. The holders of these securities may be expected to exercise or convert them when we would be able to obtain additional equity capital on terms more favorable than these securities.

We may fail to qualify for continued trading on the OTC Bulletin Board which could make it more difficult for investors to sell their shares.

Our common stock is quoted on the Over the Counter Bulletin Board (“OTCBB”). There can be no assurance that trading of our common stock on such market will be sustained. In the event that our common stock fails to qualify for continued inclusion, our common stock could thereafter only be quoted on the “pink sheets.” Under such circumstances, shareholders may find it more difficult to dispose of, or to obtain accurate quotations, for our common stock, and our common stock would become substantially less attractive to certain purchasers such as financial institutions, hedge funds and other similar investors.

Our common stock may be affected by limited trading volume and price fluctuations which could adversely impact the value of our common stock.

There has been limited trading in our common stock and there can be no assurance that an active trading market in our common stock will either develop or be maintained. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. These fluctuations may also cause short sellers to periodically enter the market in the belief that we will have poor results in the future. We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our common stock will be stable or appreciate over time.

Our stock price may be volatile.

The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:

  
 
changes in our industry;
 
 
competitive pricing pressures;
 
 
our ability to obtain working capital financing;
 
 
additions or departures of key personnel;
 
 
sales of our common stock;
 
 
our ability to execute our business plan;
 
 
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operating results that fall below expectations;
 
 
loss of any strategic relationship;
 
 
regulatory developments; and
 
 
economic and other external factors.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

We have never paid nor do we expect in the near future to pay dividends.

We have never paid cash dividends on our capital stock and do not anticipate paying any cash dividends on our common stock for the foreseeable future.  Investors should not rely on an investment in us if they require income generated from dividends paid on our capital stock.  Any income derived from our common stock would only come from rise in the market price of our common stock, which is uncertain and unpredictable.

Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

If our stockholders sell substantial amounts of our common stock in the public market upon the expiration of any statutory holding period, under Rule 144, or issued upon the exercise of outstanding warrants, it could create a circumstance commonly referred to as an "overhang" and in anticipation of which the market price of our common stock could fall.  The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.  The shares of our restricted common stock will be freely tradable upon the earlier of: (i) effectiveness of a registration statement covering such shares and (ii) the date on which such shares may be sold without registration pursuant to Rule 144 (or other applicable exemption) under the Securities Act.

Because we became public by means of a reverse merger, we may not be able to attract the attention of major brokerage firms.

There may be risks associated with us becoming public through a “reverse merger.” Securities analysts of major brokerage firms may not provide coverage of us since there is no incentive to brokerage firms to recommend the purchase of our common stock.  No assurance can be given that brokerage firms will, in the future, want to conduct any secondary offerings on our behalf.

Investor relations activities, nominal “float” and supply and demand factors may affect the price of our stock.

We expect to utilize various techniques such as non-deal road shows and investor relations campaigns in order to create investor awareness for us.  These campaigns may include personal, video and telephone conferences with investors and prospective investors in which our business practices are described.  We may provide compensation to investor relations firms and pay for newsletters, websites, mailings and email campaigns that are produced by third-parties based upon publicly-available information concerning us. We do not intend to review or approve the content of such analysts’ reports or other materials based upon analysts’ own research or methods.  Investor relations firms should generally disclose when they are compensated for their efforts, but whether such disclosure is made or complete is not under our control.   In addition, investors in us may, from time to time, also take steps to encourage investor awareness through similar activities that may be undertaken at the expense of the investors.  Investor awareness activities may also be suspended or discontinued which may impact the trading market our common stock.
 
 
13

 

 
The SEC and FINRA enforce various statutes and regulations intended to prevent manipulative or deceptive devices in connection with the purchase or sale of any security and carefully scrutinize trading patterns and company news and other communications for false or misleading information, particularly in cases where the hallmarks of “pump and dump” activities may exist, such as rapid share price increases or decreases.  We, and our shareholders may be subjected to enhanced regulatory scrutiny due to the small number of holders who initially will own the registered shares of our common stock publicly available for resale, and the limited trading markets in which such shares may be offered or sold which have often been associated with improper activities concerning penny-stocks, such as the OTC Bulletin Board or the OTCQB Marketplace (Pink OTC) or pink sheets.  Until such time as our restricted shares are registered or available for resale under Rule 144, there will continue to be a small percentage of shares held by a small number of investors, many of whom acquired such shares in privately negotiated purchase and sale transactions, which will constitute the entire available trading market.  The Supreme Court has stated that manipulative action is a term of art connoting intentional or willful conduct designed to deceive or defraud investors by controlling or artificially affecting the price of securities.  Often times, manipulation is associated by regulators with forces that upset the supply and demand factors that would normally determine trading prices.  Since a small percentage of our outstanding common stock will initially be available for trading, held by a small number of individuals or entities, the supply of our common stock for sale will be extremely limited for an indeterminate amount of time, which could result in higher bids, asks or sales prices than would otherwise exist.  Securities regulators have often cited factors such as thinly-traded markets, small numbers of holders, and awareness campaigns as hallmarks of claims of price manipulation and other violations of law when combined with manipulative trading, such as wash sales, matched orders or other manipulative trading timed to coincide with false or touting press releases. There can be no assurance that our or third-parties’ activities, or the small number of potential sellers or small percentage of stock in the “float,” or determinations by purchasers or holders as to when or under what circumstances or at what prices they may be willing to buy or sell stock will not artificially impact (or would be claimed by regulators to have affected) the normal supply and demand factors that determine the price of the stock.

Our common stock is subject to the “penny stock” rules of the SEC, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.

Our common stock is considered a “Penny Stock”.  The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock. The Financial Industry Regulatory Authority, or FINRA, has adopted sales practice requirements which may also limit a stockholder's ability to buy and sell our stock. In addition to the "penny stock" rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit investors’ ability to buy and sell our stock and have an adverse effect on the market for our shares.
 
 
14

 

 
If we lose key personnel or are unable to attract and retain additional qualified personnel we may not be able to successfully manage our business and achieve our objectives.

We believe our future success will depend upon our ability to retain our key management, including Doug Croxall, our Chief Executive Officer.  We may not be successful in attracting, assimilating and retaining our employees in the future.  The loss of Mr. Croxall may have an adverse effect on our operations.  We have entered into a two-year employment agreement with Mr. Croxall.  We are competing for employees against companies that are more established than we are and have the ability to pay more cash compensation than we do.  As of the date hereof, we have not experienced problems hiring employees in the recent past.

If we fail to establish and maintain an effective system of internal control, we may not be able to report our financial results accurately and timely or to prevent fraud. Any inability to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our common stock.

Effective internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed. As a result, our small size and any future internal control deficiencies may adversely affect our financial condition, results of operation and access to capital. We have not performed an in-depth analysis to determine if historical un-discovered failures of internal controls exist, and may in the future discover areas of our internal control that need improvement.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. Such statements include statements regarding our expectations, hopes, beliefs or intentions regarding the future, including but not limited to statements regarding our market, strategy, competition, development plans (including acquisitions and expansion), financing, revenues, operations, and compliance with applicable laws. Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could cause actual results to differ materially from such forward-looking statements include the risks described in greater detail in the following paragraphs. All forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement. Market data used throughout this prospectus is based on published third party reports or the good faith estimates of management, which estimates are based upon their review of internal surveys, independent industry publications and other publicly available information.

You should review carefully the section entitled “Risk Factors” beginning on page 6 of this prospectus for a discussion of these and other risks that relate to our business and investing in shares of our common stock.
 
 
15

 

 
USE OF PROCEEDS

The selling stockholders will receive all of the proceeds from the sale of the shares offered by them under this prospectus. We will not receive any proceeds from the sale of the shares by the selling stockholders covered by this prospectus.

MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Market Information

Our common stock is currently quoted on the OTC Bulletin Board under the symbol “MARA”. Prior to that, our common stock was quoted on the OTC Bulletin Board under the symbol “AMSC”. Because we are quoted on the OTC Bulletin Board, our securities may be less liquid, receive less coverage by security analysts and news media, and generate lower prices than might otherwise be obtained if they were listed on a national securities exchange.

The following table sets forth the high and low bid quotations for our common stock as reported on the OTC Bulletin Board for the periods indicated. Where applicable, the prices set forth below give retroactive effect to the Reverse Split effectuated on July 18, 2013.

 
High
Low
Fiscal 2013
$
$
     
First Quarter
11.05
3.38
Second Quarter
6.50
3.90
Third Quarter (through September 12, 2013)
7.94
4.16
     
Fiscal 2012
$
$
     
First Quarter
-
-
Second Quarter
14.95
6.50
Third Quarter
13.13
3.77
Fourth Quarter
13.00
6.63
     
Fiscal 2011
$
$
     
First Quarter
-
-
Second Quarter
-
-
Third Quarter
-
-
Fourth Quarter
-
-

Holders.

As of September 12, 2013, there are 88 record holders of 5,333,824 shares of our common stock.

Dividends.

We have not paid any cash dividends to date and do not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of our business.
 
 
16

 

 
Securities Authorized for Issuance under Equity Compensation Plans

2012 Equity Incentive Plan

The following table gives information about the Company’s common stock that may be issued upon the exercise of options granted to employees, directors and consultants under its 2012 Equity Incentive Plan as of December 31, 2012, after giving effect to the Reverse Split. On August 1, 2012, our board of directors and stockholders adopted the 2012 Equity Incentive Plan, pursuant to which 769,231 shares of our common stock are reserved for issuance as awards to employees, directors, consultants, advisors and other service providers, after giving effect to the Reverse Split.

 
Equity Compensation Plan Information
 
Plan category
 
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
   
Weighted-average
exercise price of
outstanding options,
warrants and rights
   
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a)
 
                   
Equity compensation plans approved by security holders
   
153,846
   
$
6.50
     
615,385
 
Equity compensation plans not approved by security holders
   
0
   
$
0
     
0
 
Total
   
153,846
   
$
6.50
     
615,385
 


MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION

Overview

We were incorporated in the State of Nevada on February 23, 2010 under the name “Verve Ventures, Inc.” On December 7, 2011, we changed our name to “American Strategic Minerals Corporation” and were primarily engaged in exploration and potential development of uranium and vanadium minerals business. During June 2012, we decided to discontinue our uranium and vanadium minerals business and engaged in the business of acquiring, renovating, and selling real estate properties located within the areas of Southern California. On November 14, 2012, we completed a share exchange and acquired all the intellectual property rights of Sampo. On November 14, 2012, we decided to discontinue our real estate business.
 
We are a patent licensing company that serves a wide range of patent holders and technologies from Fortune 500 to independent inventors. We provide our clients advice and services that enable them to realize financial and strategic return on their intellectual property rights. We acquire patent assets, partners with patent holders, and monetizes patent portfolios through actively managed patent licensing campaigns.
 
Our principal office is located at 2331 Mill Road, Suite 100, Alexandria, VA 22314. Our telephone number is (703) 232-1701.
 
 
17

 

 
Recent Developments

Reverse Split

On May 31, 2013, shareholders holding a majority of our outstanding voting capital approved a reverse stock split of our issued and outstanding common stock by a ratio of not less than one-for-five and not more than one-for-fifteen at any time prior to April 30, 2014, with the exact ratio to be set at a whole number within this range as determined by our Board of Directors in its sole discretion.

On July 18, 2013, we filed a certificate of amendment to our Amended and Restated Articles of Incorporation with the Secretary of State of the State of Nevada in order to effectuate a reverse stock split of our issued and outstanding common stock, par value $0.0001 per share on a one (1) for thirteen (13) basis (the “Reverse Split”). The Reverse Split became effective with the FINRA at the open of business on July 22, 2013. As a result of the Reverse Stock Split, every thirteen shares of our pre-reverse split common stock will be combined and reclassified into one share of our common stock. No fractional shares of common stock will be issued as a result of the Reverse Split. Stockholders who otherwise would be entitled to a fractional share shall receive the next highest number of whole shares.

Throughout this prospectus, each instance which refers to a number of shares of our common stock, refers to the number of shares of common stock after giving effect to the Reverse Split, unless otherwise indicated.

Private Placement

On May 31, 2013, we sold an aggregate of 1,153,844 units representing gross proceeds of $6,000,000 to certain accredited investors pursuant to a securities purchase agreement, among which, 999,998 units representing $5,200,000 were funded. Each unit was subscribed for a purchase price of $5.20 per unit and consists of: (i) one share of our common stock, and (ii) a three (3) year warrant to purchase one half share of our common stock at an exercise price of $6.50 per share, subject to adjustment upon the occurrence of certain events such as stock splits and stock dividends and similar events.  The warrants contain limitations on the holders’ ability to exercise the warrants in the event such exercise causes the holder to beneficially own in excess of 9.99% of our issued and outstanding common stock. The Company paid placement agent fees of $170,000 to two broker-dealers in connection with the sale of the units of which $30,000 was previously paid by us as a retainer. On July 29, 2013, we converted legal fees of $29,620 into 5,696 units. In August 2013, two investors who had subscribed for an aggregate of 153,846 units for an aggregate purchase price of $800,000 on May 31, 2013 assigned their subscriptions to other investors. Such other investors each funded their subscriptions and such additional units were issued.

Cyberfone Acquisition

On April 22, 2013, CyberFone Acquisition Corp. (“CyberFone Acquisition Corp.”), a Texas corporation and our newly formed wholly owned subsidiary entered into a merger agreement (the “CyberFone Agreement”) with CyberFone Systems LLC, a Texas limited liability company (“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”).

CyberFone Systems owns a foundational patent portfolio that includes claims that provide specific transactional data processing, telecommunications, network and database inventions, including financial transactions. The portfolio, which has a large and established licensing base, consists of ten United States patents and 27 foreign patents and one patent pending. The patent rights that cover digital communications and data transaction processing are foundational to certain applications in the wireless, telecommunications, financial and other industries. IP Navigation Group LLC (“IP Nav”), a company founded by Erich Spangenberg and associated with the CyberFone Sellers will continue to support and manage the portfolio of patents and retain a contingent participation interest in all recoveries.  IP Nav provides patent monetization and support services under an existing agreement with CyberFone Systems.
 
