-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OlGUgg7xnnHJzePJv8GWI9B0aRt1AjY55HE/ee/FqWFeiOirBKA9jJ2jywhhFAav V1dr6iDQCSTlF5FPRg1RQg== 0000950172-99-001613.txt : 19991115 0000950172-99-001613.hdr.sgml : 19991115 ACCESSION NUMBER: 0000950172-99-001613 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RARE MEDIUM GROUP INC CENTRAL INDEX KEY: 0000756502 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 232368845 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-13865 FILM NUMBER: 99750681 BUSINESS ADDRESS: STREET 1: 565 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2128836940 MAIL ADDRESS: STREET 1: 565 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: ICC TECHNOLOGIES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL COGENERATION CORP DATE OF NAME CHANGE: 19891005 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999, OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____ OR ____ COMMISSION FILE NUMBER 0-13865 RARE MEDIUM GROUP, INC. ------------------------------------------------------ (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 23-2368845 ------------------------------- ---------------------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 565 FIFTH AVENUE NEW YORK, NEW YORK 10017 --------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (212) 883-6940 ---------------------------------------------------- (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, par value $.01 per share 41,703,585 shares outstanding as of November 8, 1999. RARE MEDIUM GROUP, INC. Index [PAGE] PART I FINANCIAL INFORMATION Item 1 Financial Statements 1 Consolidated Balance Sheets at September 30, 1999 (Unaudited) and December 31, 1998 1 Unaudited Consolidated Statements of Operations - Three and Nine months ended September 30, 1999 and 1998 (Unaudited) 2 Unaudited Consolidated Statements of Cash Flows - Nine months ended December 30, 1999 and 1998 (Unaudited) 3 Notes to Unaudited Consolidated Financial Statements 4 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 3 Market Risk Exposure 15 PART II OTHER INFORMATION Item 1 Legal Proceedings 16 Item 2 Changes in Securities 16 Item 3 Defaults Upon Senior Securities 17 Item 4 Submission of Matters to Vote of Security Holders 17 Item 5 Other Information 17 Item 6 Exhibits and Reports on Form 8-K 17 SIGNATURES Part I Financial Information Item 1. Financial Statements RARE MEDIUM GROUP, INC. Consolidated Balance Sheets
September 30, December 31, 1999 1998 ------------- ------------ (Unaudited) ASSETS Current assets: Cash and cash equivalents $59,373,542 $ 917,978 Accounts receivable, net 7,296,630 1,184,182 Work in process 3,125,002 251,718 Prepaid expenses and other current assets 2,621,532 443,526 ---------- ----------- Total current assets 72,416,706 2,797,404 Property, plant and equipment, net 7,839,516 1,918,273 Investments in affiliates 14,550,901 - Intangibles, net 57,720,459 39,899,170 Other assets 1,197,912 128,275 ------------ ----------- Total assets $153,725,494 $44,743,122 ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 5,115,569 $ 1,634,889 Accrued liabilities 4,086,135 1,912,364 Deferred revenue 605,730 308,898 Current portion of notes payable - related parties 2,990,285 Current portion of notes payable 854,159 129,525 ----------- ----------- Total current liabilities 13,651,878 3,985,676 Notes payable - related parties 2,990,285 10,591,526 Other noncurrent liabilities 183,658 344,210 ----------- ----------- Total liabilities 16,825,821 14,921,412 ----------- ----------- Series A Convertible Preferred stock, $.01 par value, net of unamortized discount of $55,668,678 34,553,354 - ----------- ----------- Stockholders' equity: Preferred stock, $.01 par value, authorized 10,000,000 shares, issued 902 shares at September 30, 1999 - - Common stock, $.01 par value, authorized 200,000,000 shares, issued 40,359,067 shares at September 30, 1999 and 30,696,828 shares at December 31, 1998 407,588 306,968 Additional paid-in capital 216,261,555 84,720,304 Note receivable from shareholder (230,467) (230,467) Accumulated deficit (113,920,927) (54,803,665) Treasury stock, at cost, 66,227 shares (171,430) (171,430) ------------ ----------- Total stockholders' equity 102,346,319 29,821,710 ------------ ----------- Total liabilities and stockholders' equity $153,725,494 $ 44,743,122
See accompanying notes to unaudited consolidated financial statements RARE MEDIUM GROUP, INC. Unaudited Consolidated Statements of Operations
Three months ended September 30, Nine months ended September 30, 1999 1998 1999 1998 ------------------ ------------ ----------------- ------------- Revenue $ 11,336,636 $ 1,522,839 $ 19,080,519 $ 2,537,929 Expenses: Compensation expense 9,944,680 2,129,760 18,625,508 3,554,328 Sales and marketing expense 660,095 84,977 1,315,271 126,968 General and administrative expense 5,565,179 769,768 9,999,430 2,249,697 Depreciation and amortization 6,807,273 4,165,861 16,971,398 8,414,642 ------------ ----------- ------------ ------------- Total expenses 22,977,227 7,150,366 46,911,607 14,345,635 ------------ ----------- ------------ ------------- Loss from operations (11,640,591) (5,627,527) (27,831,088) (11,807,706) Interest income (expense), net 795,615 (449,225) (1,407,019) (716,656) Equity interest in net loss of investment - 10,650 - (122,800) ------------ ----------- ------------ ------------- Loss before discontinued operation (10,844,976) (6,066,102) (29,238,107) (12,647,162) Discontinued operation: Loss from discontinued operation - (1,525,342) - (4,301,711) Gain on restructuring of Engelhard/I-CC - - - 24,256,769 ------------ ----------- ------------ ------------- (Loss) income from discontinued operation - (1,525,342) - 19,955,058 ------------ ----------- ------------ ------------- Net (loss) income (10,844,976) (7,591,444) (29,238,107) 7,307,896 Deemed dividend attributable to issuance of convertible preferred stock - - (29,879,155) - Cumulative dividends and accretion of convertible preferred stock to liquidation value (3,470,733) - (4,662,730) - ------------ ----------- ------------ ------------- Net (loss) income attributable to common stockholders $(14,315,709) $(7,591,444) $(63,779,992) $ 7,307,896 ============ =========== =========== ============= Basic and diluted (loss) earnings per share: Continuing operations $ (0.37) $ (0.23) $ (1.81) $ (0.48) Discontinued operation $ - $ (0.05) $ - $ 0.76 ------------ ----------- ------------ ------------- Net (loss) income per share $ (0.37) $ (0.28) $ (1.81) $ 0.28 Weighted average common shares outstanding 38,723,657 26,731,817 35,320,850 26,128,504
