UNITED STATES
                       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 PERIOD ENDED SEPTEMBER 30, 2001, OR

   / /  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           (I.R.S. Employer I
                 organization)                            dentification Number)



         28 WEST 23RD STREET, 5TH FLOOR
               NEW YORK, NEW YORK                                10010
    (Address of principal executive offices)                  (Zip Code)

       Registrant's telephone number, including area code: (646) 638-9700

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.

Number of shares outstanding of the issuer's common stock, as of November 9,
2001

Common Stock, par value $0.01 per share                 64,086,076
                 Class                          Number of shares outstanding

<Page>

<Table>
<Caption>

                                                            INDEX

                                                                                                                  PAGE
<S>                                                                                                                 <C>
Part I.  FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements

   Consolidated Balance Sheets as of December 31, 2000 and September 30, 2001 (Unaudited)                            2

   Unaudited Consolidated Statements of Operations - Three and nine months ended September 30, 2000 and 2001         3

   Unaudited Consolidated Statements of Cash Flows - Nine months ended September 30, 2000 and 2001                   4

   Notes to Unaudited Consolidated Financial Statements                                                              5

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

Item 3.  Quantitative and Qualitative Disclosures About Market Risk                                                 17

Part II.  OTHER INFORMATION

Item 1.  Legal Proceedings                                                                                          18

Item 2.  Changes in Securities                                                                                      19

Item 3.  Defaults Upon Senior Securities                                                                            19

Item 4.  Submission of Matters to a Vote of Security Holders                                                        19

Item 5.  Other Information                                                                                          19

Item 6.  Exhibits and Reports on Form 8-K                                                                           19

SIGNATURES                                                                                                          20
</Table>



<Page>

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

<Table>
<Caption>

                                                                                             DECEMBER 31,      SEPTEMBER 30,
                                                                                                2000               2001
                                                                                             ------------      -------------
                                                                                                               (UNAUDITED)
<S>                                                                                         <C>                <C>
                                           ASSETS
Current assets:
   Cash and cash equivalents                                                                $     113,018      $   32,052
   Short-term investments                                                                          44,465          33,739
                                                                                            -------------      ----------
     Total cash, cash equivalents and short-term investments                                      157,483          65,791
   Accounts receivable, net                                                                        21,952           3,096
   Work in process                                                                                  5,426             136
   Notes receivable                                                                                    --          52,231
   Prepaid expenses and other current assets                                                        5,402             783
                                                                                            -------------      ----------
     Total current assets                                                                         190,263         122,037

Property and equipment, net                                                                        28,740             872
Investments in affiliates                                                                          48,016          15,327
Goodwill and intangibles, net                                                                      49,061              --
Other assets                                                                                        1,411             555
                                                                                            -------------      ----------
     Total assets                                                                           $     317,491      $  138,791
                                                                                            =============      ==========

                            LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                                         $      10,740      $    6,313
   Accrued liabilities                                                                             16,876          18,671
   Deferred revenue                                                                                 3,778              66
   Other current liabilities                                                                           --          10,013
                                                                                            -------------      ----------
     Total current liabilities                                                                     31,394          35,063
Other noncurrent liabilities                                                                        9,367           1,737
                                                                                            -------------      ----------
     Total liabilities                                                                             40,761          36,800
                                                                                            -------------      ----------
Series A Convertible Preferred Stock, $.01 par value, net of unamortized discount of
   $50,162 and $46,867, respectively                                                               47,621          56,520
                                                                                            -------------      ----------
Stockholders' equity:
   Preferred stock, $.01 par value. Authorized 10,000,000 shares; issued 977,838
     shares as Series A Convertible Preferred Stock at December 31, 2000 and
     1,033,875 shares at September 30, 2001                                                            --              --
   Common stock, $.01 par value.  Authorized 200,000,000 shares; issued and outstanding
     63,676,074 shares at December 31, 2000 and 63,666,505 shares at September 30, 2001               637             637
   Additional paid-in capital                                                                     528,958         528,469
   Accumulated other comprehensive loss                                                            (1,127)           (615)
   Accumulated deficit                                                                           (299,188)       (482,849)
   Treasury stock, at cost, 66,227 shares                                                            (171)           (171)
                                                                                            -------------      ----------
     Total stockholders' equity                                                                   229,109          45,471
                                                                                            -------------      ----------
     Total liabilities and stockholders' equity                                             $     317,491      $  138,791
                                                                                            =============      ==========
</Table>

     See accompanying notes to unaudited consolidated financial statements.



