SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

                                   (Mark One)
     (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                       For the period ended June 30, 2000

     ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                         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 incorporation or organization)
                     (I.R.S. Employer Identification Number)

                          565 Fifth Avenue, 29th Floor
                            New York, New York 10017
               (Address of principal executive offices) (Zip Code)


       Registrant's telephone number, including area code: (212) 883-6940

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  period 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.

Number of shares outstanding of the issuer's common stock, as of July 31, 2000

     Common Stock, par value $.01 per share                  50,694,644
     --------------------------------------                  -----------
                   Class                            Number of shares outstanding



<PAGE>






                                     INDEX

                                                                            Page
                                                                            ----

Part I.  FINANCIAL INFORMATION

     Item 1.   Consolidated Financial Statements

               Consolidated Balance Sheets as of June 30, 2000
               (Unaudited) and December 31, 1999                             3

               Unaudited Consolidated Statements of Operations
               Three and six months ended June 30, 2000 and 1999             4

               Unaudited Consolidated Statements of Cash Flows
               Six months ended June 30, 2000 and 1999                       5

               Notes to Unaudited Consolidated Financial Statements         6-7

     Item 2.   Management's Discussion and Analysis of Financial
               Condition and Results of Operations                          8-11

     Item 3.   Quantitative and Qualitative Disclosures About Market Risk    11

Part II.  OTHER INFORMATION

     Item 1.   Legal Proceedings                                             12

     Item 2.   Changes in Securities and Use of Proceeds                     12

     Item 3.   Defaults Upon Senior Securities                               12

     Item 4.   Submission of Matters to a Vote of Security Holders           12

     Item 5.   Other Information                                             12

     Item 6.   Exhibits and Reports on Form 8-K                              12

SIGNATURE                                                                    13



                                       2
<PAGE>

                             RARE MEDIUM GROUP, INC
                           CONSOLIDATED BALANCE SHEETS
                        (In thousands except share data)

<TABLE>
<CAPTION>
                                                               June 30,           December 31,
                                                                 2000                 1999
                                                              ----------          -----------
                                                              (Unaudited)
<S>                                                           <C>                 <C>
ASSETS
Current assets:
     Cash and cash equivalents                                $ 208,345           $   28,540
     Accounts receivable, net                                    19,746               12,601
     Work in process                                              8,573                3,171
     Notes receivable                                               450                1,100
     Prepaid expenses and other current assets                    5,014                2,508
                                                              ----------          -----------
Total current assets                                            242,128               47,920

Property, plant and equipment, net                               24,438               12,100
Investments in affiliates                                        52,086               26,467
Goodwill and intangibles, net                                    71,184               72,552
Other assets                                                      3,798                1,384
                                                              ----------          -----------
Total assets                                                  $ 393,634            $ 160,423
                                                              ==========          ===========


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                         $   8,405                7,097
     Accrued liabilities                                         10,921                5,759
     Deferred revenue                                             5,977                3,044
     Current portion of note payable - related parties                -                  997
     Current portion of notes payable                               245                  579
                                                              ----------          -----------
Total current liabilities                                        25,548               17,476

Note payable                                                        173                   -
Note payable - related parties                                        -                  997
Other noncurrent liabilities                                      4,338                  735
                                                              ----------          -----------
Total liabilities                                                30,059               19,208
                                                              ----------          -----------

Series A Convertible Preferred Stock, $.01 par
  value, net of unamortized discount of $52,361                  41,858               36,224
                                                              ----------          -----------

Stockholders' equity:
     Preferred stock, $.01 par value, authorized
        10,000,000 shares, issued 942,184 shares as
        Series A Convertible Preferred Stock at
        June 30, 2000 and 907,820 shares at
        December 31, 1999                                             -                    -
     Common stock, $.01 par value, authorized
        200,000,000 shares, issued and outstanding
        50,614,077 shares at June 30, 2000
        and 42,893,357 shares at December 31, 1999                  506                  429
     Additional paid-in capital                                 528,316              252,075
     Accumulated other comprehensive income                       6,850                  937
     Note receivable from shareholder                                 -                 (231)
     Accumulated deficit                                      (213,784)             (148,048)
     Treasury stock, at cost, 66,227 shares                       (171)                 (171)
                                                              ----------          -----------
Total stockholders' equity                                      321,717              104,991
                                                              ----------          -----------
Total liabilities and stockholders' equity                    $ 393,634            $ 160,423
                                                              ==========          ===========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