See accompanying notes to unaudited consolidated financial statements. RARE MEDIUM GROUP, INC. Unaudited Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1999 1998 -------------- ------------ Cash flows from operating activities: Net income (loss) $ (29,238,107) $ 7,307,896 Adjustments to reconcile net income (loss) to net cash used in operating activities: Gain on restructuring of Engelhard/ICC - (24,256,769) Depreciation and amortization 16,971,398 8,553,299 Equity interest in net loss of investments - 122,800 Common stock and stock options issued - for services rendered - 589,914 Loss on disposition of FAS - 252,587 Noncash interest expenses 2,358,687 - Changes in assets and liabilities, net of acquisitions: Accounts receivable (3,947,590) (2,838,441) Work in process (2,873,284) - Prepaid expenses and other assets (1,773,785) - Deferred revenue 296,832 - Accounts payable, accrued and other liabilities 2,315,064 - ----------- ------------ Net cash used in operatin (15,890,785) (10,268,714) ----------- ------------ Cash flows from investing activities: Cash paid for acquisitions and investments in affiliates, net of cash acquired, and acquisition cost (15,809,291) (10,041,986) Cash received in connection with restructuring of Engelhard - 18,864,003 Purchases of property, plant and equipment, net (4,305,531) (682,069) Redemption of restricted cash deposits - 2,500,000 Cash components of assets held for sale - (526,827) ----------- ------------ Net cash provided by (used in) investing activities (20,114,822) 10,113,121 ----------- ------------ Cash flows from financing activities: Proceeds from issuance of convertible debentures 6,000,000 - Proceeds from issuance of convertible preferred net of costs 82,997,651 - Repayments of borrowings, net of acquired debt (1,624,566) (181,219) Proceeds from issuance of stock in conection with exercise of warrants and options 7,088,086 53,696 ----------- ------------ Net cash provided by (used in) financing activities 94,461,171 (127,523) ----------- ------------ Net increase (decrease) in cash and cash equivalents 58,455,564 (283,116) Cash and cash equivalents, beginning of period 917,978 1,257,483 ----------- ------------ Cash and cash equivalents, end of period $ 59,373,542 $ 974,367 ----------- ------------
See accompanying notes to unaudited consolidated financial statements RARE MEDIUM GROUP, INC. Notes to Unaudited Consolidated Financial Statements September 30, 1999 (Unaudited) (1) The Company Rare Medium Group, Inc. ("the Company") conducts its operations primarily through its subsidiaries, which are organized as two related lines of business: the Internet solutions business of Rare Medium, Inc., and the venture/incubator business. The Company is headquartered in New York with offices throughout the United States, Canada, and abroad. Through its wholly owned subsidiary, Rare Medium, Inc., the Company is a provider of Internet solutions, offering Fortune 1000 companies and others its services to develop e-commerce Internet strategies, improve business processes, and develop marketing communications, branding strategies, and interactive content using Internet-based technologies and solutions. The Company broadened its initial Internet solutions-based strategy with the advent of its venture/incubator business. The Company uses its knowledge of the Internet and its existing development platform to incubate new Internet companies emerging from Silicon Alley in New York, the Digital Coast in Los Angeles, Dallas, Atlanta, Detroit, Toronto and San Francisco, all cities where the Company currently has a presence, as well as in Silicon Valley and other areas. Rare Medium Group's incubator companies include: liveuniverse.com, a "Micro-Portal Enabler;" iFace.com, a Voice over Internet Protocol, or "VoIP" company that is "Voice Enabling" the Internet; ChangeMusic.com, which participates in the emerging MP3 revolution, changing the way music is made, promoted, distributed, and consumed; and Regards.com, an electronic greeting card company. The Company also holds investments consistent with its strategy of developing internet-based enterprises. The Company restructured its former climate control systems business in February 1998 and combined with Rare Medium, Inc. in April 1998. Since April 1998 the Company acquired a number of other internet solutions companies. In October 1998, the Company disposed of its former climate control systems operations. In March 1999, the Company changed its name to "Rare Medium Group, Inc." (2) Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 1998 included in the Company's Annual Report on Form 10-K/A-2 for the year then ended. The accompanying unaudited consolidated financial statements as of September 30, 1999 include the results of operations and financial position of the Company on a consolidated basis. The accompanying unaudited consolidated financial statements as of September 30, 1998 include the results of operations of the Company and its formerly 90% owned partnership with Engelhard Corporation, Fresh Air Solutions ("FAS"). On October 14, 1998, the Company, through its wholly owned subsidiary, ICC Desiccant Technologies, Inc., completed the sale of a majority of its partnership interests in FAS. ICC Desiccant Technologies, Inc., which was subsequently renamed Investment Holding Company, was the general partner of FAS. In connection with this sale, the unaffiliated investment entity that purchased the partnership interests assumed the liabilities of FAS as general partner, with certain exceptions. As a result of the sale of FAS partnership interests, ICC Desiccant Technologies, Inc. retained, as its sole asset, a 32.4% passive investment limited partnership interest in FAS. Subsequent to the sale of the FAS partnership interests referred to above, FAS redeemed the 10% limited partnership interest in FAS held by Engelhard Corporation in exchange for the 20% limited partnership interest in Engelhard HexCore, L.P. held by FAS and $1 million in cash. As a result, Investment Holding Company's interest in FAS has been increased to a 36% limited partnership interest. The Company has no future funding responsibilities with respect to FAS and its 36% limited partnership interest has no voting rights, and therefore, is accounting for the remaining investment in FAS under the cost method. Consequently, the results of operations of FAS for the three and nine months ended September 30, 1998 are accounted for as discontinued operations (see Note 8). For further information regarding this transaction, refer to the Current Report on Form 8-K filed by the Company on October 29, 1998 as amended on Form 8-K/A filed on November 13, 1998. (3) Acquisitions and Investments During the three months ended September 30, 1999, the Company issued 896,422 shares of unregistered common stock, valued at $9.0 million and $1.0 million of cash, in private placements to various founders, investors and employees as consideration or partial consideration for the acquisitions of all or substantially all of certain businesses. Certain shares issued in connection with these transactions are held in escrow as security for covenants contained in the respective merger agreements. Each of the above transactions has been accounted for under the purchase method of accounting. The purchase prices, which totaled $10.5 million in stock, cash and fees, were allocated to the relative fair values of the net tangible assets, which consisted primarily of cash, accounts receivable, property and equipment, accounts payable, and notes payable. Goodwill of $10.2 million resulting from the transactions is being amortized over a three-year period. The Company also made venture investments consistent with its strategy of developing internet-based enterprises. The Company's venture investments, accounted for under the cost and equity method of accounting, range from 1% to 33% and amounted to $14.6 million. (4) Summary of Significant Accounting Policies Internal-Use Software The Company has adopted the American Institute of Certified Public