<Page>

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

<Table>
<Caption>
                                                  THREE MONTHS ENDED SEPTEMBER 30,       NINE MONTHS ENDED SEPTEMBER 30,
                                                  --------------------------------      --------------------------------
                                                      2000               2001                2000              2001
                                                  -------------      -------------      --------------     -------------
<S>                                               <C>                <C>                <C>                <C>
Revenues                                          $       2,311      $          25      $        5,627     $       1,887
Cost of revenues                                            910                  2               4,007             1,337
                                                  -------------      -------------      --------------     -------------
   Gross profit                                           1,401                 23               1,620               550
Expenses:
   Sales and marketing                                    3,560                 28               8,255             1,257
   General and administrative                            13,378              2,737              31,768            14,236
   Depreciation and amortization                          2,518                398               6,246             2,981
   Restructuring charges                                     --                125                  --             1,071
                                                  -------------      -------------      --------------     -------------
     Total expenses                                      19,456              3,288              46,269            19,545
                                                  -------------      -------------      --------------     -------------
Loss from operations                                    (18,055)            (3,265)            (44,649)          (18,995)
Interest income, net                                      3,004              3,010               7,562             7,481
Loss on investments in affiliates                        (1,860)           (18,212)             (4,424)          (41,844)
Unrealized loss on derivative instrument                     --            (15,311)                 --            (1,511)
Other (expense) income                                      (73)               490                (135)              828
                                                  -------------      -------------      --------------     -------------
Loss before discontinued operations                     (16,984)           (33,288)            (41,646)          (54,041)
Discontinued operations:
   Loss from discontinued operations                    (16,187)           (50,677)            (40,418)         (117,647)
   Loss from wind-down of discontinued operations            --             (3,073)                 --            (3,073)
                                                  -------------      -------------      --------------     -------------
     Loss from discontinued operations                  (16,187)           (53,750)            (40,418)         (120,720)
                                                  -------------      -------------      --------------     -------------
Net loss                                                (33,171)           (87,038)            (82,064)         (174,761)
   Cumulative dividends and accretion of
     convertible preferred stock to liquidation
     value                                               (2,975)            (3,001)            (19,818)           (8,900)
                                                  -------------      -------------      --------------     -------------
Net loss attributable to common stockholders      $     (36,146)     $     (90,039)           (101,882)    $    (183,661)
                                                  =============      =============      ==============     =============
Basic and diluted loss per share:
   Continuing operations                          $       (0.36)     $       (0.57)     $        (1.23)    $       (0.99)
   Discontinued operations                                (0.29)             (0.85)              (0.80)            (1.91)
                                                  -------------      -------------      --------------     -------------
     Net loss per share                           $       (0.65)     $       (1.42)     $        (2.03)    $       (2.90)
                                                  =============      =============      ==============     =============
Basic weighted average common shares outstanding     55,419,834         63,416,825          50,108,149        63,417,488
                                                  =============      =============      ==============     =============
</Table>

     See accompanying notes to unaudited consolidated financial statements.