                                       3
<PAGE>

                             RARE MEDIUM GROUP, INC.
                 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
                        (In thousands except share data)



<TABLE>
<CAPTION>
                                           Three Months Ended June 30,        Six Months Ended June 30,
                                               2000          1999                  2000         1999
                                            ---------      --------            ---------     --------

 <S>                                        <C>           <C>                  <C>          <C>
 Revenues                                   $  27,706      $  5,155            $  51,523     $  7,744
 Cost of revenues                              16,663         3,008               29,725        4,388
                                            ---------      --------            ---------     --------
       Gross profit                            11,043         2,147               21,798        3,356

 Expenses:
      Sales and marketing expense               5,626           900                9,173        1,111
      General and administrative expense       23,428         5,652               41,251        8,271
      Depreciation and amortization            11,605         5,671               22,014       10,164
                                            ---------      --------            ---------     --------
 Total expenses                                40,659        12,223               72,438       19,546
                                            ---------      --------            ---------     --------

 Loss from operations                         (29,616)      (10,076)             (50,640)     (16,190)

 Interest income (expense), net                 3,420        (1,466)               4,572       (2,203)
 Equity interest in net loss of investments    (1,193)            -               (2,563)           -
 Other expense                                   (311)            -                 (262)           -
                                            ---------      --------            ---------     --------
 Net loss                                     (27,700)      (11,542)             (48,893)     (18,393)



   Deemed dividend attributable to
    issuance of convertible preferred stock         -       (29,879)                   -      (29,879)

   Cumulative dividends and accretion of
    convertible preferred stock to
    liquidation value                          (5,015)       (1,192)             (16,843)      (1,192)
                                            ---------     ---------           ----------    ---------

 Net loss attributable to common
   stockholders                             $ (32,715)    $ (42,613)           $ (65,736)   $ (49,464)
                                            =========     =========           ==========    =========

 Basic and diluted loss per share           $   (0.66)    $   (1.19)           $   (1.39)   $   (1.48)
                                            =========     =========           ==========    =========

 Basic weighted average common shares
   outstanding                             49,288,828    35,929,161           47,436,995   33,520,807
                                           ==========    ==========           ==========   ==========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

                                       4
<PAGE>

                             RARE MEDIUM GROUP, INC.
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)


<TABLE>
<CAPTION>
                                                              Six months ended June 30,
                                                              2000                1999
                                                           ---------            ---------
<S>                                                        <C>                  <C>
 Cash flows from operating activities:
    Net loss                                               $ (48,893)           $ (18,393)
    Adjustments to reconcile net loss to
      net cash provided by (used in)
      operating activities:
         Depreciation and amortization                        22,014               10,164
         Equity interest in net loss of investments            2,563                    -
         Non-cash interest                                         -                2,246
         Changes in assets and liabilities,
         net of acquisitions:
            Accounts receivable                               (8,753)              (1,802)
            Work in process                                   (5,403)                (555)
            Prepaid expenses and other assets                 (4,770)                (167)
            Deferred revenue                                   2,933                   70
            Accounts payable and accrued liabilities           9,206                   57
                                                           ---------            ---------
              Net cash used in operating activities          (31,103)              (8,380)
                                                           ---------            ---------

 Cash flows from investing activities:
    Cash paid for investments in affiliates                  (19,659)                   -
    Purchases of property, plant and equipment, net          (15,474)              (1,315)
    Decrease in notes receivable                                 650                    -
    Cash acquired in acquisitions, net of
      acquisition costs                                           46                  948
                                                           ---------            ---------
              Net cash used in investing activities          (34,437)                (367)
                                                           ---------            ---------

 Cash flows from financing activities:
    Proceeds from issuance of convertible debenture                -                6,000
    Proceeds from issuance of convertible
      preferred stock, net of costs                                -               82,998
    Proceeds from issuance of common
      stock, net of costs                                    241,355                    -
    Repayments of borrowings, net                               (737)                (634)
    Proceeds from issuance of stock in connection
       with exercise of warrants and options                   4,727                6,389
                                                           ---------            ---------
              Net cash provided by financing activities      245,345               94,753
                                                           ---------            ---------

 Net increase in cash and cash equivalents                   179,805               86,006
 Cash and cash equivalents, beginning of period               28,540                  918
                                                           ---------            ---------
 Cash and cash equivalents, end of period                  $ 208,345            $  86,924
                                                           =========            =========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

                                       5
<PAGE>

                             RARE MEDIUM GROUP, INC.