Accountants Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 provides guidance for determining whether computer software qualifies as internal-use software and on accounting for the proceeds of computer software originally developed or obtained for internal use and then subsequently sold to the public. It also provides guidance on capitalization of the costs incurred for computer software developed or obtained for internal use. The Company has adopted SOP 98-1 effective January 1, 1999. The effect of the adoption of SOP 98-1 was not material. Recently Issued Accounting Standards In July 1999, the Financial Accounting Standards Board issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," which amends SFAS No. 133 and is effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. (5) Equity Transactions THE RARE MEDIUM NOTEHOLDERS. As part of the consideration for the Company's April 15, 1998 acquisition of Rare Medium, Inc., the Company guaranteed a secured promissory note (the "Rare Medium Note") in the original principal amount of $22.2 million, payable to the original shareholders of Rare Medium, Inc. Through June 30, 1999 the Company issued 3,914,866 shares of common stock of the Company to certain noteholders in exchange for their beneficial interest in $15.8 million of the original principal amount. Effective August 12, 1999, the Company issued 70,000 shares of common stock of the Company to a noteholder in exchange for their beneficial interest in $0.5 million of the original principal amount. In connection with this transaction the Company recognized approximately $0.1 million in non-cash interest expense to the extent that the market value of the common stock on the date of conversion exceeded the conversion price. At September 30, 1999, as a result of these transactions, there is a remaining principal balance of $6.0 million payable under the Rare Medium Note, which bears interest payable semi-annually at the prime rate, and is due in two equal principal installments on April 15, 2000 and April 15, 2001 (see Note 8). THE APOLLO SECURITIES PURCHASE. On June 4, 1999, the Company issued and sold to Apollo Investment Fund IV, LP, Apollo Overseas Partners IV, LP and AIF IV/RRRR LLC (collectively, the "Preferred Stockholders"), for an aggregate purchase price of $87.0 million, 126,000 shares of the Company's Series A Convertible Preferred Stock (the "Series A Preferred Stock"), 126,000 Series 1-A Warrants (the "Series 1-A Warrants"), 1,916,994 Series 2-A Warrants (the "Series 2-A Warrants"), 744,000 shares of the Company's Series B Preferred Stock (the "Series B Preferred Stock"), 744,000 Series 1-B Warrants (the "Series 1-B Warrants") and 10,345,548 Series 2-B Warrants (the "Series 2-B Warrants"). The Series A Preferred Stock and Series B Preferred Stock accrue dividends at an annual rate of 7.5%. The Series A and Series B Preferred Stock are subject to mandatory redemption on June 30, 2012. Under the terms of the securities purchase agreement with the Preferred Stockholders, at the Company's 1999 Annual Meeting of its stockholders held on August 19, 1999, the holders of common stock approved the conversion (the "Apollo Conversion") of all of the Series B Preferred Stock, Series 1-B Warrants and Series 2-B Warrants, including such additional Series B Securities that have been issued as dividends, into like amounts of Series A Preferred Stock, Series 1 Warrants and Series 2 Warrants, respectively. Pursuant to the approval, all Series B preferred stock and related warrants were converted into Series A preferred stock and warrants. The Series A securities are convertible into or exercisable for voting common stock whereas the Series B securities were convertible into or exercisable for non-voting common stock. For further information regarding this transaction, see the Company's Current Report on Form 8-K as filed on June 21, 1999, and the Company's Definitive Proxy Statement for its Annual Meeting of Shareholders as filed with the SEC on July 12, 1999. (6) Income Taxes The Company and the former stockholders of Rare Medium, Inc. and other companies subsequently acquired by merger, intend that each of their respective merger agreements shall constitute a tax-free plan of reorganization pursuant to Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended. As a result of various recent equity transactions, management believes the Company experienced an "ownership change" as defined by section 382 of the Internal Revenue Code in 1999. Accordingly, the utilization of the net operating loss carryforward to offset future taxable income is subject to an annual limitation. (7) Earnings Per Share Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if stock options or warrants were exercised or converted into common stock. Basic and diluted earnings per share were the same for the three and nine months ended September 30, 1999 since the effect of all potential dilutive common shares was antidilutive. (8) Subsequent Events Acquisitions and Investments Subsequent to September 30, 1999, the Company completed additional venture investments totaling $3.78 million in cash consistent with its venture/incubator strategy. The Rare Medium Noteholders Effective October 10, 1999, the Company issued 398,703 shares of common stock of the Company to two noteholders in exchange for their beneficial interest in $4.0 of the original principal amount of the Rare Medium Note. In connection with this transaction the Company recognized approximately $0.1 million in non-cash interest expense to the extent that the market value of the common stock on the date of conversion exceeded the conversion price. Investment in FAS In October 1999, Engelhard Corporation, FAS and the Company entered into an agreement by which Engelhard Corporation advanced cash and credit support to FAS. Under the terms of the agreement, the Company's interest in FAS could be diluted to 13% if all monies are advanced. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations As a result of the Company's disposition of its non-Internet-related businesses during 1998, the results of operations of FAS for the three and nine months ended September 30, 1998 are accounted for as discontinued operations. Accordingly, Management's Discussion and Analysis of Financial Condition and Results of Operations will focus on its Internet-related businesses, and operations for the nine months ended September 30, 1999 will be compared with the operating results of the Company for 1998 on a pro forma basis, including the operating results of Rare Medium, Inc. for the three months ended March 31, 1998. (Rare Medium, Inc. was purchased by the Company in April 1998). For information related to the operations of FAS during the first, second and third quarters of 1998, refer to the Company's form 10-Q filed for the quarters ended. Safe Harbor for Forward-Looking Statements THIS QUARTERLY REPORT, INCLUDING THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY, CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1993 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, INCLUDING STATEMENTS REGARDING THE COMPANY'S CAPITAL NEEDS, BUSINESS STRATEGY, THE LISTING OF ITS COMMON STOCK ON THE NASDAQ NATIONAL MARKET, YEAR 2000 COMPLIANCE, EXPECTATIONS AND INTENTIONS. THE WORDS "BELIEVE," "ANTICIPATE," "EXPECT," "ESTIMATE," "INTEND," AND SIMILAR EXPRESSIONS