<Page>

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

<Table>
<Caption>
                                                                                  NINE MONTHS ENDED SEPTEMBER 30,
                                                                                  -------------------------------
                                                                                       2000              2001
                                                                                  -----------        -----------
<S>                                                                               <C>                <C>
Cash flows from operating activities:
   Net loss                                                                       $   (82,064)       $  (174,761)
   Adjustments to reconcile net loss to net cash used in operating activities:
     Loss from discontinued operations                                                 40,418            120,720
     Depreciation and amortization                                                      6,246              2,981
     Loss on investments in affiliates                                                  4,424             41,844
     Unrealized loss on derivative instrument                                              --              1,511
     Non-cash restructuring charges                                                        --                689
     Non-cash interest, net                                                                --             (1,511)
     Changes in assets and liabilities, net of acquisitions and sale of
        businesses:
        Accounts receivable                                                            (1,377)               275
        Work in process                                                                    62                 --
        Prepaid expenses and other assets                                              (1,420)            (1,531)
        Deferred revenue                                                                  575                666
        Accounts payable, accrued and other liabilities                                (2,334)               728
                                                                                  -----------        -----------
          Net cash used in continuing operations                                      (35,470)            (8,389)
          Net cash used in discontinued operations                                    (21,332)           (26,996)
                                                                                  -----------        -----------
          Net cash used in operating activities                                       (56,802)           (35,385)
Cash flows from investing activities:
   Cash paid for investments in affiliates                                            (26,592)            (6,199)
   Purchases of property and equipment                                                 (2,513)               (95)
   Purchase of notes receivable                                                            --            (50,000)
   Cash paid for acquisitions, net of cash acquired and acquisition costs                 (76)                --
   Cash received for sale of investment in affiliates                                      --              3,556
   Purchases of short-term investments                                                     --            (72,860)
   Sales of short-term investments                                                         --             83,587
                                                                                  -----------        -----------
          Net cash used in continuing operations                                      (29,181)           (42,011)
          Net cash used in discontinued operations                                    (15,519)            (3,592)
                                                                                  -----------        -----------
          Net cash used in investing activities                                       (44,700)           (45,603)
Cash flows from financing activities:
   Proceeds from issuance of common stock, net of costs                               241,355                 --
   Proceeds from issuance of common stock in connection with the exercise of
     warrants and options                                                               5,468                 22
   Repayments of borrowings, net                                                         (832)                --
                                                                                  -----------        -----------
          Net cash provided by financing activities                                   245,991                 22
                                                                                  -----------        -----------
Net increase (decrease) in cash and cash equivalents                                  144,489            (80,966)
Cash and cash equivalents, beginning of period                                         28,540            113,018
                                                                                  -----------        -----------
Cash and cash equivalents, end of period                                          $   173,029             32,052
                                                                                  ===========        ===========
</Table>

     See accompanying notes to unaudited consolidated financial statements.



<Page>


                             RARE MEDIUM GROUP, INC.
       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

(1)  DESCRIPTION OF THE BUSINESS

     Rare Medium Group, Inc. (the "Company") conducts its business
primarily through its subsidiaries. Since 1998, its principal business was
conducted through Rare Medium, Inc., which developed Internet e-commerce
strategies, business processes, marketing communications, branding
strategies and interactive content using Internet-based technologies and
solutions. A decision to discontinue Rare Medium, Inc.'s operations was made
at the end of the quarter.

     Through its investment business, the Company has historically made venture
investments by taking strategic minority equity positions in other independently
managed companies. Additionally, in the past, the Company has developed, managed
and operated companies in selected Internet-focused market segments ("Incubator
Companies"). During the first quarter of 2001, the Company reduced its focus on
the investment business and substantially ceased providing funding to its
Incubator Companies. Additionally, in April 2001, the Company sold a majority of
its equity interest in ChangeMusic Network ("CMJ") and ePrize, two of its
Incubator Companies (see Note 5).

     Currently, the Company, through its newly formed subsidiary, MSV Investors
Holdings, Inc., expects to be an active participant in the Mobile Satellite
Ventures ("MSV") joint venture, which includes TMI Communications, Inc., Motient
Corporation ("Motient"), Telcom Ventures LLC, Columbia Capital and Spectrum
Equity Investors. MSV is a provider of mobile satellite services in North
America, providing its customers with digital voice and data services, including
circuit switched voice, nationwide voice and data dispatch, and packet data
services.

     In addition to its joint venture interest in MSV, subject to closing
(see Note 11), the Company's principal assets consist of its venture
portfolio, 5,000,000 shares of XM Satellite Radio Holdings, Inc. ("XM
Radio") common stock, a promissory note from Motient with a $26.2 million
face value and cash.

     The Company is headquartered in New York, New York. Its Rare Medium,
Inc. subsidiary continues to have an office in Dallas, Texas as well.