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(1)     Description of the business

     Rare Medium Group, Inc. (the "Company")  conducts its operations  primarily
through its subsidiaries,  which are organized as two related lines of business:
the Internet  services  business  and the  investment  business.  The Company is
headquartered  in New York with  offices  throughout  the  United  States and in
England, Australia, Singapore and Canada.

     The  Company's  Internet  services  business  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.

     Through  its  incubator  investment  strategy  the  Company  invests in and
develops,  manages and operates companies in selected  Internet-focused markets.
The  Company  also  makes  venture   investments  by  making   strategic  equity
investments in companies with Internet-focused business models.

(2)     Basis of Presentation

     The  accompanying  unaudited  consolidated  financial  statements have been
prepared  by the  Company  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,  the
accompanying   consolidated   financial   statements  contain  all  adjustments,
consisting  only of those of a normal  recurring  nature,  necessary  for a fair
presentation of the Company's financial position, results of operations and cash
flows at the dates and for the periods  indicated.  While the  Company  believes
that  the  disclosures  presented  are  adequate  to make  the  information  not
misleading,   these  consolidated   financial   statements  should  be  read  in
conjunction with the audited financial statements and related notes for the year
ended  December 31, 1999 which are contained in the  Company's  Annual Report on
Form 10-K filed with the Securities  and Exchange  Commission  (the "SEC").  The
results  for the  three  and six  month  periods  ended  June  30,  2000 are not
necessarily  indicative of the results to be expected for the full year. Certain
prior  year  amounts  in  the  consolidated   financial   statements  have  been
reclassified to conform with the current year's presentation.

(3)     Acquisition

     On June 6, 2000, the Company  completed the acquisition of Friedland Jacobs
Communications,  Inc.  ("FJC"),  a privately held marketing and branding company
based in  Burbank,  California  that  specializes  in  strategic  marketing  and
creative  production for the  entertainment  industry.  In connection  with this
acquisition,  the Company  issued 800,745 shares of common stock valued at $14.8
million in exchange  for all  outstanding  shares of capital  stock of FJC.  The
Company  has  accounted  for this  transaction  under  the  purchase  method  of
accounting.  The aggregate purchase price, including acquisition costs, exceeded
the fair value of the net assets acquired by approximately  $14.5 million.  This
amount  has  been  allocated  to  goodwill  and is  being  amortized  using  the
straight-line method over three years.  Included in the accompanying  statements
of  operations  are  the  results  of  operations  of  FJC  since  the  date  of
acquisition.

(4)     Investments in Affiliates

     The following is a summary of the carrying values of the  investments  held
by the Company:

<TABLE>
<CAPTION>
                                                       June 30, 2000      December 31, 1999
                                                       -------------      -----------------
                                                                  (In thousands)
<S>                                                    <C>                   <C>
Cost investments                                              36,009                 20,876
Equity investments                                             2,242                  3,531
Marketable securities                                         13,835                  2,060
                                                       -------------         --------------
                                                       $      52,086         $       26,467
                                                       -------------         --------------
</TABLE>

                                       6
<PAGE>

                             RARE MEDIUM GROUP, INC.

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


(5)      Segment Information

     Presented below are the operating results and total assets of the Company's
two  primary  operating  segments:   the  Internet  services  business  and  the
investment business.