IDENTIFY FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS NECESSARILY INVOLVE RISKS AND UNCERTAINTIES, AND THE COMPANY'S ACTUAL RESULTS AND TIMING OF CERTAIN EVENTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF, AMONG OTHER THINGS, THE COMPANY'S LIMITED OPERATING HISTORY; ABILITY TO COMPLETE FINANCING; COMPETITION; LOW BARRIERS TO ENTRY; RELIANCE ON STRATEGIC RELATIONSHIPS; RAPID TECHNOLOGICAL CHANGES; INABILITY TO COMPLETE TRANSACTION ON FAVORABLE TERMS; AND THOSE FACTORS DESCRIBED ELSEWHERE IN THIS QUARTERLY REPORT AND IN OTHER FILINGS MADE BY THE COMPANY WITH THE COMMISSION. Overview Rare Medium Group Inc. is in the business of providing the tools to enable paradigm-shifting ideas and build the next generation of Internet companies by leveraging its award winning Internet solutions arm, Rare Medium, Inc., its capital and its vast network of on-line relationships. The Company conducts its operations primarily through its subsidiaries that are organized as two related lines of business: the Internet solutions business of Rare Medium, Inc., and the venture/incubator business. The Company is headquartered in New York, and employs approximately 400 Internet professionals in offices throughout the United States, Canada, and abroad. Internet Solutions Through its wholly owned subsidiary, Rare Medium, Inc., the Company is a leading provider of Internet solutions, offering Fortune 1000 companies and others its services to develop e-commerce Internet strategies, improve business processes, and develop marketing communications, branding strategies, and interactive content using Internet-based technologies and solutions. The Company's clients have included Microsoft, The New York Times, Merrill Lynch, Epson, and Hotel Reservations Network, among other leading companies. The Company integrates the operations of its acquisitions under the Rare Medium brand name while achieving economies of marketing, purchasing, operations, and simultaneously leveraging relationships with various clients that existed prior to the acquisitions. Venture/Incubator Business The Company broadened its initial Internet solutions-based strategy with the advent of its venture/incubator business. The Company uses its knowledge of the Internet and its existing development platform to incubate new Internet companies emerging from Silicon Alley in New York, the Digital Coast in Los Angeles, Dallas, Atlanta, Detroit, Toronto and San Francisco, all cities where the Company currently has a presence, as well as in Silicon Valley and other areas. Under this strategy, the Company offers access to: capital; technical expertise and execution; and administrative, legal and financial professional services. Rare Medium Group's incubator companies and venture investments currently include: Majority owned Effective subsidiaries Description % Ownership* -------------- ----------- ------------ Changemusic.com A digital music company providing music 96% (Incubator business) news, information and content. iFace.com Voice-enabling the Internet with computer 80% (Incubator business) telephony solutions LiveUniverse.com Resource for building, hosting, and 100% (Incubator business) developing web-based communities Regards.com Electronic greeting cards 90% (Incubator business) Venture Effective investments Description % Ownership* ----------- ----------- ------------ AtomicPop.com All-digital record label and pop music 33% lifestyle portal Edmunds.com Automotive editorial and pricing content 4% L90.com** Solutions for advertising, sponsorship, and 6% brand development iParty.com Resource for party planning, supplies and 2% related services SmartOnline.com Business information for small businesses 1% and entrepreneurs StreamSearch.com Directory and database of streaming media 21% content Speakout.com Online forum for exchange of ideas and 7% information among the public, the media and government officials MoneyHunt.com Provides advice to America's leading 16% entrepreneurs goShip.com Expanding delivery options for e-commerce 5% sites Compacc.com Direct marketer of motorcycles, parts and 25% accessories * Includes issued options and warrants. ** L90.com has recently filed with the SEC to conduct an initial public offering. Three Months Ended September 30, 1999 Compared to Three Months Ended September 30, 1998 Revenue Revenue for the three months ended September 30, 1999 was $11.3 million, an increase of $9.8 million or 644% over the three months ended September 30, 1998. The increase is the result of both organic growth and acquisitions, which have facilitated increases in both the number and relative size of client engagements. Sequential quarterly revenue increased approximately 120% from the second quarters revenue of $5.2 million. A substantial portion of such increase was generated organically. The Company integrates acquired Internet solutions' operations into the existing operations of Rare Medium, Inc. During the quarter, the Company dedicated otherwise billable resources to development work for iFace.com, LiveUniverse.com, ChangeMusic.com and other development stage projects as part of its strategy to incubate early stage Internet companies. This practice is expected to continue in future periods, and while it may have a negative impact on short-term revenue growth, the Company believes this development work will have a positive impact in the long-term by accelerating the growth of the development stage projects. However, there can be no assurance that these projects will be successful. Our Internet solutions clients generally retain us on a project by project basis, rather than under long-term contracts. As a result, a client may or may not engage us for further services once a project is completed. Establishment and development of relationships with additional companies and other corporate users of information technology is an important component of our success. Compensation Expense Compensation expense for the three months ended September 30, 1999 increased $7.8 million or 367% to $9.9 million from the same period in the prior year. The increase is due primarily to personnel added in our internet solutions business and incubator companies. The increase is also due to the Company's continued investment in building infrastructure to support the anticipated long-term growth of the Company. The Company expects compensation expenses to increase on an absolute dollar basis as the Company hires additional personnel and incurs additional costs related to the anticipated growth of its Internet solutions business and the hiring of additional employees associated with its venture/incubator strategy. The Company also expects to hire additional personnel and increase its spending for marketing and other infrastructure needs. General and Administrative Expense General and administrative expense for the three months ended September 30, 1999 was $5.6 million. This was an increase of $4.8 million or 623% over the three months ended September 30, 1998. The increase is principally a result of the substantial increase in personnel and number of facilities as the Company expanded into new markets in Toronto, Dallas, San Francisco, San Antonio, Detroit, Sydney, Houston, and Atlanta as well as the cost associated with required resources to implement our venture/incubator strategy. Sales and Marketing