 
18

 

 
Pursuant to the terms of the CyberFone Agreement, CyberFone Systems merged with and into CyberFone Acquisition Corp with CyberFone Systems surviving the merger as our wholly owned subsidiary.  We (i) issued 461,538 post-split (6,000,000 pre-split) 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 “Note”).  On June 21, 2013, we paid $500,000 to TechDev in satisfaction of the note.

TQP Agreement

On May 1, 2013, TQP Acquisition Corp. entered into a merger agreement (the “TQP Agreement”) with TQP Development LLC, and the TQP Sellers. The closing of the transactions contemplated under the TQP Agreement is subject to customary closing conditions as well as the trigger financing within 45 days.  The Company did not consummate the trigger financing and thus, the TQP Agreement has been terminated.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with US GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Management believes the following critical accounting policies affect the significant judgments and estimates used in the preparation of the financial statements.

Principles of Consolidation

The condensed consolidated financial statements are prepared in accordance with US GAAP and present the financial statements of the Company and our wholly-owned subsidiary. In the preparation of our consolidated financial statements, intercompany transactions and balances are eliminated.

Development Stage Companies

We are a development stage company. Activities during the development stage include organizing the business, raising capital, enforcement and development of our intellectual property and acquiring additional intellectual property.  We are a development stage company with insignificant revenues and no profits from its planned principal operations.  We have not commenced significant operations and, in accordance with ASC Topic 915 “Development Stage Entities”, is considered a development stage company.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates made by management include, but are not limited to, the assumptions used to calculate fair value of warrants granted, common stock issued for services, common stock issued in connection with an option agreement, common stock issued for acquisition of patents, and the valuation of mineral rights.
 
 
19

 

 
Fair Value of Financial Instruments

We adopted Financial Accounting Standards Board (“FASB”) ASC 820, “Fair Value Measurements and Disclosures”, for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing US GAAP that require the use of fair value measurements which establishes a framework for measuring fair value and expands disclosure about such fair value measurements.

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

  
Level 1: 
Observable inputs such as quoted market prices in active markets for identical assets or liabilities
     
 
Level 2:
Observable market-based inputs or unobservable inputs that are corroborated by market data
     
 
Level 3:
Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

In addition, FASB ASC 825-10-25 “Fair Value Option” was effective for January 1, 2008. ASC 825-10-25 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value.

Stock-based Compensation

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

Pursuant to ASC Topic 505-50, for share-based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date.

Long-Lived Assets

We review for impairment whenever events or circumstances indicate that the carrying amount of assets may not be recoverable, pursuant to guidance established in ASC 360-10-35-15, “Impairment or Disposal of Long-Lived Assets”. We recognize an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value.
 
 
20

 

 
Recent Accounting Pronouncements

Other accounting standards that have been issued or proposed by the FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

Results of Operations

Our business began on April 30, 2011. We are still in our development stage and have generated insignificant revenues to date in connection with our current patent business.

For the Three and Six months ended June 30, 2013 and 2012

We generated revenues of $1,524,979 during the three and six months ended June 30, 2013 as compared to no revenue during the three and six months ended June 30, 2012. Revenues from patent enforcement activities accounted for 100% of our revenues for the three and six months ended June 30, 2013. Included in revenues are non-cash revenue in connection with a settlement and license agreement dated May 6, 2013 whereby the customer agreed to assign and transfer to us 3 US patents and rights valued at $1,000,000 in lieu of cash payment.

Cost of revenues during the three and six months ended June 30, 2013 amounted to $760,305 which mainly includes expenses incurred in connection with our patent enforcement activities, such as legal fees, consulting costs, patent maintenance, royalty fees for acquired patents and other related expenses, as well as, the amortization of acquired patents. Our gross profit margin during the three and six months ended June 30, 2013 was approximately 50%.

We incurred operating expenses of $2,299,143 and $3,341,727 for the six months ended June 30, 2013 and 2012, respectively, a decrease of $1,042,584 or 31%. We incurred operating expenses of $1,584,766 and $284,153 for the three months ended June 30, 2013 and 2012, respectively, an increase of $1,300,613 or 458%. These expenses primarily consisted of 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. The operating expenses consisted of the following:

   
For the Three Months ended
June 30, 2013
   
For the Three Months ended
June 30, 2012
   
For the Six
Months ended
June 30, 2013
   
For the Six Months ended June 30, 2012
 
                         
Travel and related expenses
 
$
26,598
   
$
16,812
   
$
54,916
   
$
80,791
 
Professional fees
   
289,752
     
107,464
     
448,224
     
370,203
 
Compensation and related taxes
   
1,041,353
     
81,449
     
1,468,028
     
922,392
 
Consulting fees
   
130,685
     
27,171
     
175,909
     
1,856,594
 
Other general and administrative
   
96,378
     
51,257
     
152,066
     
111,747
 
Total
 
$
1,584,766
   
$
284,153
   
$
2,299,143
   
$
3,341,727
 
 
 
Travel and related expenses: Travel expenses were $54,916 and $80,791 during the six months ended June 30, 2013 and 2012, respectively, a decrease of $25,875 or 32%. This decrease is due to a decrease in business development related travel. Travel expenses were $26,598 and $16,812 during the three months ended June 30, 2013 and 2012, respectively, an increase of $9,786 or 58%.
 
 
21

 
 
     
  
Professional fees:  For the six months ended June 30, 2013 and 2012, professional fees were $448,224 and $370,203, respectively, an increase of $78,021 or 21%.  For the three months ended June 30, 2013 and 2012, professional fees were $289,752 and $107,464, respectively, an increase of $182,288 or 170%. Professional fees include fees incurred for audits and legal fees related to public company filing requirements. The increase is primarily due to an increase in accounting and legal fees related to public company filing and reporting requirements.
 
    
Consulting fees: For the six months ended June 30, 2013 and 2012, we incurred consulting fees of $175,909, and $1,856,594, respectively, a decrease of $1,680,685 or 91%, which is primarily attributable to a decrease in stock based consulting expense of approximately $1.7 million in connection with warrant grants to consultants for consulting on strategic acquisitions and advice on capital restructuring during the six months ended June 30, 2012. For the three months ended June 30, 2013 and 2012, we incurred consulting fees of $130,685, and $27,171, respectively, an increase of $103,514 or 381%, which is primarily attributable to an increase in hiring of consultants for investor relations and business advisory services in fiscal 2013.
 
   
Compensation expense and related taxes: Compensation expense includes salaries and stock-based compensation to our employees. For the six months ended June 30, 2013 and 2012, compensation expense and related payroll taxes were $1,468,028 and $922,392, respectively, an increase of $545,636 or 59%. For the three months ended June 30, 2013 and 2012, compensation expense and related payroll taxes were $1,041,353 and $81,449, respectively, an increase of $959,904 or 1,179%. The increase is primarily attributable to an increase in stock based compensation of approximately $751,000 in connection with warrant and option grants to our directors and officers and an increase in salaries due to hiring our executive and management employees and support staff during the first quarter of 2013.
     
 
Other general and administrative expenses: For the six months ended June 30, 2013 and 2012, other general and administrative expenses were $152,066 and $111,747, respectively, an increase of $40,319 or 36%. For the three months ended June 30, 2013 and 2012, other general and administrative expenses were $96,378 and $51,257, respectively, an increase of $45,121 or 88%. Other general and administrative expenses include postage, general insurance, office supplies, utilities, rent expense and office expenses. Such increase is primarily attributable to an increase in operations.

Operating Loss from Continuing Operations

We reported an operating loss from continuing operations of $1,534,469 and $3,341,727 for the six months ended June 30, 2013 and 2012, respectively, a decrease of $1,807,258 or 54%. The decrease in operating loss was due to the increase in gross profit as described above. We reported an operating loss from continuing operations of $820,092 and $284,153 for the three months ended June 30, 2013 and 2012, respectively, an increase of $535,939 or 189%. The increase in operating loss was due to an increase in operating expenses offset by the increase in gross profit as described above.

Other Income

Total other income was $181 and $125,173 for the six months ended June 30, 2013 and 2012, respectively, a decrease of $124,992 or 99%. On March 19, 2012, we entered into an agreement with California Gold, pursuant to which we agreed to provide California Gold with a geological review on or prior to March 30, 2012, of our certain uranium properties in consideration for $125,000.  We do not have a comparable other income during the six months ended June 30, 2013. Total other income was $120 and $173 for the three months ended June 30, 2013 and 2012, respectively, a decrease of $53 or 31%.
 
 
22

 

 
Discontinued Operations

During June 2012, we decided to discontinue our exploration and potential development of uranium and vanadium minerals business and prior periods have been restated in our consolidated financial statements and related footnotes to conform to this presentation. Subsequently, in November 2012, we decided to discontinue our real estate business and we intend to sell and dispose our remaining real estate holdings during fiscal 2013. We are now engage in the acquisition, development and monetization of intellectual property through both the prosecution and licensing of our own patent portfolio, the acquisition of additional intellectual property or partnering with others to defend and enforce their patent rights.

The following table indicates selected financial data of our discontinued operations of our uranium and vanadium minerals business and real estate business.

   
For the Three Months ended June 30, 2013
   
For the Three Months ended June 30, 2012
   
For the Six Months ended June 30, 2013
   
For the Six Months ended June 30, 2012
 
Revenues – real estate
 
$
283,966
   
$
-
   
$
1,270,916
   
$
-
 
Cost of sales- real estate
   
(243,837
)
   
-
     
(1,061,320
   
-
 
Gross profit
   
40,129
     
-
     
209,596
     
-
 
Operating and other non-operating expenses
   
(30,656
)
   
(1,302,620
)
   
(91,343
)
   
(1,329,925
                                 
Income (loss) from discontinued operations
 
$
9,473
   
$
(1,302,620
)
 
$
118,253
   
$
(1,329,925
)

Net loss

We reported a net loss of $1,416,035 or $(0.37) per common shares - basic and diluted and $4,546,378 or $(1.64) per common share - basic and diluted, respectively, for the six months ended June 30, 2013 and 2012, respectively, a decrease of  3,130,343 or 69%. We reported a net loss of $810,499 or $(0.19) per common shares - basic and diluted and $1,586,499 or $(0.50) per common share - basic and diluted, respectively, for the three months ended June 30, 2013 and 2012, respectively, a decrease of  $776,000 or 49%.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. As of June 30, 2013, we had a cash balance of $6,391,293 and working capital of $6,669,928. During the six months ended June 30, 2013, we have been funding our operations through the sale of our common stock, the revenues generated from patent enforcement activities and the sale of our remaining real estate properties which is included in our discontinued operations. We received net proceeds from the sale of our common stock of $5,055,000 during the six months ended June 30, 2013. Additionally, in August 2013, we received $800,000 from the sale of our common stock.
 
 
23

 

 
We may be required to raise additional funds, particularly if we are unable to generate positive cash flow as a result of our operations.   We estimate that based on current plans and assumptions, that our available cash is sufficient to satisfy our cash requirements under our present operating expectations for at least the next twelve months. We presently have no other alternative source of working capital. We may not have sufficient working capital to fund the expansion of our operations and to provide working capital necessary for our ongoing operations and obligations after 12 months.  We have not generated revenues to support our current daily operations from the inception of development stage. We may need to raise significant additional capital to fund our future operating expenses, pay our obligations, and grow our Company. Although we generated revenue during the six months ended June 30, 2013, such revenue is not sufficient to fund our ongoing operations.  Therefore our future operations will be dependent on our ability to secure additional financing.  Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. The trading price of our common stock could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. Our inability to obtain additional capital may restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we will likely be required to curtail our development plans and possibly cease our operations.

Operating Activities

We have not generated positive cash flows from operating activities. For the six months ended June 30, 2013, net cash flows used in operating activities was $693,446 and was primarily attributable to our net loss of $1,416,035, adjusted for non-cash items such as stock based compensation of $1,053,521, amortization and depreciation expense of $476,791 and  total changes in assets and liabilities of $192,277 primarily attributable to a decrease in prepaid expenses of $24,414, decrease in assets of discontinued operations of $82,145, increase in accounts payable and accrued expenses of $335,718 offset by an increase in accounts receivable of $250,000.

For the six month period ended June 30, 2012, net cash flows used in operating activities was $655,775 and was primarily attributable to our net loss of $4,546,378, adjusted for the add-back of non-cash items such as stock based compensation of $2,598,438, impairment of mining rights and assets of discontinued operations of $1,286,248 and other income of $125,000, and total changes in assets and liabilities of $56,018 primarily attributable to an increase in prepaid expenses of $71,600, and increase in accounts payable and accrued expenses of $103,703.

Investing Activities

Net cash flows provided by investing activities were $175,570 in connection with the sale of real estate property of $1,052,320 offset by acquisition of patents of $350,000, acquisition of CyberFone Systems of $500,000, capitalized cost related to improvements of real estate property of $16,750 and purchase of property and equipment of $10,000 during the six months ended June 30, 2013.

Net cash flows used in investing activities were $712,074 in connection with acquisition of mineral rights of $325,000, investment in note receivable of $133,058 and acquisition of real estate property of $254,016 during the six months ended June 30, 2012.

Financing Activities

Net cash flows provided by financing activities were $4,555,000 in connection with net proceeds from sale of our common stock of $5,055,000 offset by $500,000 payment of note payable related to the CyberFone acquisition during the six months ended June 30, 2013. Net cash flows provided by financing activities were $4,553,991 for the six months ended June 30, 2012. We received net proceeds from the sale of our stocks of $5,768,965 offset by payment on notes payable of $1,082,974 and payments of $132,000 in connection with the rescission agreement.