<TABLE>
<CAPTION>
                                   Three month period ending        Six month period ending
                                     June 30,       June 30,         June 30,     June 30,
                                      2000           1999             2000          1999
                                   --------------------------      --------------------------
                                        (In thousands)                  (In thousands)

<S>                                <C>             <C>              <C>           <C>
Revenues:
   Internet services                   30,026          5,491           53,515          8,004
   Investment                           1,838            136            3,316            212
   Internet services provided to
        investments                    (4,158)          (472)          (5,308)          (472)
                                   -----------    -----------      -----------   ------------
                                   $   27,706     $    5,155       $   51,523    $     7,744
                                   ===========    ===========      ===========   ============

Loss before interest, taxes,
depreciation and amortization:
   Internet services                   (2,470)        (1,037)          (5,734)        (1,714)
   Investment and corporate           (15,541)        (3,368)         (22,892)        (4,312)
                                   -----------    -----------      -----------   ------------
                                   $  (18,011)    $   (4,405)      $  (28,626)   $    (6,026)
                                   ===========    ===========      ===========   ============

Depreciation and amortization         (11,605)        (5,671)         (22,014)       (10,164)
Interest income (expense), net          3,420         (1,466)           4,572         (2,203)
Equity interest in net loss on
   investments                         (1,193)             -           (2,563)             -
Other expense                            (311)             -             (262)             -
                                   -----------    -----------      -----------   ------------
Net loss                           $  (27,700)    $  (11,542)      $   (48,893)  $   (18,393)
                                   ===========    ===========      ===========   ============
</TABLE>
<TABLE>
<CAPTION>
                                                                    As of            As of
                                                                June 30, 2000   December 31, 1999
<S>                                                                <C>           <C>
Total assets:
   Internet services                                                   62,759         31,047
   Investment and corporate                                           330,875        129,376
                                                                   -----------   ------------
                                                                   $  393,634    $   160,423
                                                                   ===========   ============
</TABLE>


(6)     Equity Transactions

     On January 14, 2000, the Company sold 2,500,000  shares of its common stock
for gross proceeds of $70.1 million (net proceeds of $65.7 million) in a private
transaction  to a group of  mutual  funds  managed  by  Putnam  Investments  and
Franklin  Resources,  Inc. On April 18, 2000,  the Company filed a  registration
statement  with the SEC to register the resale of such shares as required by the
purchase agreement executed in connection with such private transaction.

     On March 29, 2000,  the Company sold  3,000,000  shares of common stock for
gross  proceeds of $186  million  (net  proceeds of $175.6  million) in a public
offering  underwritten by Credit Suisse First Boston Corporation,  Deutsche Bank
Securities Inc. and FleetBoston Robertson Stephens Inc.


                                       7
<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     This  report  contains  forward-looking  statements  within the  meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and
Section 21E of the  Securities  Exchange Act of 1934, as amended (the  "Exchange
Act") that involve risks and uncertainties,  including  statements regarding our
capital needs,  business strategy,  expectations and intentions.  We urge you to
consider  that  statements  which use the  terms  "believe,"  "do not  believe",
anticipate," "expect," "plan", "estimate," "intend," and similar expressions are
intended to identify  forward-looking  statements.  These statements reflect our
current  views with respect to future events and because our business is subject
to numerous  risks,  uncertainties  and risk factors,  our actual  results could
differ  materially  from those  anticipated in the  forward-looking  statements,
including those set forth below under this "Item 2. Management's  Discussion and
Analysis of Financial Condition and Results of operations" and elsewhere in this
report.  Actual  results will most likely  differ from those  reflected in these
statements, and the differences could be substantial. We disclaim any obligation
to publicly  update these  statements,  or disclose any  difference  between our
actual  results  and  those  reflected  in  these  statements.  The  information
constitutes  forward  looking  statements  within  the  meaning  of the  Private
Securities Litigation Reform Act of 1995.


OVERVIEW

We are an Internet-focused company that:

o provides Internet professional services to companies;

o invests  in  and  develops,   manages  and  operates  companies  in  selected
Internet-focused market segments; and

o takes strategic equity positions in companies that we believe possess superior
Internet-focused business models.

     Our end-to-end  Internet  professional  services  offering  encompasses the
entire  Internet  services   spectrum,   ranging  from  strategic  and  creative
consulting  to  applications   development,   implementation  and  hosting.  Our
strategic  approach is to align these service  offerings and expertise  with our
customers  industries.  This vertical  market approach allows us to provide more
sophisticated strategic solutions.  Our customers include AT&T, Dr. Drew, Epson,
Forbes,   Microsoft,   Nestle,   Ritz  Carlton,   Weider,   Paine  Webber,   Sun
International, Furniture Brands, Wyndham Hotels, Corporate Express, Red Herring,
Providence Health Systems, Cablevision and Body Shop.