Expense Sales and marketing expense for the three months ended September 30, 1999 were $0.7 million, which is an increase of approximately $0.6 million over the three months ended September 30, 1998. The increase is primarily the result of implementation of a national marketing program to build the "Rare Medium" brand. The expense was primarily the result of an advertising campaign for Rare Medium, Inc. during the three months ended September 30, 1999. We expect sales and marketing expenses to increase as the Company continues to build brand awareness. Depreciation and Amortization Expense Depreciation and amortization expenses substantially consist of the amortization of goodwill and acquisition costs. For the three months ended September 30, 1999 the $2.6 million increase in expense resulted primarily from the Company's acquisitions during 1999. The Company anticipates that expenses related to the amortization of intangible assets will increase in future periods as it continues to make acquisition. Interest Income (Expense), Net Interest Income for the three months ended September 30, 1999 includes $0.8 million relating to the income earned on the net proceeds received with respect to the Apollo Securities Purchase. This was partially offset by interest expense related to the Rare Medium Note and $0.1 million of non-cash interest expense related to the conversion of a portion of the Rare Medium Note by certain holders to common stock. The interest expense related to the Rare Medium Note represents the accrued interest on the Company's note payable to the original Rare Medium, Inc. stockholders, payable in a combination of cash or common stock of the Company, at the Company's election, subject to some restrictions. Net Loss For the three months ended September 30, 1999, the Company recorded a loss of $4.0 million, excluding $6.8 million in amortization and depreciation. Including these charges, the net loss was $10.8 million. The loss was primarily due to the factors described in "Compensation Expense," "General and Administrative Expense," and "Sales and Marketing Expense." Included in net loss attributable to common shareholders of $14.3 million was $3.5 million of non-cash dividends related to issuance of the Series A Preferred Stock. These dividends included non-cash dividends that were accrued related to the payment-in-kind ("PIK") dividends payable quarterly on the Series A Preferred Stock, and to the accretion of the $29.9 million carrying amount of the Series A Preferred Stock up to the $87.0 million face redemption amount over a period of 13 years. Although we have experienced revenue growth, this growth may not be sustainable or indicative of future operating results. In addition, we have incurred substantial costs to expand and integrate our operations and we intend to continue to invest heavily in acquisitions, infrastructure and marketing. Our ongoing integration costs will include the combination of the financial, information and communications systems of the various companies that we have acquired and expect to acquire. Our ongoing expansion costs will include the leasing of additional office space and the purchase and leasing of new computer and communications equipment. As a result of these and other costs, we may continue to incur operating losses. Nine Months Ended September 30, 1999 Compared to Nine Months Ended September 30, 1998 Below is a table comparing the Internet operations of the Company on a pro forma basis. The amounts shown for the nine months ended September 30, 1999 include the operations of the Company as they are currently reported. The amounts shown for the nine months ended September 30, 1998 include operations of the Company as they are currently reported for the nine months ended September 30, 1998, combined with the pro forma results of operations of Rare Medium, Inc. for the nine months ended September 30, 1998. The results of operations of FAS have been condensed as a single net loss included in "Loss from discontinued operation." Unaudited Condensed Statements of Operations
Nine Months Ended September 30 ---------------------------------------- 1999 (Actual) 1998 (Pro Forma) ------------- ---------------- Revenue $ 19,080,519 $ 3,579,461 Expenses: Compensation expense 18,625,508 4,472,722 Sales and marketing expense 1,315,271 150,289 General and administrative expense 9,999,430 2,496,264 Depreciation and amortization 16,971,398 8,271,061 ------------ ------------ Total Expenses 46,911,607 15,390,336 ------------ ------------ Loss from operations (27,831,088) (11,810,875) Interest Expense, net (1,407,019) (820,701) Equity interest in net loss of investments -- (122,800) ------------ ------------ Loss before discontinued operation (29,238,107) (12,754,376) Discontinued operation: Loss from discontinued operation -- (4,423,168) Gain on restructuring of Englehard/ICC -- 24,256,769 ------------ ------------ Income from discontinued operation -- 19,833,601 ------------ ------------ Net (loss) income (29,238,107) 7,079,225 Deemed dividend attributable to issuance of Convertible preferred stock (29,879,155) - Cumulative dividends and accretion of convertible Preferred stock to liquidation value (4,662,730) - ------------ ------------ Net income (loss) attributable to Common stockholders $(63,779,992) $ 7,079,225 ============ ============
Revenue Revenue for the nine months ended September 30, 1999 was $19.1 million, an increase of $15.5 million or 433% over the nine months ended September 30, 1998. The increase is the result of both organic growth and acquisitions, which have facilitated increases in both the number and relative size of client engagements. All of the acquired Internet Solutions companies' operations have been or are being integrated into the existing operations of Rare Medium, Inc. Compensation Expense Compensation expense for the nine months ended September 30, 1999 increased $14.2 million or 316% to $18.6 million from the same period in the prior year. The increase is due primarily to personnel added in our internet solutions business and incubator companies. The increase is also due to the Company's continued investment in building infrastructure to support anticipated long-term growth and to a $1.5 million bonus paid in June 1999. During this period, the Company also hired a President and senior operations managers for its major offices in New York and Los Angeles for its Rare Medium, Inc. subsidiary. The Company expects compensation expenses to increase on an absolute dollar basis as the Company hires additional personnel and incurs additional costs related to the anticipated growth of its Internet solutions business and the hiring of employees associated with its venture/incubator strategy. The Company also expects to hire additional personnel and increase its spending for marketing and other infrastructure needs. Sales and Marketing Expense Sales and marketing expense for the nine months ended September 30, 1999 were $1.3 million, which is an increase of approximately $1.2 million or 775% over the nine months ended September 30, 1998. The increase is primarily the result of implementation of a national marketing program to build the "Rare Medium" brand and an advertising campaign for Rare Medium, Inc. during the nine months ended September 30, 1999. We expect sales and marketing expenses