Contractual Obligations

We have certain fixed contractual obligations and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of payments. We have presented below a summary of the most significant assumptions used in our determination of amounts presented in the tables, in order to assist in the review of this information within the context of our consolidated financial position, results of operation, and cash flows.
 
 
24

 

 
The following table summarizes our contractual obligations as of June 30, 2013, and the effect these obligations are expected to have on our liquidity and cash flows in future periods:

  
 
Payments Due By Period
 
   
Total
   
Less than 1
year
   
1-3 Years
   
4-5
Years
   
6- 10
Years
 
Contractual Obligations:
                             
Uranium lease agreements
   
838,720
     
76,400
     
276,690
     
190,580
     
295,050
 
Uranium Royalty agreement – minimum payments
   
770,000
     
70,000
     
262,500
     
175,000
     
262,500
 
                                         
Total Contractual Obligations
 
$
1,608,720
   
$
146,400
   
$
539,190
   
$
365,580
   
$
557,550
 

Off-balance Sheet Arrangements

We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as stockholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.

For the year ended December 31, 2012 and for the period from April 30, 2011 (inception) to December 31, 2011

We incurred operating expenses of $5,540,962 and $9,848 for the year ended December 31, 2012 and for the period from April 30, 2011 (inception) to December 31, 2011, respectively, an increase of $5,531,114 or 56,165%. These expenses primarily consisted of general expenses, compensation, professional fees and consulting incurred in connection with the day-to-day operation of our business. The operating expenses consisted of the following:

   
For the Year ended December 31, 2012
   
Period from April 30, 2011 (inception) to December 31, 2011
 
Travel and related expenses
 
$
112,760
   
$
-
 
Professional fees
   
510,112
     
4,605
 
Compensation and related taxes
   
2,676,462
     
-
 
Consulting fees
   
2,042,144
     
-
 
Other general and administrative
   
199,484
     
5,243
 
Total
 
$
5,540,962
   
$
9,848
 
 
 
Travel and related expenses: Travel expenses were $112,760 and $0 during the year ended December 31, 2012 and for the period from April 30, 2011 (inception) to December 31, 2011, respectively, an increase of $112,760 or 100%. These expenses are in connection with conference campaign and business development related travel.
 
 
25

 
 
     
  
Compensation expense and related taxes: Compensation expense includes salaries and stock-based compensation to our employees. For the year ended December 31, 2012 and for the period from April 30, 2011 (inception) to December 31, 2011, compensation expense and related payroll taxes were $2,676,462 and $0, respectively, an increase of $2,676,462 or 100%, which is primarily attributable to stock based compensation of approximately $2.4 million in connection with warrant and option grants to our directors and officers during the year ended December 31, 2012.

  
Consulting fees: For the year ended December 31, 2012 and for the period from April 30, 2011 (inception) to December 31, 2011, we incurred consulting fees of $2,042,144, and $0, respectively, an increase of $2,042,144 or 100%, which is primarily attributable to stock based consulting expense of approximately $1.8 million in connection with warrant grants to consultants for consulting on strategic acquisitions and advice on capital restructuring during the year ended December 31, 2012.
 
   
Professional fees:  For the year ended December 31, 2012 and for the period from April 30, 2011 (inception) to December 31, 2011, professional fees were $510,112 and $4,605, respectively, an increase of $505,507 or 10,977%, which includes fees incurred for audits and legal fees related to public company filing requirements.
     
 
Other general and administrative expenses: For the year ended December 31, 2012 and for the period from April 30, 2011 (inception) to December 31, 2011, other general and administrative expenses were $199,484 and $5,243, respectively, an increase of $194,241 or 3,705%, which includes postage, general insurance, automobile, office supplies, utilities, rent expense and office expenses.

Operating Loss from Continuing Operations

We reported an operating loss from continuing operations of $5,540,962 and $9,848 for the year ended December 31, 2012 and for the period from April 30, 2011 (inception) to December 31, 2011, respectively, an increase of $5,531,114 or 56,165%. The increase in operating loss was due to the increase in operating expenses described above.

Other Income

Total other income was $13,325 and $0 for the year ended December 31, 2012 and for the period from April 30, 2011 (inception) to December 31, 2011, respectively, an increase of $13,325 or 100%. On March 19, 2012, we entered into an agreement with California Gold, pursuant to which we agreed to provide California Gold with a geological review on or prior to March 30, 2012, of our certain uranium properties in consideration for $125,000. During the year ended December 31, 2012, the Company has recorded a realized loss on other than temporary decline of $112,500 in connection with our marketable securities – available for sale.

Discontinued Operations

During June 2012, we decided to discontinue our exploration and potential development of uranium and vanadium minerals business and prior periods have been restated in our consolidated financial statements and related footnotes to conform to this presentation. Subsequently, in November 2012, we decided to discontinue our real estate business and we disposed of our remaining real estate holdings during the second fiscal quarter of 2013. We are now engage in the acquisition, development and monetization of intellectual property through both the prosecution and licensing of our own patent portfolio, the acquisition of additional intellectual property or partnering with others to defend and enforce their patent rights.
 
 
26

 

 
The following table indicates selected financial data of our discontinued operations of our uranium and vanadium minerals business and real estate business.

   
For the Year Ended December 31, 2012
   
Period from inception
(April 30, 2011) to
December 31, 2011
 
Revenues – real estate
 
$
724,090
   
$
-
 
Cost of sales- real estate
   
(576,126
)
   
-
 
Gross profit
   
147,964
     
-
 
Operating and other non-operating expenses
   
(1,558,635
)
   
(99,474
)
                 
Loss from discontinued operations
 
$
(1,410,671
)
 
$
(99,474
)

Net loss

We reported a net loss of $6,938,308 million or $(0.19) per common shares - basic and diluted and $109,322 or $(0.01) per common share - basic and diluted, respectively, for the year ended December 31, 2012 and for the period from April 30, 2011 (inception) to December 31, 2011, respectively, an increase of approximately $6.8 million or 6,247%.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. At December 31, 2012, we had a cash balance of approximately $2.4 million and working capital of approximately $2.4 million. We have been funding our operations through the sale of our common stock through private placements for operating capital purposes.

We may be required to raise additional funds, particularly if we are unable to generate positive cash flow as a result of our operations.   We estimate that based on current plans and assumptions, that our available cash is sufficient to satisfy our cash requirements under our present operating expectations for up to 12 months. We presently have no other alternative source of working capital. We may not have sufficient working capital to fund the expansion of our operations and to provide working capital necessary for our ongoing operations and obligations after 12 months.  We have not generated revenues to support our current daily operations from the inception of development stage. We may need to raise significant additional capital to fund our future operating expenses, pay our obligations, and grow our Company. We do not anticipate we will generate significant revenues in 2013.  Therefore our future operations will be dependent on our ability to secure additional financing.  Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. The trading price of our common stock could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital may restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we will likely be required to curtail our development plans and possibly cease our operations.

Operating Activities

We have not generated positive cash flows from operating activities. For the year ended December 31, 2012, net cash flows used in operating activities was $1,261,404 and was primarily attributable to our net loss of $6,927,812, adjusted for non-cash items such as stock based compensation of $4,436,387, impairment of mining rights and assets of discontinued operations of $1,286,248, realized loss other than temporary decline – available for sale securities of $112,500 and add back by other income of $125,000, and total changes in assets and liabilities of $42,004 primarily attributable to an increase in prepaid expenses of $36,933, increase in assets of discontinued operations of $62,145, and increase in accounts payable and accrued expenses of $53,159.
 
 
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For the period from inception (April 30, 2011) to December 31, 2011, net cash flows used in operating activities was ($29,348) and was primarily attributable to our net loss of $109,322, offset by impairment of mining rights of $99,474, and add back total changes in assets and liabilities of $19,500 due to an increase in prepaid expenses of $20,000, increase in deposits of $3,500 and increase in accounts payable and accrued expenses of ($4,000).

Investing Activities

Net cash flows used in investing activities were $1,860,570 in connection with acquisition of mineral rights of $325,000, acquisition of patents of $500,000, investment in note receivable of $147,708 and acquisition of real estate property including capitalized improvements of $1,612,047 offset by sale of real estate property of $576,477 and collection of note receivable of $147,708 during the year ended December 31, 2012.

Financing Activities

Net cash flows provided by financing activities were $5,346,991 for the year ended December 31, 2012. We received net proceeds from the sale of our securities of $6,511,965 and proceeds from disgorgement of former officer short swing profits of $50,000 offset by payment on notes payable of $1,082,974 and payments of $132,000 in connection with the rescission agreement.

For the period from inception (April 30, 2011) to December 31, 2011, net cash provided by financing activities was $158,500 received from sale of common stock to officers of $5,000, proceeds from issuance of note payable-related party of $53,500 and advance payable to an unrelated party of $100,000.

Contractual Obligations

We have certain fixed contractual obligations and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of payments. We have presented below a summary of the most significant assumptions used in our determination of amounts presented in the tables, in order to assist in the review of this information within the context of our consolidated financial position, results of operation, and cash flows.

The following table summarizes our contractual obligations as of December 31, 2012, and the effect these obligations are expected to have on our liquidity and cash flows in future periods:

  
 
Payments Due By Period
 
   
Total
   
Less than 1
year
   
1-3 Years
   
4-5
Years
   
6- 10
Years
 
Contractual Obligations:
                             
Uranium lease agreements
   
838,720
     
73,200
     
276,690
     
190,580
     
298,250
 
Royalty agreement – minimum payments
   
770,000
     
70,000
     
262,500
     
175,000
     
262,500
 
                                         
Total Contractual Obligations
 
$
1,608,720
   
$
143,200
   
$
539,190
   
$
365,580
   
$
560,750
 
 
 
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Off-balance Sheet Arrangements

We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as stockholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.
 
BUSINESS

We are a patent licensing company that serves a wide range of patent holders and technologies from Fortune 500 to independent inventors. We provide our clients advice and services that enable them to realize financial and strategic return on their intellectual property rights. Our operating subsidiaries acquire patent assets, partners with patent holders, and monetizes patent portfolios through actively managed patent licensing campaigns.

Currently, we own four patent portfolios consisting of 55 U.S. and foreign patents and 2 open applications.  We have generated revenues from three of our four patent portfolios.

We were incorporated in the State of Nevada on February 23, 2010 under the name “Verve Ventures, Inc.” On December 7, 2011, we changed our name to “American Strategic Minerals Corporation” and were primarily engaged in exploration and potential development of uranium and vanadium minerals business. During June 2012, we decided to discontinue our uranium and vanadium minerals business and engaged in the business of acquiring, renovating, and selling real estate properties located within the areas of Southern California. On November 14, 2012, we acquired all the intellectual property rights of Sampo. On November 14, 2012, we decided to discontinue our real estate business. Our principal office is located at 2331 Mill Road, Suite 100, Alexandria, VA 22314. Our telephone number is (703) 232-1701.
 
Industry Overview And Market Opportunity

Under U.S. law an inventor or patent owner has the right to exclude others from making, selling or using their patented invention. Unfortunately, in the majority of cases, infringers are generally unwilling, at least initially, to negotiate or pay reasonable royalties for their unauthorized use of third-party patents and will typically fight any allegations of patent infringement. Inventors and/or patent holders, without sufficient legal, financial and/or expert technical resources to bring and continue the pursuit of legal action, may lack credibility in dealing with potential licensees and as a result, are often ignored. As a result of the common reluctance of patent infringers to negotiate and ultimately take a patent license for the use of third-party patented technologies, patent licensing and enforcement often begins with the filing of patent enforcement litigation. However, the majority of patent infringement contentions settle out of court based on the strength of the patent claims, validity, and persuasive evidence and clarity that the patent is being infringed.

Due to the relative infancy of the IP monetization industry, we believe that the absolute size of our market opportunity is very significant but difficult to quantify.

Business Model And Strategy – Overview

Our business model is based on two strategies: 1.) The identification, analysis and acquisition of patents and patent rights; and 2.) The generation of licensing revenues from the acquired patents or patent rights.

Typically, we compensate the patent seller through either a cash fee paid upon the acquisition of the patents or patent rights as well as the assignment of the patents or patent rights to us or one of our operating subsidiaries.  Additionally, a patent seller may also seek to receive compensation through participation in the licensing revenue generated by us from the patents or patent rights.  The patent seller may also receive compensation through a combination of both cash and revenue participation.
 
Key Factors Of Our Business Model

Diversification within the Asset Class

We currently own 55 patents and 2 patent applications.  We intend to add more patents and patent applications for the purpose of generating licensing revenues.  By owning multiple patent assets, we will become diversified in both the types of patents that we own as well as the frequency and size of the licensing revenues generated.  This diversification will prevent us from relying on a single patent, or patent family to generate all of our revenue. Additionally, by commencing multiple licensing campaigns with our different patent assets, we intend to generate frequent revenue events through the execution of multiple licensing agreements.  Our diversification of patent assets and revenue generation allows us to avoid the binary risk that can be associated with owning a single patent asset that typically generates a single stream of licensing revenues.
 
 
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Supply of Patent Acquisition Opportunities

We have worked to establish a supply of patent acquisition opportunities with patent broker and dealers, with individual inventors and patent owners, as well as with large corporations who own patent portfolios.  Service providers, such as patent prosecution and litigation attorneys and patent licensing professionals have also become key suppliers of patent opportunities.  An example of a key supplier of patent opportunities is IP Nav.  We have received a significant amount of our patent acquisition opportunities from our relationship with IP Nav.  We intend to continue to add to our patent acquisition opportunities by increasing the number of third parties that we work with when reviewing potential patent acquisition opportunities.  Additionally, we intend to seek opportunities to acquire patents from companies and patent owners that are in industry sectors that we have not acquired patents from in the past.