 (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 unaudited 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 disclosures presented are adequate to make the information
not misleading, these unaudited consolidated financial statements should be read
in conjunction with the audited financial statements and related notes for the
year ended December 31, 2000 which are contained in the Company's second amended
Annual Report on Form 10-K/A filed with the Securities and Exchange Commission
(the "SEC"). The results of the three and nine month periods ended September 30,
2001 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 to the current year's presentation.



<Page>

                             RARE MEDIUM GROUP, INC.
       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

(3)  INVESTMENTS IN AFFILIATES

     The following is a summary of the carrying value of investments held by the
Company (in thousands):

<Table>
<Caption>
                                       DECEMBER 31,             SEPTEMBER 30,
                                         2000                      2001
                                       ------------             ----------
                                                                (UNAUDITED)
<S>                                       <C>                     <C>
Cost investments                          $37,501                 $15,155
Marketable securities                       7,791                     172
Equity investments                          2,724                      --
                                       ------------             ----------
                                          $48,016                 $15,327
                                       ============             ==========
</Table>

     The Company recognized losses of approximately $0.5 million for the
nine months ended September 30, 2001 representing its proportionate share
of the losses of investee companies, for those investments carried under
the equity method. The Company also recognized losses of approximately $2.2
million for the nine months ended September 30, 2001 representing the
amortization of the net excess of investment over its proportionate share
of the affiliates' net assets. Amortization is generally recorded on a
straight-line basis over three years. Also, the Company recorded a loss of
approximately $35.9 million during the nine months ended September 30, 2001
for the impairment of investments in affiliates, including approximately
$4.1 million relating to its Incubator Companies. Additionally, the Company
recognized a loss of approximately $3.2 million for realized losses on the
sale of publicly traded securities. During the nine months ended September
30, 2001, Rare Medium, Inc. recognized revenue of approximately $4.5
million for services provided to affiliates which is included in the loss
from discontinued operations.

(4)  DISCONTINUED OPERATIONS

     At the end of the third quarter, a decision to discontinue the
operations of Rare Medium, Inc. and the LiveMarket subsidiary was made in
light of their performance and prospects. The wind-down of these businesses
is expected to be completed by the first quarter 2002. In connection with
the discontinuance of these businesses, the Company recorded a charge in
the third quarter of 2001 of $35.9 million related to severance and
benefits resulting from headcount reductions, an accrual for estimated
losses of $3.1 million during the wind-down period and the write-off of
unamortized goodwill and property and equipment, net of expected proceeds.
As of September 30, 2001, the remaining assets, including cash, accounts
receivables, work in process, property and equipment and other assets, and
liabilities, including accounts payable, restructuring and other accrued
expenses and advances payable, amounted to approximately $8.2 million and
$27.6 million, respectively.

     The discontinuance of these businesses represents the disposal of a
business segment under Accounting Principles Board Opinion No. 30.
Accordingly, the results of these operations have been classified as
discontinued, and prior period results have been restated. For segment
reporting purposes, Rare Medium, Inc.'s results are classified as "Internet
Services," and LiveMarket's results are included in "Investment."

(5)  SALE OF BUSINESSES

     In April 2001, the Company sold a majority of its equity interest in two of
its Incubator Companies: CMJ and ePrize. The Company received total aggregate
consideration of $1.4 million, consisting of cash and a promissory note with a
principal amount of approximately $0.5 million. The Company retained a 15%
equity interest in CMJ and a 5% equity interest in ePrize. During the first
quarter of 2001, the Company recognized a loss of approximately $2.5 million
relating to the sale of CMJ. During the second quarter of 2001, the Company
recognized a gain of approximately $1.5 million relating to the sale of ePrize.