to increase as the Company continues to build brand awareness. General and Administrative Expense General and administrative expense for the nine months ended September 30, 1999 was $10.0 million. This was an increase of $7.5 million or 301% over the nine months ended September 30, 1998. The increase is principally a result of the substantial increase in personnel and number of facilities as the Company expanded into new markets in Toronto, Dallas, San Francisco, San Antonio, Detroit, Sydney, Houston, and Atlanta as well as the cost associated with required resources to implement our venture/incubator strategy and the costs associated with generating the substantial revenue increase from 1998. Depreciation and Amortization Expense Depreciation and amortization expenses substantially consist of the amortization of goodwill and acquisition costs. For the nine months ended September 30, 1999 the $8.7 million increase in expense resulted primarily from the Company's acquisitions during 1999. The Company anticipates that expenses related to the amortization of intangible assets will increase in future periods as it continues to make acquisitions. Interest (Expense) Income, Net Interest (expense) income for the nine months ended September 30, 1999 includes $0.2 million of interest expense related to the Rare Medium Note, $1.1 million of interest expense related to the conversion of a portion of the Rare Medium Note by certain holders to common stock, and $1.1 million related to the Capital Ventures International ("CVI") convertible debentures. The interest expense related to the Rare Medium Note represents the accrued interest on the Company's note payable to the original Rare Medium, Inc. stockholders, payable in a combination of cash or common stock of the Company, at the Company's election, subject to some restrictions. The CVI expense includes $1.0 million for the amortization of the debt discount and the beneficial conversion feature. This was partially offset by interest income of $1.0 million relating to the income earned on the net proceeds received from the Apollo Securities Purchase. Net Loss For the nine months ended September 30, 1999, the Company recorded a net loss of $12.3 million, excluding $17.0 million in amortization and depreciation. Including these charges, the net loss was $29.2 million. The loss was primarily due to the factors described in "Compensation Expense," "General and Administrative Expense," and "Sales and Marketing Expense." Included in net loss attributable to common shareholders of $63.8 million was $34.5 million of non-cash deemed dividends related to issuance of the Series A Preferred Stock. These dividends included a one-time non-cash deemed dividend resulting from the difference between the market price of the Company's common stock and the conversion price of the Series A Preferred Stock on the date of issuance of the Series A Preferred Stock. In addition to this non-cash deemed dividend, dividends were accrued related to the PIK dividends payable quarterly on the Series A Preferred Stock, and to the accretion of the $29.9 million carrying amount of the Series A Preferred Stock up to the $87.0 million face redemption amount over 13 years. Liquidity and Capital Resources The Company had $59.4 million in cash and equivalents at September 30, 1999, which is discussed below. This amount is substantially a result of the proceeds received from the issuance of Series A Preferred Stock and related warrants. Cash used in operating activities was $15.9 million for the nine months ended September 30, 1999 and resulted primarily from the net loss of $29.2 million, offset by non-cash charges of $19.3 million (which consists of depreciation, amortization and non-cash interest charges) and changes in working capital. Cash used in investing activities was $20.1 million for the nine months ended September 30, 1999, which primarily consists of the purchase of businesses and venture investments of $15.8 million, and capital expenditures of $4.3 million. Capital expenditures have generally been comprised of purchases of computer hardware and software, as well as leasehold improvements related to leased facilities, and are expected to increase in future periods. Cash provided by financing activities was $94.5 million for the nine months ending September 30, 1999. This consisted primarily of issuance of a $6.0 million convertible debenture to CVI (which was subsequently converted into common stock), $83.0 million of net proceeds from the issuance of the Series A Preferred Stock as discussed below, and the exercise of warrants and options that yielded $7.1 million to the Company, partially offset by repayment of borrowings totaling $1.6 million. THE RARE MEDIUM NOTEHOLDERS. The Company issued 1,033,052 shares of common stock of the Company to certain noteholders in exchange for their beneficial interest in $4.5 million of the original principal amount of the Rare Medium Note. In 1999, the Company recognized approximately $1.1 million of non-cash interest expense related to the conversion to the extent the market value of the stock on the date of conversion exceeded the conversion price. On September 30, 1999, as a result of these transactions, there is a remaining principal balance of $6.0 million payable under the Rare Medium Note, which bears interest payable semi-annually at the prime rate, and is due in two equal principal installments on April 15, 2000 and April 15, 2001. THE APOLLO SECURITIES PURCHASE. On June 4, 1999, the Company issued and sold to Apollo Investment Fund IV, LP, Apollo Overseas Partners IV, LP and AIF IV/RRRR LLC (collectively, the "Preferred Stockholders"), for an aggregate purchase price of $87.0 million, 126,000 shares of the Company's Series A Convertible Preferred Stock (the "Series A Preferred Stock"), 126,000 Series 1-A Warrants (the "Series 1-A Warrants"), 1,916,994 Series 2-A Warrants (the "Series 2-A Warrants"), 744,000 shares of the Company's Series B Preferred Stock (the "Series B Preferred Stock"), 744,000 Series 1-B Warrants (the "Series 1-B Warrants") and 10,345,548 Series 2-B Warrants (the "Series 2-B Warrants"). The Series A Preferred Stock and Series B Preferred Stock accrue dividends at an annual rate of 7.5%. The Series A and Series B Preferred Stock are subject to mandatory redemption on June 30, 2012. Under the terms of the securities purchase agreement with the Preferred Stockholders, at the Company's 1999 Annual Meeting of its stockholders held on August 19, 1999, the holders of common stock approved the conversion (the "Apollo Conversion") of all of the Series B Preferred Stock, Series 1-B Warrants and Series 2-B Warrants, including such additional Series B Securities that have been issued as dividends, into like amounts of Series A Preferred Stock, Series 1 Warrants and Series 2 Warrants, respectively. Pursuant to the approval, all Series B preferred stock and related warrants were converted into Series A preferred stock and warrants. The Series A securities are convertible into or exercisable for voting common stock whereas the Series B securities were convertible into or exercisable for non-voting common stock. For further information regarding this transaction, see the Company's Current Report on Form 8-K as filed on June 21, 1999, and the Company's Definitive Proxy Statement