     We also invest in and internally  develop,  manage and operate companies in
selected  Internet-focused  market  segments.  In  addition,  we  make  minority
investments  in  independently  managed  companies,  in which we co-invest  with
well-known financial and industry partners such as Brentwood Associates,  Compaq
Computer Corp.,  Constellation  Ventures,  GE Capital Corp., Hicks, Muse, Tate &
Furst,  Mayfield  Partners and  Omnicom.  Our  investment  business is currently
focused on Internet  companies engaged in the  business-to-business  e-commerce,
Internet enabling tools, broadband and next generation  communications  sectors.
Our investment in these businesses amounted to $88.8 million at June 30, 2000.

     Our  operating  results  are  primarily  driven  by our  Internet  services
business.  We evaluate the  performance of this business as a separate  segment.
Revenue and loss before interest,  taxes, depreciation and amortization are used
to measure and evaluate our financial  results and make relative  comparisons to
other entities that operate within the Internet services industry.  Our Internet
service  business  revenue,  including  revenue  from  services  provided to our
consolidated subsidiaries, increased to $30.0 million for the three month period
ended June 30, 2000 from $23.5  million for the three month  period  ended March
31,  2000.  This 28%  increase  in revenue  from the second  quarter of 2000 was
achieved through organic growth. Loss before interest,  taxes,  depreciation and
amortization  decreased from $3.3 million for the three month period ended March
31, 2000 to $2.5 million for the three month period ended June 30, 2000.

     Many of our  Internet  service  contracts  are  currently  on a fixed price
basis,  rather than a time and materials basis. We recognize revenues from fixed
price  contracts  based  on our  estimate  of the  percentage  of  each  project
completed in a reporting period. To the extent our estimates are inaccurate, the
revenues and operating  profits,  if any, we report for periods  during which we
are working on a project  may not  accurately  reflect the final  results of the
project and we would be  required to make  adjustments  to such  estimates  in a
subsequent period.

     Our Internet  services clients  generally retain us on a project by project
basis, rather than entering into 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 and securing repeat engagements
with existing clients are important components of our success.

                                       8
<PAGE>

     Cost of revenues includes salaries,  payroll taxes and related benefits and
other  direct  costs  associated  with the  generation  of  revenues.  Sales and
marketing  expense  represent the actual costs associated with our marketing and
advertising.  General and  administrative  expenses  include  facilities  costs,
recruiting,  training,  finance,  legal,  and other  corporate  costs as well as
salaries and related  employee  benefits for those  employees  that support such
functions.

     Our board of  directors  has  approved  an equity  participation  plan that
allows our  Compensation  Committe to incentivize our employees by allocating to
them up to 20% of any profit we might  recognize when and if our  investments in
portfolio and incubator  companies  become liquid,  subject to vesting and other
requirements.  Upon liquidation  event, we will recognize a compensation  charge
for that  portion  of the  profit on the  investment  that is  allocated  to the
employees.  We will have the right to pay such amount to the employees either in
cash, in shares of common stock, or a combination thereof.


Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999

REVENUES

     Revenue for the three months ended June 30, 2000 increased to $27.7 million
from $5.2 million for the three months ended June 30, 1999, an increase of $22.5
million.  This increase reflects  increases in both the number and relative size
of client  engagements  which has been  facilitated  by increase in our billable
employees as a result of acquisitions and aggressive hiring strategy. All of the
acquired Internet services businesses'  operations have been integrated into our
existing  operations.  Our incubator  companies generated revenues totaling $1.8
million in the second  quarter of 2000,  compared to $0.1  million in the second
quarter ended June 30, 1999.

COST OF REVENUES

     Cost of revenues  for the three  months  ended June 30, 2000  increased  to
$16.7  million from $3.0  million for the three  months ended June 30, 1999,  an
increase of $13.7  million.  This  increase is due  primarily  to a  substantial
increase in additional  personnel in our Internet services  business.  We expect
cost of revenues to increase on an absolute  dollar basis as we hire  additional
personnel and incur  additional  costs related to the anticipated  growth of our
Internet services business.  The increase in cost of revenues also reflects $1.7
million of costs related to our incubator businesses.