Subtleties in the language of a patent, recorded interactions with the patent office, and the evaluation of prior art and literature can make a significant difference in the potential licensing and enforcement revenue derived from a patent or patent portfolio.  Our specialists are trained and skilled in these areas.  It is important to identify potential problem areas, if any, and determine whether potential problem areas can be overcome, prior to acquiring a patent portfolio or launching an effective licensing program.  We have developed processes and procedures for identifying problem areas and evaluating the strength of a patent portfolio before the decision is made to allocate resources to an acquisition or to launch an effective licensing and enforcement effort.

Patent Portfolio Evaluation

We follow a disciplined approach to the due diligence that is performed when analyzing potential patent acquisitions.  Each opportunity to acquire a patent portfolio can vary based on the amount and type of patent assets, the complexity of the underlying inventions, and the analysis of the industries in which the invention is being used.

We seek to use third-party experts in addition to our internal management team in the evaluation and due diligence of the patent assets.  The combination of our management team and third-party patent attorneys, intellectual property licensing executives, and technology engineers allow us to conduct our tailored patent acquisition and evaluation processes and procedures.  We may also leverage the expertise of external specialists and technology consultants.  We evaluate both the types and strength of the claims of the patent as well as the file history of the patent.  Additionally, we review prior art associated with the patent as well as relevant trade journals.

Finally, prior to making a final decision to acquire a patent asset, we identify and consider potential problem areas, if any, and determine whether any potential problem areas can be overcome prior to acquiring a patent portfolio or launching an effective licensing program.  Additionally, we identify potential infringers; industries within which the potential infringers exist; longevity of the patented technology; and a variety of other factors that directly impact the magnitude and potential success of a licensing and enforcement program.
 
Commencement of Licensing Campaign
 
If we complete the due diligence and have determined that the patent acquisition opportunity is worth pursuing, we may enter into final negotiations to acquire the patent assets. The owner of the patent will typically receive an upfront acquisition payment, or a portion of the revenues generated from a patent portfolio’s licensing and enforcement campaign, or a combination of the two. We control the licensing and enforcement process and utilize experienced patent litigation and licensing professionals on a contingency basis to reduce the typical high costs associated with patent litigation.

Our due diligence process also identifies potential infringers that are using the acquired patent assets in an unauthorized manner.  We generate, or have generated on our behalf, presentations that identify the potentially infringing technologies.  Furthermore, we present an analysis of the claims of our patents and demonstrate how they apply to companies we believe are using our technologies in their products or services.  These presentations can take place in a non-adversarial business setting, but can also occur through the litigation process, if necessary. Ultimately, we execute patent licensing agreements with users of our patented technologies through licensing negotiations without the filing of patent infringement litigation, or through the negotiation of license and settlement arrangements in connection with the filing of patent infringement litigation.
 
 
30

 
 
Our Products And Services
 
We acquire IP from patent holders in order to maximize the value of their patent holdings by conducting and managing a licensing campaign. Some patent holders tend to have limited internal resources and/or expertise to effectively address the unauthorized use of their patented technologies or they simply make the strategic business decision to outsource their intellectual property licensing. They can include individual inventors, large corporations, universities, research laboratories and hospitals. Typically, we, or an operating subsidiary acquires a patent portfolio in exchange for a combination of an upfront cash payment, a percentage of our operating subsidiary's net recoveries from the licensing and enforcement of the portfolio, or a combination of the two.
 
Competition

We expect to encounter significant competition from others seeking to acquire interests in intellectual property assets and monetize such assets. This includes an increase in the number of competitors seeking to acquire the same or similar patents and technologies that we may seek to acquire.  Most of our competitors have much longer operating histories, and significantly greater financial and human resources, than we do. Entities such as Vringo, Inc. (NYSE MKT: VRNG), VirnetX Holding Corp (NYSE MKT: VHC), Acacia Research Corporation (NASDAQ: ACTG), RPX Corporation (NASDAQ: RPXC), and others presently market themselves as being in the business of creating, acquiring, licensing or leveraging the value of intellectual property assets. We expect others to enter the market as the true value of intellectual property is increasingly recognized and validated. In addition, competitors may seek to acquire the same or similar patents and technologies that we may seek to acquire, making it more difficult for us to realize the value of its assets.

We also compete with venture capital firms, strategic corporate buyers and various industry leaders for technology acquisitions and licensing opportunities.  Many of these competitors may have more financial and human resources than we do.  As we become more successful, we may find more companies entering the market for similar technology opportunities, which may reduce our market share in one or more technology industries that we currently rely upon to generate future revenue.
 
 
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Other companies may develop competing technologies that offer better or less expensive alternatives to our patented technologies that we may acquire and/or out-license.  Many potential competitors may have significantly greater resources than we do.  Technological advances or entirely different approaches developed by one or more of our competitors could render certain of the technologies owned or controlled by our operating subsidiaries obsolete and/or uneconomical.

Intellectual Property and Patent Rights

Our intellectual property is primarily comprised of trade secrets, patented know-how, issued and pending patents, copyrights and technological innovation.

We have a portfolio comprised of 55 U.S. and foreign patents and 2 open applications.

We have included a list of our U.S. patents below.  Each patent below is publicly accessible on the Internet website of the U.S. Patent and Trademark Office at www.uspto.gov.

Type
Number
 Sampo / GS Title
Issue / Publication Date
File Date
Earliest Priority Date
US Patent
6,161,149
Centrifugal Communication and collaboration method
12/12/00
03/13/98
03/13/98
US Patent
6,772,229
Centrifugal Communication and collaboration method
08/03/04
11/13/00
03/13/98
US Patent
8,015,495
Centrifugal Communication and collaboration method
09/06/11
02/28/03
03/13/98
US Patent
5,331,637
Multicast Routing Using Core Based Trees
07/19/94
07/30/93
07/30/93
US Application
2012/0158869
Centrifugal Communication and collaboration method
06/21/12
07/22/11
03/13/98
 
Type
Number
Cyberfone Title
Issue / Publication Date
File Date
Earliest Priority Date
US Patent
6,044,382
Data transaction assembly server
3/28/00
06/20/97
05/19/95
US Patent
5,805,676
Telephone/transaction entry device and system for entering transaction data into databases
09/08/98
05/19/95
05/19/95
US Patent
5,987,103
Telephone/transaction entry device and system for entering transaction data into databases
11/16/99
08/11/97
05/19/95
US Patent
8,019,060
Telephone/transaction entry device and system for entering transaction data into databases
09/13/11
09/04/07
05/19/95
US Patent
7,778,395
Telephone/transaction entry device and system for entering transaction data into databases
8/17/10
04/12/07
05/19/95
US Patent
7,334,024
System for transmission of voice and data over the same communications line
02/19/08
02/10/05
05/19/95
US Patent
6,973,477
System for securely communicating amongst client computer systems
12/06/05
06/07/00
05/19/95
US Patent
6,574,314
Method for entering transaction data into data bases using transaction entry device
06/03/03
09/07/99
05/19/95
US Patent
5,427,327
Method and apparatus for capturing and positioning a cable
09/27/93
09/27/93
06/27/95
US Patent
5,414,219
Printed circuit board circuit control device
05/09/95
04/22/94
04/22/94
 
 
32

 

 
Type
Number
Relay / Title
Issue / Publication Date
File Date
Earliest Priority Date
US Patent
5,331,637
Multicast routing using core based trees
07/19/94
07/30/93
07/30/93

Type
Number
Bismark /Title
Issue / Publication Date
File Date
Earliest Priority Date
US Patent
5,883,896
Arrangement for coupling optional auxiliary devices to terminal equipment of private branch exchanges
03/16/99
06/21/96
06/29/95
US Patent
5,734,832
Method for evaluating performance-feature-related messages in a program-controlled communication equipment
03/31/98
09/13/96
09/15/95
US Patent
6,674,848
Method for displaying performance feature names at a communication terminal equipment
01/06/04
07/07/99
02/05/97


The life of the patent rights shall be based on the expiration dates of the patent rights as follows:

Sampo
US Patent 6,161,149 expires March 13, 2018;
US Patent 6,772,229 expires December 1, 2019;
US Patent 8,015,495 expires November 16, 2023.

Cyberfone
US Patent  6,044,382 expires January 20, 2017
US Patent 5,805,676 expires May 19, 2015
US Patent 5,987,103 expires Aug 11, 2017
US Patent 8,019,060 expires Sept 4, 2027
US Patent 7,778,395 expires April 12, 2027
US Patent 7,334,024 expires Feb. 10, 2025
US Patent 6,973,477 expires June 7, 2020
US Patent 6,574,314 expires Sept. 7, 2019
US Patent 5,427,327 expires Sept. 27, 2013
US Patent 5,414,219 expires April 22, 2014
 
Bismark
US Patent 5,883,896 expires June 21, 2016
US Patent 5,734,832 expires Sept. 13 2016
US Patent 6,674,848 expires July 7, 2019
 
 
33

 

 
Patent Enforcement Litigation

We may often be required to engage in litigation to enforce our patents and patent rights. We are, or may become a party to ongoing patent enforcement related litigation, alleging infringement by third parties of certain of the patented technologies owned or controlled by us.

Research and Development

We have not expended funds for research and development costs since inception.

Employees

As of September 12, 2013, we had five (5) full-time employee and no part-time employees.   We believe our employee relations to be good.

PROPERTIES

We lease approximately 200 square feet of office space at 2331 Mill Road, Suite 100, Alexandria, VA 22314. The lease is on a month-to-month term and provides for a monthly rent of $175. We leased approximately 1,776 square feet of office space at 9070 South Rita Road, Suite 1550, Tucson, AZ 85747. The lease expired on July 31, 2013.
 
Legal Proceedings

In the ordinary course of business, we actively pursue legal remedies to enforce our intellectual property rights and to stop unauthorized use of our technology. Other than ordinary routine litigation incidental to the business, we know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder are an adverse party or has a material interest adverse to us.

MANAGEMENT

The following table presents information with respect to our officers, directors and significant employees as of the date of this prospectus:

Name and Address
Age
Date First Elected or Appointed
Position(s)
       
Doug Croxall
44
November 14, 2012
Chief Executive Officer and Chairman
John Stetson
28
June 26, 2012
Chief Financial Officer, Secretary and Director
James Crawford
38
March 1, 2013
Chief Operating Officer
Stuart Smith
53
January 26, 2012
Director
Craig Nard
47
March 8, 2013
Director
William Rosellini
33
March 8, 2013
Director
 
 
34

 

 
Each director serves until our next annual meeting of the stockholders unless they resign earlier. The Board of Directors elects officers and their terms of office are at the discretion of the Board of Directors.

Background of officers and directors

The following is a brief account of the education and business experience during at least the past five years of our officers and directors, indicating each person’s principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.

Doug Croxall - Chief Executive Officer and Chairman

Mr. Croxall, 44, has served as the Chief Executive Officer and Founder of LVL Patent Group LLC, a privately owned patent licensing company, since 2009.  From 2003 to 2008, Mr. Croxall served as the Chief Executive Officer and Chairman of FirePond, a software company that licensed configuration pricing and quotation software to Fortune 1000 companies. Mr. Croxall earned a Bachelor of Arts degree in Political Science from Purdue University in 1991 and a Master of Business Administration from Pepperdine University in 1995.  Mr. Croxall was chosen as a director of the Company based on his knowledge of and relationships in the patent acquisition and monetization business.
 
John Stetson - Chief Financial Officer, Secretary and Director
 
Mr. Stetson, 28, has been the Managing Member of HS Contrarian Investments LLC since 2011 and the President of Stetson Capital Investments, Inc. since 2010.  Mr. Stetson was an Investment Analyst from 2008 to 2009 for Heritage Investment Group and worked in the division of Corporate Finance of Toll Brothers from 2007 to 2008. The Board believes his knowledge of business makes him a valuable member of the Board.

James Crawford - Chief Operating Officer

Mr. Crawford, 38, was a founding member of Kino Interactive, LLC, and of AudioEye, Inc. Mr. Crawford’s experience as an entrepreneur spans the entire life cycle of companies from start-up capital to compliance officer and director of reporting public companies. Prior to his involvement as Chief Operating Officer of Marathon, Mr. Crawford served as a director and officer of Augme Technologies, Inc. beginning March 2006, and assisted the company in maneuvering through the initial challenges of acquisitions executed by the company through 2011 that established the company as a leading mobile marketing company in the United States. Mr. Crawford is experienced in public company finance and compliance functions. He has extensive experience in the area of intellectual property creation, management and licensing. Mr. Crawford also served on the board of directors Modavox® and Augme Technologies, and as founder and managing member of Kino Digital, Kino Communications, and Kino Interactive.
 
 
35

 

 
Stuart Smith- Director

Stuart H. Smith, 52, is a practicing plaintiff attorney licensed in Louisiana. He is a founding partner of the New Orleans-based law firm SmithStag, LLC. Smith has practiced law for nearly 25 years, litigating against oil companies and other energy-related corporations for damages associated with radioactive oilfield waste, referred to within the oil and gas industry as technologically enhanced radioactive material (TERM).  In 2001, Smith was lead counsel in an oilfield radiation case that resulted in a verdict of $1.056 billion against ExxonMobil.  Smith has been interviewed and his cases have been covered by a variety of media outlets, including CNN’s Andersen Cooper 360, BBC World News, Fox News, The New York Times, The Washington Post, USA Today, Lawyers Weekly USA, The Times-Picayune, The Baton Rouge Advocate, The Hill, The Associated Press, Bloomberg, National Public Radio, Radio America, and Washington Post Radio. Mr. Smith was chosen to be a member of our Board of Directors based on knowledge of complex litigation.