for its Annual Meeting of Shareholders as filed with the SEC on July 12, 1999. Year 2000 Issue The "Year 2000 Issue" refers to the problem of many computer programs using the last two digits to represent a year rather than four digits (i.e., "99" for 1999). Some of the computer programs used by the Company may have date-sensitive software that may not operate properly when dealing with years past 1999, which is when "00" will represent the year 2000. To the extent that this situation exists, there is a potential for computer system failure or miscalculations, which could cause a disruption of operation of that program. The problem is not limited to computer software, since some equipment may have date-sensitive processors that may not be able to properly use dates after the year 1999. The Company has appointed a Year 2000 Task Force to perform an assessment of the Company's readiness for Year 2000. This assessment includes quality assurance testing of our internally developed software and applications; quality assurance testing of our overall information technology systems; contacting third-party vendors and licensors of material software and services that are both directly and indirectly related to the delivery of our products and services; assessing our repair and replacement requirements; and creating contingency plans in the event of Year 2000 failures. We performed an initial Year 2000 simulation on our applications and systems during the second quarter of 1999 to test system readiness, and found no relevant failures. We completed the final simulation tests in October 1999. Our material software component vendors and our Internet service provider have informed us that the products we use are currently Year 2000 compliant. We purchased all of our software and hardware within the past two years, and therefore we do not have legacy systems that have been historically identified to have Year 2000 issues. We are applying all known vendor patches for relevant software to come to compliance with vendor defined Year 2000 standards. To date we have not incurred any material costs in identifying or evaluating Year 2000 compliance issues. Based on our assessment to date, we do not anticipate that costs associated with remediating our non-compliant systems will be material. We expect that our existing employees or consultants will perform any significant work pertaining to Year 2000 compliance. We are not currently aware of any Year 2000 compliance problems relating to our applications or our systems that would have a material adverse effect on our business, results of operations or financial condition. However, we may discover Year 2000 compliance problems in our technology that will require substantial revisions. In addition, we may need to revise or replace third party software, hardware or services incorporated into our applications and systems, all of which could be time consuming and expensive. If we fail to fix our technology or to fix or replace third party software, hardware or services on a timely basis, the result could be lost revenues, increased operating costs, the loss of customers and other business interruptions, any of which could have a material adverse effect on our business, results of operations and financial condition. Moreover, the failure to adequately address Year 2000 compliance issues in our applications and systems could result in claims of mismanagement, misrepresentation or breach of contract and related litigation, which could be costly and time-consuming to defend. In addition, we cannot be sure that governmental agencies, utility companies, Internet access companies, third party service providers and others outside our control will be Year 2000 compliant. The failure by such entities to be Year 2000 compliant could result in a systematic failure beyond our control, such as a prolonged Internet, telecommunications or electrical failure, which could also prevent us from delivering our products and services to our customers, decrease the use of the Internet or prevent users from accessing the websites of companies with whom we have entered into business alliances, which could have a material adverse effect on our business, results of operations and financial condition. We are in the process of finalizing contingency plans in case of Year 2000 disruptions. We are taking into account the results of our Year 2000 simulation testing and the responses received from third party vendors and service providers in determining the nature and extent of any contingency plans. We completed our system tests in October 1999, and expect to complete our contingency plans by November 1999. Based on our assessment completed to date, we believe that the reasonably likely worst case scenario with respect to Year 2000 issues could be: - portions of client applications may be down while programmers fix our systems or the systems of ISPs or other third parties; - temporary data loss could occur while backup copies of data are retrieved from tape; - lengthy outages could occur while programmers work to repair or restore corrupted or missing database files; and - our internal corporate, billing and accounting systems may be down while programmers fix our system. Although these events could have an adverse effect on our business in the short term, we do not believe that Year 2000 issues will materially and adversely affect our business, results of operations or financial condition over the long term. While we will have system engineers on-site over the Year 2000 date change, we can give no assurance that all expectations will be realized. Item 3 Market Risk Exposure The Company believes that its market risk exposures associated with its outstanding debt is immaterial since the carrying value of the Company's variable rate debt obligations approximates fair value as the market rate is based on prime. The Company's fixed rate debt obligations are not material. Part II Other Information Item 1. Legal Proceedings Currently, the Company is not engaged in any material lawsuits. Item 2. Changes in Securities. THE RARE MEDIUM NOTEHOLDERS. Effective August 12, 1999, the Company issued 70,000 shares of common stock of the Company to a noteholder in exchange for beneficial interest in $458,519 of the original principal amount. In connection with this transaction the Company recognized approximately $0.1 million in non-cash interest expense to the extent that the market value of the common stock on the date of conversion exceeded the conversion price. On September 30, 1999, as a result of these transactions, there is a remaining principal balance of $5,980,569 payable under the Rare Medium Note, which bears interest payable semi-annually at the prime rate, and is due in two equal principal installments on April 15, 2000 and April 15, 2001. The securities described in this paragraph were issued in reliance upon the exemption from registration provided by Section 3(a)(9) and/or Section 4(2) of the Securities Act of 1933. THE APOLLO SECURITIES PURCHASE. Pursuant to the terms of the securities purchase agreement with the Preferred Stockholders, at the Company's 1999 Annual Meeting of its stockholders held on August 19, 1999, the holders of common stock approved the conversion (the "Apollo Conversion") of all of the Series B Preferred Stock, Series 1-B Warrants and