SALES AND MARKETING EXPENSE

     Sales and  marketing  expense  for the three  months  ended  June 30,  2000
increased  to $5.6  million from $.9 million for the three months ended June 30,
1999, an increase of $4.7 million.  This increase is primarily the result of the
continued  national  marketing  program to build the "Rare Medium" brand and the
marketing with respect to our incubator companies. We expect sales and marketing
expenses to increase as we continue to build brand awareness.

GENERAL AND ADMINISTRATIVE EXPENSE

     General and administrative expense for the three months ended June 30, 2000
increased to $23.4 million from $5.7 million for the three months ended June 30,
1999,  an  increase  of  $17.7  million.  This  increase  is  a  result  of  the
infrastructure  needed to support  the  significant  growth in  revenue  and our
continued expansion into new markets. The increase in general and administrative
expenses  also  relates  to the costs  associated  with  required  resources  to
implement our venture/incubator strategy.

DEPRECIATION AND AMORTIZATION EXPENSE

     Depreciation  and  amortization  expense  substantially   consists  of  the
amortization of intangible assets. Depreciation and amortization expense for the
three  months ended June 30, 2000  increased to $11.6  million from $5.7 million
for the three  months  ended June 30, 1999,  an increase of $5.9  million.  This
increase  resulted  primarily from our  acquisitions  during 1999. We anticipate
that expenses related to the amortization of intangible  assets will increase in
future periods as we continue to make acquisitions.

INTEREST INCOME, NET

     Interest  income,  net for the three  months  ended June 30, 2000 is mainly
comprised of the interest  earned on the proceeds  received from the sale of our
common stock during the first  quarter of 2000 as described  below in "Liquidity
and Capital Resources".

                                       9
<PAGE>

NET LOSS

     For the three months  ended June 30, 2000,  we recorded a net loss of $27.7
million. Excluding $11.6 million in amortization and depreciation,  the net loss
was $16.1 million. This loss was primarily due to the factors described above in
"Cost  of  Revenues,"  "General  and  Administrative  Expense"  and  "Sales  and
Marketing Expense."

     Included in net loss  attributable to common  shareholders of $32.7 million
was $5.0 million of non-cash deemed dividends and accretion  related to issuance
of our Series A convertible  preferred stock.  Dividends were accrued related to
the  pay-in-kind  dividends  payable  quarterly  on  the  Series  A  convertible
preferred  stock,  and to the accretion of the $29.9 million  carrying amount of
the Series A convertible preferred stock up to the $87.0 million face redemption
amount over 13 years.


Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999

REVENUES

     Revenue for the six months ended June 30, 2000  increased to $51.5  million
from $7.7 million for the six months  ended June 30, 1999,  an increase of $43.8
million.  This increase reflects  increases in both the number and relative size
of client engagements which has been facilitated by the increase in our billable
employees as a result of acquisitions and aggressive hiring strategy. All of the
acquired Internet services businesses'  operations have been integrated into our
existing  operations.  Our incubator  companies generated revenues totaling $3.3
million in the six months ended June 30,  2000,  compared to $0.2 million in the
six months ended June 30, 1999.

COST OF REVENUES

     Cost of revenues for the six months ended June 30, 2000  increased to $29.7
million from $4.4 million for the six months ended June 30, 1999, an increase of
$25.3  million.  This  increase is due  primarily to a  substantial  increase in
additional  personnel  in our  Internet  services  business.  We expect  cost of
revenues to increase on an absolute dollar basis as we hire additional personnel
and incur  additional  costs related to the  anticipated  growth of our Internet
services  business.  The increase in cost of revenues also reflects $3.1 million
of costs related to our incubator businesses.

SALES AND MARKETING EXPENSE

     Sales  and  marketing  expense  for the six  months  ended  June  30,  2000
increased  to $9.2  million  from $1.1 million for the six months ended June 30,
1999, an increase of $8.1 million.  This increase is primarily the result of our
continued  national  marketing  program to build the "Rare Medium" brand and the
marketing with respect to our incubator companies. We expect sales and marketing
expenses to increase as we continue to build our brand awareness.

GENERAL AND ADMINISTRATIVE EXPENSE

     General and  administrative  expense for the six months ended June 30, 2000
increased  to $41.3  million from $8.3 million for the six months ended June 30,
1999,  an  increase  of  $33.0  million.  This  increase  is  a  result  of  the
infrastructure  needed to support  our  significant  growth in  revenue  and our
continued expansion into new markets. The increase in general and administrative
expenses  also  relates  to the costs  associated  with  resources  required  to
implement our venture/incubator strategy.