Craig Nard - Director

Mr. Nard, 47, is the Tom J.E. and Bette Lou Walker Professor of Law and Director of the Center for Law, Technology & the Arts and the FUSION program at Case Western Reserve University since 2005. He is also a Senior Lecturer at the World Intellectual Property Organization Academy in Torino, Italy. Mr. Nard is frequently asked to serve as an expert witness and consultant in patent litigation and is widely published in the area of patent law, with scholarly articles appearing in many of the most prominent law journals. He is also the author of a leading patent law casebook, The Law of Patents, and a coauthor of The Law of Intellectual Property. Prior to entering the legal academy, Mr. Nard clerked for the Honorable Giles S. Rich and Helen W. Nies of the United States Court of Appeals for the Federal Circuit in Washington, D.C. and, before that, was a patent litigator in Dallas, Texas. He is a member of the Texas bar, and is licensed to practice before the United States Patent & Trademark Office. The Board has determined that Mr. Nard’s academic experience in intellectual property law makes him a valuable member of the Board.

William Rosellini - Director

William Rosellini, 33, is Founder and Chairman of Microtransponder Inc. and Rosellini Scientific, LLC. Dr. Rosellini previously served as the founding CEO of Microtransponder from 2006 to 2012 and Lexington Technology Group in 2012. During his tenures as CEO he has raised nearly $30M in venture funding and $10M in NIH grants. Dr. Rosellini has been named a MTBC Tech Titan and a GSEA Entrepreneur of the Year and has testified to Congress on the importance of non-dilutive funding for inventors and researchers. Dr. Rosellini holds a BA in economics from the University of Dallas, a JD from Hofstra Law, an MBA and MS of Accounting from the University of Texas, a MS of Computational Biology from Rutgers, a MS of Regulatory Science from USC and a MS of Neuroscience from University of Texas. Previously, Dr. Rosellini was a right-handed pitcher who played in Arizona Diamondbacks system. The Board has determined that Dr. Rosellini’s medical technology expertise and industry knowledge and experience will make him a valuable member of the Board.

Code of Ethics

We have not yet adopted a code of ethics that applies to our principal executive officers, principal financial officer, principal accounting officer or controller, or persons performing similar functions, since we have been focusing our efforts on obtaining financing for the company. We expect to adopt a code as we develop our business.

Family Relationships

There are no family relationships between any of our directors, executive officers or directors.

Involvement in Certain Legal Proceedings

During the past ten years, none of our officers, directors, promoters or control persons have been involved in any legal proceedings as described in Item 401(f) of Regulation S-K.

Term of Office

Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws.
 
 
36

 

 
Director Independence

Mr. Stuart Smith, Mr. Craig Nard and Dr. William Rosellini are "independent" directors based on the definition of independence in the listing standards of the NASDAQ Stock Market LLC.

Committees of the Board of Directors

Due to our size, we have not formally designated a nominating committee, an audit committee, a compensation committee, or committees performing similar functions.

Board Leadership Structure and Role in Risk Oversight

Although we have not adopted a formal policy on whether the Chairman and Chief Executive Officer positions should be separate or combined, we have traditionally determined that it is in the best interests of the Company and its shareholders to partially combine these roles.  Due to the small size of the Company, we believe it is currently most effective to have the Chairman and Chief Executive Officer positions partially combined.

Our Board of Directors is primarily responsible for overseeing our risk management processes.  The Board of Directors receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding the Company’s assessment of risks. The Board of Directors focuses on the most significant risks facing us and our general risk management strategy, and also ensures that risks undertaken by us are consistent with the Board of Directors’ appetite for risk. While the Board of Directors oversees the Company, our management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing the Company and that our board leadership structure supports this approach.

EXECUTIVE COMPENSATION

The following summary compensation table sets forth information concerning compensation for services rendered in all capacities during 2012 and 2011 awarded to, earned by or paid to our executive officers. The value attributable to any Option Awards and Stock Awards reflects the grant date fair values of stock awards calculated in accordance with FASB Accounting Standards Codification Topic 718. As described further in Note 6 – Stockholders’ Equity (Deficit) – Common Stock Option to our consolidated year-end financial statements, a discussion of the assumptions made in the valuation of these option awards and stock awards.

Name and Principal
Position
Year
Salary
Bonus
Awards
Stock
Awards
Other Incentive
Compensation
Non-Equity
Plan
Compensation
Nonqualified
Deferred
Earnings
All
Other
Compensation
Total
   
($)
($)
($)
($)
($)
($)
($)
($)
 
Doug Croxall
CEO and Chairman
 
2012
2011
 
40,385
-
 
-
-
 
-
-
 
968,600
-
 
-
-
 
-
-
 
-
-
 
1,008,985
-
John Stetson (1)
CFO and Secretary
2012
2011
8,654
-
-
-
33,287
-
-(3)
-
-
-
-
-
-
-
41,941
-
Mark Groussman (2)
Former CEO
2012
2011
44,384
-
-
-
-
-
-(4)
-
-
-
-
-
-
-
44,384
-
 
 
37

 

 
(1) John Stetson was appointed as President, COO and a director on June 26, 2012. On November 14, 2012, John Stetson resigned as the Company’s President and Chief Operating Officer and was re-appointed as the Chief Financial Officer and Secretary on January 28, 2013.
(2) Mark Groussman was appointed as the Chief Executive Officer of the Company on June 11, 2012 and resigned as the Company’s Chief Executive Officer on November 14, 2012.
(3) John Stetson was awarded a ten year option award to purchase an aggregate of 115,385 shares of the Company’s common stock (after giving effect to the Reverse Split) with an exercise price of $6.50 per share and was cancelled on November 14, 2012 upon resignation.
(4) Mark Groussman was awarded a ten year option award to purchase an aggregate of 115,385 shares of the Company’s common stock (after giving effect to the Reverse Split) with an exercise price of $6.50 per share and was cancelled on November 14, 2012 upon resignation.

Employment Agreements

On November 14, 2012, we entered into an employment agreement with Doug Croxall (the “Croxall Employment Agreement”), whereby Mr. Croxall agreed to serve as our Chief Executive Officer for a period of two years, subject to renewal, in consideration for an annual salary of $350,000 and an Indemnification Agreement. Additionally, under the terms of the Croxall Employment Agreement, Mr. Croxall shall be eligible for an annual bonus if we meet certain criteria, as established by the Board of Directors.  As further consideration for his services, Mr. Croxall received a ten year option award to purchase an aggregate of One Hundred Fifty Three Thousand Eight Hundred and Forty-Six (153,846) shares of our common stock with an exercise price of $6.50 per share, after giving effect to the Reverse Split, which shall vest in twenty-four (24) equal monthly installments on each monthly anniversary of the date of the Croxall Employment Agreement.

On January 28, 2013, we entered into an employment agreement with John Stetson, our Chief Financial Officer and Secretary (the “Stetson Employment Agreement”) whereby Mr. Stetson agreed to serve as our Chief Financial Officer for a period of one year, subject to renewal, in consideration for an annual salary of $75,000.  Additionally,  Mr. Stetson shall be eligible for an annual bonus if we meet certain criteria, as established by the Board of Directors, subject to standard “claw-back rights” in the event of any restatement of any prior period earnings or other results as from which any annual bonus shall have been determined.  As further consideration for his services, Mr. Stetson received a ten year option award to purchase an aggregate of Thirty Eight Thousand Four Hundred Sixty Two (38,462) shares of our common stock with an exercise price of $6.50 per share, after giving effect to the Reverse Split, which shall vest in three (3) equal annual installments on the beginning on the first annual anniversary of the date of the Stetson Employment Agreement, provided Mr. Stetson is still employed by us. In the event of Mr. Stetson’s termination prior to the expiration of his employment term under his employment agreement, unless he is terminated for Cause (as defined in the Stetson Employment Agreement), or in the event Mr. Stetson resigns without Good Reason (as defined in the Stetson Employment Agreement), we shall pay to him a lump sum in an amount equal to the sum of his (i) base salary for the prior 12 months plus (ii) his annual bonus amount during the prior 12 months.

Directors’ Compensation

The following summary compensation table sets forth information concerning compensation for services rendered in all capacities during 2012 and 2011 awarded to, earned by or paid to our directors. The value attributable to any Warrant Awards reflects the grant date fair values of stock awards calculated in accordance with FASB Accounting Standards Codification Topic 718. As described further in Note 6 – Stockholders’ Equity (Deficit) – Common Stock Warrants to our consolidated year-end financial statements, a discussion of the assumptions made in the valuation of these warrant awards.
 
 
38

 

 
Name
Fees earned or paid in cash
($)
Stock awards
($)
Warrant awards
($)
Non-equity incentive plan
compensation
($)
Nonqualified deferred
compensation earnings
($)
All other compensation
($)
Total
($)
Stuart Smith
2012
2011
 
-
-
 
-
-
 
124,725
-
 
-
-
 
-
-
 
-
-
 
124,725
-
David Rector (1)
2012
2011
 
-
-
 
-
-
 
124,725
-
 
-
-
 
-
-
 
-
-
 
124,725
-
Joshua Bleak (2)
2012
2011
 
-
-
 
-
-
 
349,230
-
 
-
-
 
-
-
 
-
-
 
349,230
-
George Glasier 2012
2011
-
-
-
-
-(3)
-
-
-
-
-
-
-
-
-


(1) David Rector resigned from his position as Director on March 8, 2013.

(2) Joshua Bleak resigned from his position as Director on March 8, 2013.

(3) George Glasier was awarded a ten year warrant to purchase an aggregate of 115,385 shares of our common stock with an exercise price of $6.50 per share, after giving effect to the Reverse Split. Mr. Glasier exercised the warrant and the shares issued upon exercise of the warrant were cancelled on June 11, 2012 upon resignation.

Grants of Plan Based Awards and Outstanding Equity Awards at Fiscal Year-End

On August 1, 2012, our board of directors and stockholders adopted the 2012 Equity Incentive Plan, pursuant to which 769,231 shares of our common stock are reserved for issuance as awards to employees, directors, consultants, advisors and other service providers, after giving effect to the Reverse Split.

Name
Option awards
Stock awards
Number of securities underlying unexercised options
(#) exercisable
Number of securities
underlying
unexercised
options
(#) unexercisable
Equity
incentive
plan awards: Number of
securities
underlying
unexercised
unearned
options
(#)
Option
exercise price
($)
Option expiration date
Number of shares or units of stock that have not vested
(#)
Market value of shares of units of stock that have not vested
($)
Equity
incentive
plan awards: Number of
unearned
shares, units or other rights that have not vested
(#)
Equity
incentive
plan awards: Market or payout value of
unearned
shares, units or other rights that have not vested
($)
Doug Croxall (1)
6,410
147,436
-
$6.50
11/14/2022
-
-
-
-
 
 
39

 

 
(1) On November 14, 2012, Mr. Croxall received an option to purchase an aggregate of 153,846 shares of Common Stock at $6.50 per share, after giving effect to the Reverse Split. The option shall become exercisable during the term of Mr. Croxall’s employment in twenty-four (24) equal monthly installments on each monthly anniversary of the date of the Mr. Croxall’s employment.

Long-Term Incentive Plan

On August 1, 2012, our board of directors and stockholders adopted the 2012 Equity Incentive Plan, pursuant to which 769,231 shares of our common stock are reserved for issuance as awards to employees, directors, consultants, advisors and other service providers, after giving effect to the Reverse Split.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves as a member of the Board of Directors or compensation committee of any other entity that has one or more of its executive officers serving as a member of our Board of Directors.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Related Party Transactions

Between February 2010 and March 2010, Christopher Clitheroe, our former Secretary and a Director, loaned us an aggregate of $1,375 for operating expenses.  Between April 2011 and September 2011, Mr. Clitheroe loaned us an aggregate of $9,675 for operating expenses. These loans were non-interest bearing and were due on demand.  On December 13, 2011, Mr. Clitheroe agreed to waive these loans.

In November 2011, we issued a promissory note for $53,500 to an affiliated company owned by the officers of Amicor (as defined herein). The note was payable in full without interest on or before January 15, 2012. In December 2011, we issued a promissory note for $99,474 to an affiliated company owned by the officers of Amicor. The note was payable in full without interest on or before January 15, 2012. Such note was issued in connection with the execution of a lease assignment agreement between us and the affiliated company for certain mineral rights located in San Juan County, Utah. On January 30, 2012, we paid both promissory notes above for a total of $152,974. The affiliated company agreed not to charge us a late penalty fee upon satisfaction of the notes.

On January 26, 2012, we entered into a 1 year consulting agreement with GRQ Consultants, Inc., pursuant to which such consultant will provide certain services to us in consideration for which we sold to the consultant warrants to purchase an aggregate of 134,615 shares of our common stock with an exercise price of $6.50. Barry Honig is the owner of GRQ Consultants, Inc. GRQ Consultants, Inc. 401(k), which is also owned by Mr. Honig, purchased an aggregate of $500,000 of shares of common stock in the our private placement.  In addition, we entered into an Option Agreement with Pershing and Mr. Honig is a member of Pershing’s board of directors (see Note 6). Additionally, we entered into consulting agreement with Melechdavid Inc. in consideration for which we sold to Melechdavid Inc. warrants to purchase an aggregate of 134,615 shares of our common stock with an exercise price of $6.50 per share. Our former Chief Executive Officer is the President of Melechdavid Inc. (see Note 6).

On January 26, 2012, we entered into an option agreement with Pershing pursuant to which we purchased the option to acquire certain uranium properties in consideration for (i) a $1,000,000 promissory note payable in installments upon satisfaction of certain conditions, expiring six months following issuance and (ii) 769,231 shares of our common stock. Pursuant to the terms of the note, upon the closing of a private placement in which we receive gross proceeds of at least $5,000,000, we shall repay $500,000 under the note.  Additionally, upon the closing of a private placement in which we receive gross proceeds of at least an additional $1,000,000, we shall pay the outstanding balance under the note.  The note does not bear interest.  On January 26, 2012, in conjunction with a private placement, we paid Pershing $500,000 under the terms of the note.  Pershing may have been deemed to be our initial promoter.  Additionally, Barry Honig was, until February 9, 2012, the Chairman of Pershing and had been a shareholder of Continental Resources Group, Inc., the then- controlling shareholder of Pershing, since 2009.  Mr. Honig remains a director of Pershing.  Mr. Honig is also the sole owner, officer and director of GRQ Consultants, Inc.  David Rector, a then- member of our board of directors, was the President and a director of Pershing at the time of the transaction and Joshua Bleak, our former director, was the Chief Executive Officer of Continental.  Mr. Rector resigned as the President of Pershing on March 6, 2012 and on such date was appointed as the Treasurer and Vice President of Administration and Finance of Pershing. In November 2012, David Rector resigned from Pershing as Treasurer, Vice President of Administration and Finance and member of the board of directors.
 