Series 2-B Warrants, including such additional Series B Securities that have been issued as dividends, into like amounts of Series A Preferred Stock, Series 1-A Warrants and Series 2-A Warrants, respectively. Pursuant to the approval, all Series B preferred stock and related warrants were converted into Series A preferred stock and warrants on August 19, 1999. The securities described in this paragraph were issued in reliance upon the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933. For further information regarding this transaction, see the Company's Current Report on Form 8-K as filed on June 21, 1999, and the Company's Definitive Proxy Statement for its Annual Meeting of Shareholders as filed with the SEC on July 12, 1999. ACQUISITIONS. During the three months ended September 30, 1999, the Company issued an aggregate of 896,422 shares of its common stock valued at $9.0 million, in private placements, to various selling parties as consideration (or partial consideration) toward the acquisition of all or substantially all of eight businesses. The securities described were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933. Item 3. Defaults Upon Senior Securities Not Applicable Item 4. Submission of Matters to a Vote of Security Holders The Company's annual meeting of stockholders was held on August 19, 1999. Proxies for the meeting were solicited by the Company pursuant to Regulation 14A under the Securities Exchange Act of 1934. All of management's nominees for the election of the Board of Directors as listed in the Company's Proxy Statement for the meeting were elected. In addition, the stockholders also voted on the following proposals with the following results: 1. The Apollo Conversion was approved. For: 21,095,484 Against: 925,184 Abstain: 379,984 Broker Non-Votes: 0 2. An amendment to the Company's Certificate of Incorporation authorizing the issuance of a class of non-voting common stock of the Company (issuable upon conversion of the Series B preferred stock and warrants if the Apollo Conversion was not approved) was approved. For: 20,434,813 Against: 1,588,954 Abstain: 376,885 Broker Non-Votes: 0 3. The appointment of KPMG LLP as the independent auditors of the Company for the year ending December 31, 1999 was ratified. For: 38,084,650 Against: 192,903 Abstain: 91,262 Broker Non-Votes: 0 Item 5. Other Information Not Applicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 3.1 Articles of Incorporation and By-laws of Rare Medium Group, Inc., formerly known as ICC Technologies, Inc. are hereby incorporated herein by reference from the Company's Form 10 filed on September 16, 1985. 3.2 Amendment to Articles of Incorporation, changing name to ICC Technologies, Inc., is hereby incorporated herein by reference from the Company's Form 8-K dated June 12, 1980. 3.3 Amendment to Articles of Incorporation, changing name to Rare Medium Group, Inc., filed with the Secretary of State of the State of Delaware on March 17, 1999 was filed as Exhibit 3.3 to the Company's Form 10-K for the year ended December 31, 1998 and is hereby incorporated herein by reference. 4.1 Certificate of Designation, Series A Convertible Preferred Stock, was filed as Exhibit 4.1 to the Company's Form 8-K filed on June 21, 1999 and is hereby incorporated herein by reference. 4.2 Certificate of Designation, Series B Preferred Stock, was filed as Exhibit 4.2 to the Company's Form 8-K filed on June 21, 1999 and is hereby incorporated herein by reference. 4.3 Form of Series 1-A Warrant, was filed as Exhibit 4.3 to the Company's Form 8-K filed on June 21, 1999 and is hereby incorporated herein by reference. 4.4 Form of Series 1-B Warrant, was filed as Exhibit 4.4 to the Company's Form 8-K filed on June 21, 1999 and is hereby incorporated herein by reference. 4.5 Form of Series 2-A Warrant, was filed as Exhibit 4.5 to the Company's Form 8-K filed on June 21, 1999 and is hereby incorporated herein by reference. 4.6 Form of Series 2-B Warrant, was filed as Exhibit 4.6 to the Company's Form 8-K filed on June 21, 1999 and is hereby incorporated herein by reference. 4.7 Form of Convertible Term Debenture dated as of January 28, 1999 was filed as Exhibit "A" to the CVI Securities Purchase Agreement, which was filed as Exhibit 10.1 to the Company's Form 8-K dated January 28, 1999, and is hereby incorporated herein by reference. 4.8 Form of Stock Purchase Warrant of ICC Technologies, Inc. dated as of January 28, 1999 was filed as Exhibit "B" to the CVI Securities Purchase Agreement, which was filed as Exhibit 10.1 to the Company's Form 8-K dated January 28, 1999, and is hereby incorporated herein by reference. 10.1 Amended and Restated Securities Purchase Agreement, dated as of June 4, 1999, among Rare Medium Group, Inc., Apollo Investment Fund IV, LP, Apollo Overseas Partners IV, LP and AIF IV/RRRR LLC, was filed as Exhibit 10.1 to the Company's Form 8-K filed on June 21, 1999 and is hereby incorporated herein by reference. 10.2 Pledge, Escrow and Disbursement Agreement, dated as of June 4, 1999, among Rare Medium Group, Inc., Apollo Investment Fund IV, LP and The Chase Manhattan Bank, was filed as Exhibit 10.2 to the Company's Form 8-K filed on June 21, 1999 and is hereby incorporated herein by reference. 10.3 Securities Purchase Agreement, dated as of January 28, 1999, by and among ICC Technologies, Inc. and Capital Ventures International ("CVI Securities Purchase Agreement") and Exhibits thereto were filed as Exhibit 10.1 to the Company's Form 8-K dated January 28, 1999 and is hereby incorporated herein by reference. 10.4 Form of Registration Rights Agreement dated as of January 28, 1999 was filed as Exhibit "C" to the CVI Securities Purchase Agreement, which was filed as Exhibit 10.1 to the Company's Form 8-K dated January 28, 1999, and is hereby incorporated herein by reference. 10.5 Agreement and Plan of Merger, dated as of March 5, 1999, among Rare Medium, Inc., ICC Technologies, Inc., Rare Medium Texas I, Inc., Big Hand, Inc., and The Stockholders of Big Hand, Inc. was filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 and is hereby incorporated herein by reference. 10.6 Agreement and Plan of Merger, dated as of May 5, 1999, among Rare Medium Group, Inc. Rare Medium Atlanta, Inc., Struthers Martin, Inc., and Certain Shareholders of Struthers Martin, Inc. Named therein, was filed as Exhibit 10 to the Company's Form 8-K dated May 17, 1999, and is hereby incorporated herein by reference. (b) The following reports on Form 8-K have been filed with the Securities and Exchange Commission. Form 8-K filed October 14, 1999 related to the purchase of 33.3% of the units of Ant21 LLC SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: November 10, 1999 BY: /s/ Glenn S. Meyers ----------------------------- Glenn S. Meyers Chairman, President and Chief Executive Officer Date: November 10, 1999 BY: /s/ Jeffrey J. Kaplan -------------------------------- Jeffrey J. Kaplan Executive Vice President and Chief Financial Officer EX-27 2 EXHIBIT 27 - FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 59,373,542 0 7,296,630 0 0 72,416,706 7,839,516 0 153,725,494 13,651,878 0 0 0 407,588 101,938,731 153,725,494 19,080,519 19,080,519 0 0 46,911,607 0 (1,407,019) (29,238,107) 0 (29,238,107) 0 0 0 (63,779,992) (1.81) (1.81)
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