DEPRECIATION AND AMORTIZATION EXPENSE

     Depreciation  and  amortization  expense  substantially   consists  of  the
amortization of intangible assets. Depreciation and amortization expense for the
six months ended June 30, 2000 increased to $22.0 million from $10.2 million for
the six months ended June 30, 1999, an increase of $11.8 million.  This increase
resulted  primarily  from our  acquisitions  during  1999.  We  anticipate  that
expenses  related to the  amortization  of  intangible  assets will  increase in
future periods as we continue to make acquisitions.

INTEREST INCOME, NET

     Interest  income,  net for the six  months  ended  June 30,  2000 is mainly
comprised of the interest  earned on the proceeds  received from the sale of our
common  stock  during the period as described  below in  "Liquidity  and Capital
Resources".

                                       10
<PAGE>

NET LOSS

     For the six months  ended June 30,  2000,  we  recorded a net loss of $48.9
million. Excluding $22.0 million in amortization and depreciation,  our net loss
was $26.9 million. This loss was primarily due to the factors described above in
"Cost  of  Revenues,"  "General  and  Administrative  Expense"  and  "Sales  and
Marketing Expense."

     Included in net loss  attributable to common  shareholders of $65.7 million
was $16.8 million of non-cash deemed dividends and accretion related to issuance
of our Series A convertible  preferred stock.  Dividends were accrued related to
the  pay-in-kind  dividends  payable  quarterly  on  the  Series  A  convertible
preferred  stock,  and to the accretion of the $29.9 million  carrying amount of
the Series A convertible preferred stock up to the $87.0 million face redemption
amount over 13 years.

LIQUIDITY AND CAPITAL RESOURCES

     We had $208.3 million in cash and cash  equivalents at June 30, 2000.  This
amount is substantially a result of the proceeds  received from (1) the issuance
of 2,500,000  shares of our common stock on January 14, 2000, for gross proceeds
of $70.1 million (net proceeds of $65.7  million) in a private  transaction to a
group of mutual funds  managed by Putnam  Investments  and  Franklin  Resources,
Inc.; and (2) the issuance of 3,000,000  shares of our common stock on March 29,
2000 for gross  proceeds of $186 million (net proceeds of $175.6  million) in an
underwritten public offering.

     Cash used in  operating  activities  was $31.1  million  for the six months
ended June 30, 2000 and resulted  primarily  from the net loss of $48.9 million,
offset by non-cash  charges of $24.6 million  (which  consists of  depreciation,
amortization,  and equity  interest in net loss on  investments)  and changes in
working capital.

     Cash used in  investing  activities  was $34.4  million  for the six months
ended  June  30,  2000,  which  primarily   consists  of  purchases  of  venture
investments of $19.7 million, and capital expenditures of $15.5 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.

YEAR 2000 ISSUE

     We and our  subsidiaries  have not experienced  any material  problems with
network infrastructure,  software, hardware and computer systems relating to the
inability to recognize  appropriate  dates  related to the year 2000. We and our
subsidiaries  are also  not  aware  of any  material  Year  2000  problems  with
customers,  suppliers or vendors.  Accordingly,  we and our  subsidiaries do not
anticipate  incurring  future  material  expenses or  experiencing  any material
operational disruptions as a result of any Year 2000 issues.

RECENTLY ISSUED ACCOUNTING STANDARDS

     In  December  1999,  the SEC issued  Staff  Accounting  Bulletin  No.  101,
"Revenue  Recognition in Financial  Statements" ("SAB No. 101") which summarizes
certain of the SEC  staff's  views in  applying  generally  accepted  accounting
principles to revenue recognition in financial  statements.  We will be required
to adopt the  accounting  provisions  of SAB No.  101,  no later than the fourth
quarter of 2000. We do not believe that the  implementation  of SAB No. 101 will
have a significant effect on our results of operations.