 
40

 

 
Additionally, we entered into consulting agreement with Melechdavid Inc. in consideration for which we issued to Melechdavid Inc. warrants to purchase an aggregate of 134,615 shares of our common stock with an exercise price of $6.50 per share. Our then-Chief Executive Officer, Mark Groussman, is the President of Melechdavid Inc.

On January 26, 2012, we issued a ten-year warrant to purchase an aggregate of 13,077 shares of common stock with an exercise price of $6.50 per share to Daniel Bleak, an outside consultant to us, which vests in three equal annual installments with the first installment vesting one year from the date of issuance. Daniel Bleak is the father of Joshua Bleak, a former member of our board of directors. Additionally, in August 2012, we paid Daniel Bleak $50,000 for research and business advisory services rendered pursuant to a Professional Service Agreement executed on August 1, 2012.

On January 26, 2012, we issued warrants to purchase an aggregate of 207,692 shares of common stock at an exercise price of $6.50 per share to Joshua Bleak, David Rector, Stuart Smith and George Glasier, our then- directors.

On March 19, 2012, we entered into an agreement with California Gold Corp., pursuant to which we agreed to provide California Gold Corp. with a geological review on or prior to March 30, 2012, of certain uranium properties in consideration for $125,000. David Rector, our former director, is a member of California Gold Corp.’s board of directors.

Our former principal place of business was located in a building owned by Silver Hawk Ltd., a Colorado corporation.   George Glasier, our former Chief Executive Officer, is the President and Chief Executive Officer of Silver Hawk Ltd.  We leased our office space on a month to month basis at a monthly rate of $850 pursuant to a lease effective January 1, 2012. Under the terms of a Rescission Agreement dated June 11, 2012, our lease for such office space was terminated.

On June 11, 2012, we exercised the option we purchased from Pershing through the assignment of Pershing’s wholly owned subsidiary, Continental Resources Acquisition Sub, Inc., a Florida corporation, which is the owner of 100% of the issued and outstanding common stock of each of Green Energy Fields, Inc., a Nevada corporation (which is the owner of 100% of the issued and outstanding common stock of CPX Uranium, Inc.) and ND Energy, Inc., a Delaware corporation.  Additionally, ND Energy, Inc. and Green Energy Fields, Inc. hold a majority of the outstanding membership interests of Secure Energy LLC.  Through our acquisition of the above entities, we acquired certain uranium properties and claims.

Between June 2012 and July 2012, we loaned $147,708 to an affiliated company in exchange for a secured promissory note. The note bore 6% interest per annum and shall become due and payable on or before June 29, 2013. This note was secured by a real estate property owned by the affiliated company. In November 2012, we collected a total of $218,218 from the affiliated company and such payment was applied towards the principal amount of $147,708 and interest of $70,510.  We recognized interest income of $70,510 during the year ended December 31, 2012 and are included in the loss from discontinued operations as this transaction relates to our real estate business. Barry Honig, the President of the affiliated company, is one of our shareholders.
 
 
41

 

 
In August 2012, we issued 23,305 shares of common stock in connection with the exercise of 46,154 stock warrants on a cashless basis. The warrant holder was Melechdavid, Inc. who purchased 46,154 warrants from a third party in June 2012. Our former Chief Executive Officer is the President of Melechdavid, Inc. Additionally, in November 2012, we received a notice from the former Chief Executive Officer that the former Chief Executive Officer had violated Section 16(b) of the Exchange Act as a result of certain purchases and sales of shares of our common stock made by the former Chief Executive Officer within a period of less than six months that generated short-swing profits under Section 16(b). In December 2012, the former Chief Executive Officer made a $50,000 payment to us in disgorgement of the short-swing profits.

On November 14, 2012, we entered into a share exchange agreement with Sampo and the members of Sampo.  Upon closing of the transaction contemplated under the share exchange agreement, on November 14, 2012, the Sampo Members (six members) transferred all of the issued and outstanding membership interests of Sampo to us in exchange for an aggregate of 711,538 shares of our Common Stock.  Such exchange caused Sampo to become our wholly-owned subsidiary. LVL Patent Group LLC, of which Mr. Croxall is the Chief Executive Officer, and John Stetson were former members of Sampo and received 307,692 and 38,462 shares of our common stock, respectively, in connection with the share exchange

On May 31, 2013, Barry Honig, a beneficial owner of more than 5% of our common stock at the time, purchased an aggregate of $100,000 of shares of common stock and warrants in our private placement.

On August 2, 2013, GRQ Consultants Inc. 401K funded a subscription of $150,000 of shares of common stock and warrants in our private placement, which was assigned to it by another investor. Barry Honig is the trustee of GRQ Consultants Inc. 401K and was a beneficial owner of more than 5% of our common stock at the time of the transaction.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding beneficial ownership of our common stock as of the date of this prospectus: (i) by each of our directors, (ii) by each of the Named Executive Officers, (iii) by all of our executive officers and directors as a group, and (iv) by each person or entity known by us to beneficially own more than five percent (5%) of any class of our outstanding shares. The percentage ownership of each beneficial owner is based on 5,333,824 outstanding shares of common stock after giving effect to the Reverse Split. As of September 12, 2013, there were 5,333,824 shares of our common stock outstanding, after giving effect to the Reverse Split.

         
Amount and Nature of Beneficial Ownership (1)
 
Name and Address of
Beneficial Owner
 
Common
Stock
   
Options
   
Warrants
   
Total 
   
Percentage of
Common
Stock (%)
 
                                         
Officers and Directors
                                       
                                         
Doug Croxall (Chairman and CEO)
   
307,692 (2)
     
102,560 (3)
     
0
     
410,252
     
7.55
%
                                         
John Stetson
(CFO and Director)
   
180,824 (4)
     
0 (5)
     
3,201 (6)
     
184,025
     
3.45
%
                                         
James Crawford (COO)
   
0
     
6,408 (7)
     
0
     
6,408
     
*
 
                                         
Stuart Smith (Director)
   
105,770
     
0
     
24,039 (8)
     
129,808
     
2.42
 %
 
 
42

 
 
                                         
Craig Nard
(Director)
   
0
     
2,400 (9)
     
0
     
2,400
     
*
 
                                         
William Rosellini (Director)
   
0
     
2,400 (10)
     
0
     
2,400
     
*
 
All Directors and Executive Officers (six persons)
   
594,286
     
106,398
     
27,240
     
727,923
     
13.43
%
                                         
Persons owning more than 5% of voting securities
                                       
TechDev Holdings LLC (12)
   
461,539
     
0
     
0
     
461,539
     
8.65
%
                                         
The Feinberg Family Trust (13)
   
432,692
     
0
     
216,346 (11)
     
649,038
     
11.69
%

* Less than 1%

(1) Amounts set forth in the table and footnotes gives effect to the Reverse Split that we effectuated on July 18, 2013. In determining beneficial ownership of our common stock as of a given date, the number of shares shown includes shares of common stock which may be acquired on exercise of warrants or options or conversion of convertible securities within 60 days of that date. In determining the percent of common stock owned by a person or entity on September 12, 2013, (a) the numerator is the number of shares of the class beneficially owned by such person or entity, including shares which may be acquired within 60 days on exercise of warrants or options and conversion of convertible securities, and (b) the denominator is the sum of (i) the total shares of common stock outstanding on September 12, 2013 (5,333,824), and (ii) the total number of shares that the beneficial owner may acquire upon conversion of the preferred and on exercise of the warrants and options, subject to limitations on conversion and exercise as more fully described in note 10 below. Unless otherwise stated, each beneficial owner has sole power to vote and dispose of its shares.

(2) Held by LVL Patent Group LLC, over which Mr. Croxall holds voting and dispositive power.

(3) Represents options to purchase 70,510 shares of common stock at an exercise price of $6.50 per share and options to purchase 32,050 shares of common stock at an exercise price of $5.265 per share and excludes options to purchase 83,336 shares of common stock at an exercise price of $6.50 per share and options to purchase 121,796 shares of common stock at an exercise price of $5.265 per share that are not exercisable within 60 days.

(4) Represents 121,786 shares held by Mr. Stetson individually, 5,769 shares held by HS Contrarian Investments LLC and 53,269 shares held by Stetson Capital Investments, Inc. Mr. Stetson is the President of Stetson Capital Investments, Inc. and the manager of HS Contrarian Investments LLC and in such capacities is deemed to have voting and dispositive power over shares held by such entities.

(5) Excludes options to purchase an aggregate of 38,462 shares of common stock at an exercise price of $6.50 per share that do not vest and are not exercisable within 60 days.

(6) Represents a warrant to purchase 3,201 shares of common stock at an exercise price of $7.80 per share.

(7) Represents options to purchase 6,408 shares of common stock at an exercise price of $4.94 per share and excludes options to purchase 32,054 shares of common stock that do not vest and are not exercisable within 60 days of the date of this Prospectus.

(8) Represents a warrant to purchase 14,423 shares of common stock at an exercise price of $6.50 per share and a warrant to purchase 9,616 shares of common stock at an exercise price of $7.80 per share.
 
 
43

 

 
(9) Represents options to purchase 2,400 shares of common stock at an exercise price of $5.265 per share and excludes options to purchase 7,692 shares of common stock at an exercise price of $11.05 per share and options to purchase 9,138 shares of common stock at an exercise price of $5.265 per share that do not vest and are not exercisable within 60 days of the date of this Prospectus.

(10) Represents options to purchase 2,400 shares of common stock at an exercise price of $5.265 per share and excludes options to purchase 7,692 shares of common stock at an exercise price of $11.05 per share and options to purchase 9,138 shares of common stock at an exercise price of $5.265 per share that do not vest and are not exercisable within 60 days of the date of this Prospectus.

(11) Represent a warrant to purchase 216,346 shares of common stock at an exercise price of $6.50 per share.

(12) Acclaim Financial Group, LLC ("AFG") is the sole member of TechDev Holdings LLC. Accordingly, AFG may be deemed to beneficially own all of the shares that are owned by TechDev Holdings LLC. Audrey Spangenberg is the sole managing member of AFG, and accordingly may be deemed to beneficially own all of the shares that are owned by TechDev. Ms. Spangenberg disclaims beneficial ownership of these securities.

(13) Jeffrey Feinberg is the trustee of The Feinberg Family Trust and holds voting and dispositive power over shares held by The Feinberg Family Trust.

* Under 1 percent of the issued and outstanding shares as of September 12, 2013.

SELLING STOCKHOLDERS

Up to 1,739,319 shares of common stock are being offered by this prospectus, all of which are being registered for sale for the account of the selling stockholders and include the following:

 
·
1,159,542  shares of common stock issued to certain investors in the private placement conducted on from May 31, 2013 and the conversion of certain legal fees on July 29, 2013, after giving effect to the Reverse Split, and
 
·
579,777 shares of common stock issuable upon the exercise of outstanding warrants issued to the investors in the private placement on May 31, 2013, after giving effect to the Reverse Split.

Each of the transactions by which the selling stockholders acquired their securities from us was exempt under the registration provisions of the Securities Act.

The 1,739,319 shares of common stock referred to above are being registered to permit public sales of the shares, and the selling stockholders may offer the shares for resale from time to time pursuant to this prospectus.  The selling stockholders may also sell, transfer or otherwise dispose of all or a portion of their shares in transactions exempt from the registration requirements of the Securities Act or pursuant to another effective registration statement covering those shares. We may from time to time include additional selling stockholders in supplements or amendments to this prospectus.

The table below sets forth certain information regarding the selling stockholders and the shares of our common stock offered by them in this prospectus. The selling stockholders have not had a material relationship with us within the past three years other than as described in the footnotes to the table below or as a result of acquisition of our shares or other securities. To the best of our knowledge, none of the selling stockholders is a broker dealer or an affiliate of a broker dealer other than as described in the footnotes to the table below.
 
 
44

 

 
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. The selling stockholders’ percentage of ownership of our outstanding shares in the table below is based upon 5,333,824  shares of common stock outstanding as of September 12, 2013.

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. The selling stockholders’ percentage of ownership of our outstanding shares in the table below is based upon 5,333,824 shares of common stock outstanding as of September 12, 2013, after giving effect to the Reverse Split.

Name and Address of
Stockholder
Total Number
of Shares of
Common Stock
Held Prior to
Offering (1)
Number of
Shares of
Common Stock
Offered
Pursuant to
this
Prospectus
 
Shares
Beneficially
Owned After
the Offering
(Number) (1) (3)
Shares
Beneficially
Owned After
the Offering
(Percentage)
(1)(2)
 
Hudson Bay Master Fund Ltd. (4)
 
 
164,626 (5)
 
 
72,116 (6)
 
92,510 
1.56%
 
Melechdavid Inc. (7)
 
 
170,673 (8)
 
 
93,750 (9)
 
76,923
1.30%
 
Edward Karr
 
 
110,578 (10)
 
 
72,116 (11)
 
 38,462
0.65%
 
The Feinberg Family Trust (12)
 
 
649,038 (13)
 
 
649,038 (13)
 
0
0
 
Erick Richardson
 
 
169,214 (14)
 
 
78,750 (15)
 
18,348
0.31%
 
Molly Richardson
 
 
36,057 (16)
 
 
36,057 (16)
 
0
0
 
BEBE, LLC (17)
 
 
72,116 (18)
 
 
72,116 (18)
 
0
0
 
IP Nav Capital, LLC (19)
 
 
72,116 (20)
 
 
72,116 (20)
 
0
0
 
Barry Honig
 
 
227,170 (21)
 
 
28,847 (22)
 
146,510
2.48%
 
MidSummer Small Cap Master, Ltd. (23)
 
72,116 (24)
72,116 (24)
0
0
 
Alpha Capital Anstalt (25)
 
 
115,385 (26)
 
 
115,385 (26)
 
0
0
 
Michael Cavalier
 
 
14,423 (27)
 
 
14,423 (27)
 
0
0
 
 
45

 
 
 
Iroquois Master Fund Ltd. (28)
 
 
72,116 (29)
 
 
72,116 (29)
 
0
0
 
Paradox Capital Partners, LLC (30)
 
 
7,212 (31)
 
 
7,212 (31)
 
0
0
 
Benjamin Padnos
 
 
29,423 (32)
 
 
29,423 (32)
 
0
0
 
Ron Low
 
 
57,693 (33)
 
 
57,693 (33)
 
0
0
 
Brian Weitman
 
 
14,423 (34)
 
 
14,423 (34)
 
0
0
 
Kevin Leung
 
14,423 (35)
14,423 (35)
0
0
 
Stuart Smith
 
129,808(36)
43,269 (37)
86,539
1.46%
 
GRQ Consultants Inc. Roth 401K (38)
 
38,351 (39)
8,544 (40)
29,807
0.50%
 
GRQ Consultants Inc. 401K (41)
 
43,269 (42)
43,269 (43)
0
0
 
Steve Gorlin
 
7,212 (44)
7,212 (44)
0
0
 
Jarrett Gorlin
 
7,212 (45)
7,212 (45)
0
0
 
BTG Investments, LLC (46)
 
27,693 (47)
27,693 (47)
0
0
 
John J. Weber
 
7,500 (48)
7,500 (48)
0
0
 
Aaron M. Gurewitz
 
7,500 (49)
7,500 (49)
0
0
 
Gordon Roth
 
35,193 (50)
7,500 (51)
0
0
 
Dinapoli Family Trust (52)
 
3,750 (53)
3,750 (54)
0
0
 
Ted Roth
 
3,750 (55)
3,750 (55)
0
0
TOTAL
 
1,739,319
   
 
 
46

 

 
* represents less than 1%.

(1) Under applicable SEC rules, a person is deemed to beneficially own securities which the person as the right to acquire within 60 days through the exercise of any option or warrant or through the conversion of a convertible security. Also under applicable SEC rules, a person is deemed to be the “beneficial owner” of a security with regard to which the person directly or indirectly, has or shares (a) voting power, which includes the power to vote or direct the voting of the security, or (b) investment power, which includes the power to dispose, or direct the disposition, of the security, in each case, irrespective of the person’s economic interest in the security. Each listed selling stockholder has the sole investment and voting power with respect to all shares of common stock shown as beneficially owned by such selling stockholder, except as otherwise indicated in the footnotes to the table.

(2) As of September 12, 2013, there were 5,333,824 shares of our common stock issued and outstanding. In determining the percent of common stock beneficially owned by a selling stockholder on September 12, 2013, (a) the numerator is the number of shares of common stock beneficially owned by such selling stockholder (including shares that he has the right to acquire within 60 days of September 12, 2013), and (b) the denominator is the sum of (i) the 5,551,630 shares outstanding after offering based upon 5,333,824 shares of common stock outstanding on September 12, 2013, after giving effect to the Reverse Split and (ii) the number of shares of common stock which such selling stockholders has the right to acquire within 60 days of September 12, 2013 after offering.

(3) Represents the amount of shares that will be held by the selling stockholders after completion of this offering based on the assumptions that (a) all shares registered for sale by the registration statement of which this prospectus is part will be sold and (b) that no other shares of our common stock beneficially owned by the selling stockholders are acquired or are sold prior to completion of this offering by the selling stockholders.

(4) Hudson Bay Capital Management LP, the investment manager of Hudson Bay Master Fund Ltd. has voting and investment power over securities held by Hudson Bay Master Fund Ltd. Sander Gerber is the managing member of Hudson Bay Capital GP LLC, which is the general partner of Hudson Bay Capital Management LP. Sander Gerber disclaims beneficial ownership over these securities.

(5) Includes (i) 72,115 shares of common stock, (ii) 48,077 shares of common stock being offered by this prospectus and (iii) 24,039 shares of common stock underlying the warrants being offered by this prospectus.

(6) Includes (i) 48,077 shares of common stock being offered by this prospectus and (ii) 24,039 shares of common stock underlying the warrants being offered by this prospectus.

(7) Mark Groussman is the President of Melechdavid Inc. and holds voting and dispositive power over shares held by Melechdavid Inc.

(8) Includes (i) 76,923 shares of common stock, (ii) 62,500 shares of common stock being offered by this prospectus and (iii) 31,250 shares of common stock underlying the warrants being offered by this prospectus.

(9) Includes (i) 62,500 shares of common stock being offered by this prospectus and (ii) 31,250 shares of common stock underlying the warrants being offered by this prospectus.

(10) Includes (i) 38,462 shares of common stock, (ii) 48,077 shares of common stock being offered by this prospectus, and (iii) 24,039 shares of common stock underlying the warrants being offered by this prospectus.
 
 
47

 

 
(11) Includes (i) 48,077 shares of common stock being offered by this prospectus, and (ii) 24,039 shares of common stock underlying the warrants being offered by this prospectus.

(12) Jeffrey Feinberg is the trustee of The Feinberg Family Trust and holds voting and dispositive power over shares held by The Feinberg Family Trust.

(13) Includes (i) 432,692 shares of common stock being offered by this prospectus, and (ii) 216,346 shares of common stock underlying the warrants being offered by this prospectus.

(14) Includes (i) 18,348 shares of common stock, (ii) 52,500 shares of common stock being offered by this prospectus, and (iii) 26,250 shares of common stock underlying the warrants being offered by this prospectus held directly by Erick Richardson and (i) 48,077 shares of common stock being offered by this prospectus held by BEBE, LLC and (ii) 24,039 shares of common stock underlying the warrants being offered by this prospectus held by BEBE, LLC. Erick Richardson is the Manager of BEBE, LLC and holds voting and dispositive power over shares held by BEBE, LLC. Excludes 24,038 shares of common stock and 12,019 shares of common stock underlying warrants beneficially owned by Molly Richardson, the wife of Erick Richardson, which are also being offered pursuant to this prospectus. Erick Richardson disclaims beneficial ownership of securities of the Company held by Molly Richardson.

(15) Includes (i) 24,038 shares of common stock being offered by this prospectus, and (ii) 12,019 shares of common stock underlying the warrants being offered by this prospectus. Excludes 52,500 shares of common stock and 26,250 shares of common stock underlying warrants beneficially owned by Molly Richardson, the wife of Erick Richardson, which are also being offered pursuant to this prospectus. Erick Richardson disclaims beneficial ownership of securities of the Company held by Molly Richardson.

(16) Includes (i) 24,038 shares of common stock being offered by this prospectus and (ii) 12,019 shares of common stock underlying the warrants being offered by this prospectus. Excludes 24,038 shares of common stock and 12,019 shares of common stock underlying warrants beneficially owned by Erick Richardson, the husband of Molly Richardson, which are also being offered pursuant to this prospectus. Molly Richardson disclaims beneficial ownership of securities of the Company held by Erick Richardson.

(17) Erick Richardson is the Manager of BEBE, LLC and holds voting and dispositive over shares held by BEBE, LLC.

(18) Includes (i) 48,077 shares of common stock being offered by this prospectus and (ii) 24,039 shares of common stock underlying the warrants being offered by this prospectus.

(19) IP Navigation Group, LLC is the sole member of IP Nav Capital, LLC. Erich Spangenberg is the managing member and owner of 90% of the membership interests in IP Navigation Group, LLC. Accordingly, Erich Spangenberg may be deemed to beneficially own all of the shares that are owned by IP Nav Capital, LLC. Mr. Spangenberg disclaims beneficial ownership of these securities except to the extent of his pecuniary interest therein.

(20) Includes (i) 48,077 shares of common stock being offered by this prospectus and (ii) 24,039 shares of common stock underlying the warrants being offered by this prospectus.
 
(21) Includes (i) 25,357 shares of common stock, (ii) 19,231 shares of common stock being offered by this prospectus, and (iii) 9,616 shares of common stock underlying the warrants being offered by this prospectus held directly by Barry Honig and (i) 23,077 shares of common stock held by GRQ Consultants Inc., (ii) 28,846 shares of common stock held by GRQ Consultants Inc. 401k Plan being offered by this prospectus, (iii) 14,423 shares of common stock underlying the warrants held by GRQ Consultants Inc. 401k Plan being offered by this prospectus, (iv) 76,923 shares of common stock held by GRQ Consultants Inc. Defined Plan and (v) 21,153 shares of common stock held by GRQ Consultants Inc. Roth 401k Plan, (vi) 8,654 shares of common stock underlying warrants held by GRQ Consultants Inc. Roth 401k Plan with an exercise price of $7.80 per share, (vii) 5,696 shares of common stock held by GRQ Consultants Inc. Roth 401k Plan being offered by this prospectus, and (viii) 2,848 shares of common stock held by GRQ Consultants Inc. Roth 401k Plan underlying the warrants being offered by this prospectus. Mr. Honig is the President of GRQ Consultants Inc. and the trustee of GRQ Consultants Inc. 401k Plan, GRQ Consultants Inc. Defined Plan and GRQ Consultants Inc. Roth 401k Plan and is deemed to hold voting and dispositive power over shares held by such entities.
 
 
48

 

 
(22) Includes (i) 19,231 shares of common stock being offered by this prospectus, and (ii) 9,616 shares of common stock underlying the warrants being offered by this prospectus.

(23) Joshua Thomas and Michael Amsalem each may be deemed to have investment discretion and voting power over the shares held by Midsummer Small Cap Master, Ltd.

(24) Includes (i) 48,077 shares of common stock being offered by this prospectus and (ii) 24,039 shares of common stock underlying the warrants being offered by this prospectus.

(25) Konrad Ackerman is the director of Alpha Capital Anstalt (“Alpha”) and in such capacity may be deemed to have voting control and investment discretion over the securities held for the account of Alpha. As a result of the foregoing, Mr. Ackerman may be deemed to have beneficial ownership (as determined under Section 13(d) of the Exchange Act) of any shares of common stock deemed to be beneficially owned by Alpha.

(26) Includes (i) 76,923 shares of common stock being offered by this prospectus, and (iii) 38,462 shares of common stock underlying the warrants being offered by this prospectus.

(27) Includes (i) 9,615 shares of common stock being offered by this prospectus, and (ii) 4,808 shares of common stock underlying the warrants being offered by this prospectus.

(28) Iroquois Capital Management L.L.C. (“Iroquois Capital”) is the investment manager of Iroquois Master Fund, Ltd (“IMF”). Consequently, Iroquois Capital has voting control and investment discretion over securities held by IMF. As managing members of Iroquois Capital, Joshua Silverman and Richard Abbe make voting and investment decisions on behalf of Iroquois Capital in its capacity as investment manager to IMF. As a result of the foregoing, Mr. Silverman and Mr. Abbe may be deemed to have beneficial ownership (as determined under Section 13(d) of the Securities Exchange Act of 1934, as amended) of the securities held by IMF.

(29) Includes (i) 48,077 shares of common stock being offered by this prospectus and (ii) 24,039 shares of common stock underlying the warrants being offered by this prospectus.

(30) Harvey Kesner is the Manager of Paradox Capital Partners, LLC and holds voting and dispositive power over shares held by Paradox Capital Partners, LLC.

(31) Includes (i) 4,808 shares of common stock being offered by this prospectus and (ii) 2,404 shares of common stock underlying the warrants being offered by this prospectus.

(32) Includes (i) 19,615 shares of common stock being offered by this prospectus and (ii) 9,808 shares of common stock underlying the warrants being offered by this prospectus.

(33) Includes (i) 38,462 shares of common stock being offered by this prospectus and (ii) 19,231 shares of common stock underlying the warrants being offered by this prospectus.

(34) Includes (i) 9,615 shares of common stock being offered by this prospectus and (ii) 4,808 shares of common stock underlying the warrants being offered by this prospectus.

(35) Includes (i) 9,615 shares of common stock being offered by this prospectus and (ii) 4,808 shares of common stock underlying the warrants being offered by this prospectus.
 
 
49

 

 
(36) Includes (i) 105,770 shares of common stock, (ii) 28,846 shares of common stock being offered by this prospectus, (iii) 14,423 shares of common stock underlying the warrants being offered by this prospectus and (iv) 9,616 shares of common stock underlying warrants with an exercise price of $7.80 per share.

(37) Includes (i) 28,846 shares of common stock being offered by this prospectus and (ii) 14,423 shares of common stock underlying the warrants being offered by this prospectus.

(38) Barry Honig is the trustee of GRQ Consultants Inc. Roth 401k Plan and is deemed to hold voting and dispositive power over shares held by such entity.

(39) Includes (i) 21,153 shares of common stock, (ii) 8,654 shares of common stock underlying warrants with an exercise price of $7.80 per share, (iii) 5,696 shares of common stock being offered by this prospectus, and (iv) 2,848 shares of common stock underlying the warrants being offered by this prospectus.

(40) Includes (i) 5,696 shares of common stock being offered by this prospectus, and (ii) 2,848 shares of common stock underlying the warrants being offered by this prospectus.

(41) Barry Honig is the trustee of GRQ Consultants Inc. 401k Plan and is deemed to hold voting and dispositive power over shares held by such entity.