     In June 1998, the Financial  Accounting Standards Board issued SFAS No. 133
"Accounting  for  Derivative  Instruments  and  Hedging  Activities."  SFAS  133
establishes  accounting  and  reporting  standards for  derivative  instruments,
including  derivative  instruments  embedded  in  other  contracts  and  hedging
activities.  In June 1999,  SFAS N0. 137 was issued which  delayed the effective
date of SFAS No. 133 to January 1, 2001. In June 2000, the Financial  Accounting
Standards  Board  issued  SFAS  No.  138,  "Accounting  for  Certain  Derivative
Instruments and Certain Hedging  Activities,  an Amendment of FASB Statement No.
133" which intended to simplify the accounting  for  derivatives  under SFAS 133
and is  effective  upon  adoption  of  SFAS  133.  Our  management  has  not yet
determined the impact of adopting SFAS 133 as amended.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We believe that our market risk exposures  associated  with our outstanding
debt is immaterial as our fixed rate and variable rate debt  obligations are not
material.


                                       11
<PAGE>


PART II. OTHER INFORMATION

Item 1. Legal Proceedings

      Currently, we are not a party to any pending material legal proceedings.

Item 2. Changes in Securities.

      None

Item 3. Defaults Upon Senior Securities

      Not applicable

Item 4. Submission of Matters to a Vote of Security Holders

     Our annual meeting of stockholders  was held on June 15, 2000. We solicited
proxies for the meeting were solicited by the Company pursuant to Regulation 14A
under the  Exchange  Act. All of  management's  nominees for the election of the
Board of  Directors  as listed  in the  Proxy  Statement  for the  meeting  were
elected.  In addition,  our stockholders  also voted on the following  proposals
with the following results:

     1. The  amendments  to the Company's  1998  Long-Term  Incentive  Plan were
ratified.
<TABLE>
<CAPTION>

                                        For:              Against:          Abstain:          Broker Non-Votes:
<S>                                     <C>               <C>               <C>               <C>
      Series A Preferred Stock:         924,837           0                 0                 0
      Common Stock:                     17,259,460        4,949,432         135,345           0
</TABLE>

     2. The appointment of KPMG LLP as the  independent  auditors of the Company
for the year ending December 31, 2000 was ratified.
<TABLE>
<CAPTION>

                                        For:              Against:          Abstain:          Broker Non-Votes:
<S>                                     <C>               <C>               <C>               <C>
      Series A Preferred Stock:         924,837           0                 0                 0
      Common Stock:                     40,591,119        112,438           80,733            0
</TABLE>

Item 5. Other Information

      None

Item 6. Exhibits and Reports on Form 8-K

      (a) The following  sets forth those exhibits filed pursuant to Item 601 of
     Regulation S-X:

        EXHIBIT
        NUMBER            DESCRIPTION

          3.1  -- Restated  Certificate of  Incorporation  of Rare Medium Group,
               Inc.,  which was filed as Exhibit 3.1 to the Company's  Form 10-K
               for the year ended December 31, 1999, and is hereby  incorporated
               herein by reference.
          3.2  -- Amended and Restated By-Laws of Rare Medium Group, Inc., which
               was filed as Exhibit 3.2 to the Company's  Form 10-K for the year
               ended  December 31, 1999,  and is hereby  incorporated  herein by
               reference.
          10.1 -- Form of Purchase  Agreement,  dated January 14, 2000,  between
               the Company and each of the  purchasers in the private  placement
               of the  Company's  Common  Stock on January 14,  2000,  which was
               filed as Exhibit 4.1 to the Company's  Form S-3 filed on February
               11, 2000, and is hereby incorporated herein by reference.
          10.2 -- Form of  Underwriting  Agreement  by and among the Company and
               Credit Suisse First Boston Corporation,  Deutsche Bank Securities
               Inc. and FleetBoston  Robertson  Stephens Inc. which was filed as
               Exhibit 1.1 to the Company's  Registration  Statement on Form S-3
               (Reg.  No.  333-95829)  and  is  hereby  incorporated  herein  by
               reference.
          27   -- Financial Data Schedule.


                                       12
<PAGE>



                                   SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
THE  REGISTRANT  HAS DULY  CAUSED  THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.



                                          By: /s/ Glenn S. Meyers
                                        -------------------------------------
Date: August 2, 2000                        Glenn S. Myers
                                    Chairman and Chief Executive Officer


                                          By: /s/ Jeffrey J. Kaplan
                                        -------------------------------------
Date: August 2, 2000                        Jeffrey J. Kaplan
                        Executive Vice President and Chief Financial Officer