(42) Includes (i) 28,846 shares of common stock being offered by this prospectus, and (ii) 14,423 shares of common stock underlying the warrants being offered by this prospectus.

(43) Includes (i) 28,846 shares of common stock being offered by this prospectus, and (ii) 14,423 shares of common stock underlying the warrants being offered by this prospectus.

(44) Includes (i) 4,808 shares of common stock being offered by this prospectus, and (ii) 2,404 shares of common stock underlying the warrants being offered by this prospectus.

(45) Includes (i) 4,808 shares of common stock being offered by this prospectus, and (ii) 2,404 shares of common stock underlying the warrants being offered by this prospectus.

(46) Gordon Roth is the manager of BTG Investments, LLC and is deemed to hold voting and dispositive power over shares held by such entity.

(47) Includes (i) 18,462 shares of common stock being offered by this prospectus, and (ii) 9,231 shares of common stock underlying the warrants being offered by this prospectus.

(48) Includes (i) 5,000 shares of common stock being offered by this prospectus, and (ii) 2,500 shares of common stock underlying the warrants being offered by this prospectus.

(49) Includes (i) 5,000 shares of common stock being offered by this prospectus, and (ii) 2,500 shares of common stock underlying the warrants being offered by this prospectus.

(50) Includes (i) 5,000 shares of common stock being offered by this prospectus, and (ii) 2,500 shares of common stock underlying the warrants being offered by this prospectus held directly by Mr. Roth and (i) 18,462 shares of common stock being offered by this prospectus, and (ii) 9,231 shares of common stock underlying the warrants being offered by this prospectus held by BTG Investments, LLC. Gordon Roth is the manager of BTG Investments, LLC and is deemed to hold voting and dispositive power over shares held by such entity.

(51) Includes (i) 5,000 shares of common stock being offered by this prospectus, and (ii) 2,500 shares of common stock underlying the warrants being offered by this prospectus.
 
 
50

 

 
(52) Philip J. Dinapoli and Jennifer N. Dinapoli are the trustees of Dinapoli Family Trust and are deemed to hold voting and dispositive power over shares held by such entity.

(53) Includes (i) 2,500 shares of common stock being offered by this prospectus, and (ii) 1,250 shares of common stock underlying the warrants being offered by this prospectus.

(54) Includes (i) 2,500 shares of common stock being offered by this prospectus, and (ii) 1,250 shares of common stock underlying the warrants being offered by this prospectus.

* represents less than 1%.

DESCRIPTION OF SECURITIES

Authorized Capital Stock

We have 250,000,000 authorized shares of capital stock, par value $0.0001 per share, of which 200,000,000 shares are common stock and 50,000,000 shares are “blank-check” preferred stock. On July 18, 2013, we effectuated a Reverse Split at a ratio of 1-for-13.

Capital Stock Issued and Outstanding

We have issued and outstanding securities on a fully diluted basis as of September 12, 2013, after giving effect to the Reverse Split:

 
·
5,333,824 shares of common stock;
 
·
Warrants to purchase 708,260 shares of common stock
 
·
Options to purchase 842,307 shares of common stock

Common Stock

As of September 12, 2013, 5,333,824 shares of common stock were issued and outstanding. The holders of our common stock have equal ratable rights to dividends from funds legally available therefore, when, as and if declared by the Board of Directors and are entitled to share ratably in all of our assets available for distribution to holders of common stock upon the liquidation, dissolution or winding up of our affairs. Holders of shares of common stock do not have preemptive, subscription or conversion rights.

Holders of shares of common stock are entitled to one vote per share on all matters which shareholders are entitled to vote upon at all meetings of shareholders. The holders of shares of common stock do not have cumulative voting rights, which means that the holders of more than 50% of our outstanding voting securities can elect all of our directors.

The payment of dividends, if any, in the future rests within the discretion of our Board of Directors and will depend, among other things, upon our earnings, capital requirements and financial condition, as well as other relevant factors. We have not paid any dividends since our inception and do not intend to pay any cash dividends in the foreseeable future, but intend to retain all earnings, if any, for use in our business.

Warrants

On May 31, 2013, we sold an aggregate of three (3) year warrants to purchase 499,999 share of our common stock at an exercise price of $6.50 per share, subject to adjustment upon the occurrence of certain events such as stock splits and stock dividends and similar events.  On July 29, 2013, we converted legal fees of $29,620 into 5,696 units. In July 2013, two investors who had subscribed for an aggregate of 76,923 warrants assigned their subscriptions to other investors. The investors each funded their subscriptions and such units were issued in August 2013.
 
 
51

 

 
Indemnification of Directors and Officers

Neither our articles of incorporation nor bylaws prevent us from indemnifying our officers, directors and agents to the extent permitted under the Nevada Revised Statute (“NRS”). NRS Section 78.7502, provides that a corporation may indemnify any director, officer, employee or agent of a corporation against expenses, including fees, actually and reasonably incurred by him in connection with any defense to the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to Section 78.7502(1) or 78.7502(2), or in defense of any claim, issue or matter therein.

NRS 78.7502(1) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

NRS Section 78.7502(2) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals there from, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.

NRS Section 78.747 provides that except as otherwise provided by specific statute, no director or officer of a corporation is individually liable for a debt or liability of the corporation, unless the director or officer acts as the alter ego of the corporation. The court as a matter of law must determine the question of whether a director or officer acts as the alter ego of a corporation.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed hereby in the Securities Act and we will be governed by the final adjudication of such issue.
 
 
52

 

 
PLAN OF DISTRIBUTION

Each selling stockholder of the common stock and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock on the OTC Bulletin Board or any other stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. A selling stockholder may use any one or more of the following methods when selling shares:

 
·
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
 
 
·
block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
 
 
·
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
 
 
·
an exchange distribution in accordance with the rules of the applicable exchange;
 
 
·
privately negotiated transactions;
 
 
·
settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part;
 
 
·
broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;
 
 
·
through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
 
 
·
a combination of any such methods of sale; or
 
 
·
any other method permitted pursuant to applicable law.

The selling stockholders may also sell shares under Rule 144 under the Securities Act of 1933, as amended, if available, rather than under this prospectus.

Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.

In connection with the sale of the common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The selling stockholders may also sell shares of the common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
 
 
53

 

 
The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended, in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act of 1933, as amended. Each selling stockholder has informed us that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the common stock. In no event shall any broker-dealer receive fees, commissions and markups which, in the aggregate, would exceed eight percent (8%).

Because selling stockholders may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended, they will be subject to the prospectus delivery requirements of the Securities Act of 1933, as amended, including Rule 172 thereunder. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act of 1933, as amended may be sold under Rule 144 rather than under this prospectus. There is no underwriter or coordinating broker acting in connection with the proposed sale of the resale shares by the selling stockholders.

Under applicable rules and regulations under the Securities Exchange Act of 1934, as amended, any person engaged in the distribution of the resale shares may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the selling stockholders will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of the common stock by the selling stockholders or any other person. We will make copies of this prospectus available to the selling stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act of 1933, as amended).

LEGAL MATTERS

Sichenzia Ross Friedman Ference LLP will pass upon the validity of the shares of common stock sold in this offering. A member of Sichenzia Ross Friedman Ference LLP is also indirectly the beneficial owner of 4,808 shares of common stock and 2,404 shares of common stock issuable upon the exercise of outstanding warrants which are being offered pursuant to this prospectus.

EXPERTS

The financial statements of Marathon Patent Group Inc. for the fiscal years ended December 31, 2012 and 2011 have been audited by KBL, LLP, an independent registered public accounting firm as set forth in its report, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission a registration statement on Form S-1, together with any amendments and related exhibits, under the Securities Act, with respect to our shares of common stock offered by this prospectus. The registration statement contains additional information about us and our shares of common stock that the selling stockholders are offering in this prospectus.

We file annual, quarterly and current reports and other information with the Securities and Exchange Commission under the Securities Exchange Act. Our Securities and Exchange Commission filings are available to the public over the Internet at the Securities and Exchange Commission’s website at http://www.sec.gov.  Access to these electronic filings is available as soon as practicable after filing with the Securities and Exchange Commission. You may also read and copy any document we file at the Securities and Exchange Commission’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the public reference rooms and their copy charges.  You may also request a copy of those filings, excluding exhibits, from us at no cost. Any such request should be addressed to us at: 2331 Mill Road, Suite 100, Alexandria, VA 22314, Attention: CFO.
 
 
54

 
 
MARATHON PATENT GROUP, INC.
(FORMERLY AMERICAN STRATEGIC MINERALS CORPORATION)
(DEVELOPMENT STAGE COMPANY)
JUNE 30, 2013
 
Index to Financial Statements
 
CONSOLIDATED BALANCE SHEETS
F-2
   
CONSOLIDATED STATEMENTS OF OPERATIONS
F-3
   
CONSOLIDATED STATEMENTS OF CASH FLOWS
F-4
   
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
   F-5
 
 
F-1

 
 
MARATHON PATENT GROUP, INC. AND SUBSIDIARIES
 
(FORMERLY AMERICAN STRATEGIC MINERALS CORPORATION )
 
(DEVELOPMENT STAGE COMPANY)
 
CONSOLIDATED BALANCE SHEETS
 
             
   
June 30, 2013
   
December 31, 2012
 
   
(Unaudited)
       
ASSETS
           
             
Current assets:
           
  Cash
  $ 6,391,293     $ 2,354,169  
  Accounts receivable
    250,000     $ -  
  Marketable securities - available for sale securities
    6,250       12,500  
  Prepaid expenses
    445,925       40,333  
  Assets of discontinued operations - current portion
    -       82,145  
     Total current assets
    7,093,468       2,489,147  
                 
Other assets:
               
  Property and equipment, net
    8,889       -  
  Intangible assets, net
    2,501,984       492,152  
  Goodwill
    2,144,488       -  
  Assets of discontinued operations - long term portion
    -       1,035,570  
     Total other assets
    4,655,361       1,527,722  
                 
     Total Assets
  $ 11,748,829     $ 4,016,869  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
Current liabilities:
               
  Accounts payable and accrued expenses
  $ 392,876     $ 57,158  
  Liabilities of discontinued operations
    30,664       30,664  
     Total liabilities
    423,540       87,822  
                 
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;
               
  5,167,988 and 3,503,565 issued and outstanding at June 30, 2013 and December 31, 2012
    517       352  
Additional paid-in capital
    19,794,687       10,976,325  
Accumulated other comprehensive income - marketable securities available for sale
    (6,250 )     -  
Deficits accumulated during the development stage
    (8,453,169 )     (7,037,134 )
                 
    Total Marathon Patent Group, Inc. equity
    11,335,785       3,939,543  
                 
    Non-controlling interest in subsidiary
    (10,496 )     (10,496 )
                 
     Total stockholders' equity
    11,325,289       3,929,047  
                 
Total liabilities and stockholders' equity
  $ 11,748,829     $ 4,016,869  
 
See accompanying notes to unaudited consolidated financial statements.
 
 
F-2

 
 
MARATHON PATENT GROUP, INC. AND SUBSIDIARIES
(FORMERLY AMERICAN STRATEGIC MINERALS CORPORATION )
(DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
   
   
FOR THE THREE MONTHS
 ENDED
JUNE 30, 2013
   
FOR THE THREE MONTHS
 ENDED
JUNE 30, 2012
   
FOR THE SIX MONTHS
 ENDED
JUNE 30, 2013
   
FOR THE SIX MONTHS
 ENDED
JUNE 30, 2012
   
PERIOD FROM INCEPTION
(APRIL 30, 2011) TO
JUNE 30, 2013
 
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
                               
Revenues
  $ 1,524,979     $ -     $ 1,524,979     $ -     $ 1,524,979  
                                         
Cost of revenues
    760,305       -       760,305       -       760,305  
                                         
Gross profit
    764,674       -       764,674       -       764,674  
                                         
Expenses
                                       
  Compensation and related taxes
    1,041,353       81,449       1,468,028       922,392       4,144,490  
  Consulting fees
    130,685       27,171       175,909       1,856,594       2,218,053  
  Professional fees
    289,752       107,464       448,224       370,203       962,941  
  General and administrative
    122,976       68,069       206,982       192,538       524,469  
     Total operating expenses
    1,584,766       284,153       2,299,143       3,341,727       7,849,953  
                                         
Operating loss from continuing operations
    (820,092 )     (284,153 )     (1,534,469 )     (3,341,727 )     (7,085,279 )
                                         
Other income (expenses)
                                       
  Other income
    -       -       -       125,000       125,000  
  Realized loss other than temporary decline - available for sale
    -       -       -       -       (112,500 )
  Interest expense
    (229 )     -       (459 )     -       (612 )
  Interest income
    349       173       640       173       1,618  
     Total other income
    120       173       181       125,173       13,506  
                                         
Loss from continuing operations before provision for income taxes
    (819,972 )     (283,980 )     (1,534,288 )     (3,216,554 )     (7,071,773 )
                                         
Provision for income taxes
    -       -       -       -       -  
                                         
Loss from continuing operations
    (819,972 )     (283,980 )     (1,534,288 )     (3,216,554 )     (7,071,773 )
                                         
Discontinued operations:
                                       
   Income (loss) from discontinued operations, net of tax
    9,473       (1,302,620 )     118,253       (1,329,925 )     (1,391,892 )
                                         
Net loss
    (810,499 )     (1,586,600 )     (1,416,035 )     (4,546,479 )     (8,463,665 )
                                         
Less: Net loss attributable to non-controlling interest
    -       101       -       101       10,496  
                                         
Net loss attributable to Marathon Patent Group, Inc.
  $ (810,499 )   $ (1,586,499 )   $ (1,416,035 )   $ (4,546,378 )   $ (8,453,169 )
                                         
Loss per common share, basic and diluted:
                                       
  Loss from continuing operations
  $ (0.19 )   $ (0.09 )   $ (0.40 )   $ (1.16 )   $ (2.94 )