<Page>

                             RARE MEDIUM GROUP, INC.
       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

 (6) SUPPLEMENTAL INFORMATION

     The Company's operations have historically been classified into two
primary segments: the investment business and the Internet services
business, the operations of which were discontinued at the end of the third
quarter (see Note 4). Subsequent to September 30, 2001, the Company will
operate solely within the investment business. Presented below is
summarized financial information of the Company's operations for each
segment (in thousands):

<Table>
<Caption>
                                                   THREE MONTHS ENDED SEPTEMBER 30,             NINE MONTHS ENDED SEPTEMBER 30,
                                                   --------------------------------             -------------------------------
                                                      2000                 2001                    2000                2001
                                                   ----------          ------------             ----------          -----------
<S>                                                <C>                 <C>                      <C>                 <C>
Revenues:
   Internet services                               $   33,215          $      3,885             $   86,730          $    25,775
   Investment                                           2,410                   297                  5,726                3,005
   Internet services provided to consolidated
     investments                                       (6,749)                   --                (12,057)              (4,648)
                                                   ----------          ------------             ----------          -----------
                                                   $   28,876          $      4,182             $   80,399          $    24,132
                                                   ==========          ============             ==========          ===========
Loss before interest, taxes, depreciation,
   amortization and other items:
   Internet services                               $     (318)         $     (6,703)            $   (6,077)         $   (28,109)
   Investment and corporate                           (20,360)               (4,193)               (43,227)             (23,406)
                                                   ----------          ------------             ----------          -----------
                                                      (20,678)              (10,896)               (49,304)             (51,515)
Depreciation and amortization                          (2,518)                 (398)                (6,246)              (2,981)
Interest income, net                                    3,004                 3,010                  7,562                7,481
Loss on investments in affiliates                      (1,860)              (18,212)                (4,424)             (41,844)
Restructuring charges                                      --                  (125)                    --               (1,071)
Unrealized loss on derivative instrument                   --               (15,311)                    --               (1,511)
Other (expense) income                                    (73)                  490                   (135)                 828
Other items included in discontinued operations       (11,046)              (45,596)               (29,517)             (84,148)
                                                   ----------          ------------             ----------          -----------
Net loss                                           $  (33,171)         $    (87,038)            $  (82,064)         $  (174,761)
                                                   ==========          ============             ==========          ===========
<Caption>
                                                                    DECEMBER 31, 2000     SEPTEMBER 30, 2001
                                                                    -----------------     ------------------
<S>                                                                    <C>                     <C>
Total assets:
   Internet services                                                   $     61,339            $     7,431
   Investment and corporate                                                 256,152                131,360
                                                                    ---------------       ----------------
                                                                       $    317,491            $   138,791
                                                                    ===============       ================
</Table>

     For the nine months ended September 30, 2001, two Internet services
customers, each representing more than 10% of Internet services revenue,
aggregated approximately 27% of Internet services revenue.

(7)  NOTES RECEIVABLE AND DERIVATIVE INSTRUMENT

     On April 2, 2001, the Company agreed to purchase from Motient 12.5%
secured promissory notes (the "Notes"), issuable in two tranches, each in
the principal amount of $25.0 million. The Notes were collateralized by
5,000,000 shares of XM Radio common stock owned by Motient. The first
tranche was purchased on April 4, 2001, and the second tranche was
purchased on July 16, 2001. The principal of and accrued interest on the
Notes were payable on October 1, 2001 in either cash, shares of XM Radio,
or any combination thereof at Motient's option, as set forth in the
agreement. At the option of the Company, the Notes may have been exchanged
for a number of XM Radio shares based on a formula, as set forth in the
agreement (the "Exchange Feature"). The Company ascribed separate values to
each of the outstanding Notes and the Exchange Feature. As such, $48.5
million was allocated to Notes and the remaining $1.5 million was allocated
to the Exchange Feature. Additional interest income was recognized
representing the accretion of the $48.5 million carrying value up to the
$50.0 million face value over the term of the Notes. As of June 30, 2001,
the Company had recognized an unrealized gain of approximately $13.8
million related to the increase in the fair value of the Exchange Feature.
As a result of the decrease in the price of XM Radio stock since June 30,
2001 and the $1.5 million value ascribed to the Exchange Feature at the
purchase date of the Notes, the Company recognized an unrealized loss of
$15.3 million for the three months ending September 30, 2001 relating to a
decrease in the fair value of the Exchange Feature.



<Page>

                             RARE MEDIUM GROUP, INC.
       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

(7)  NOTES RECEIVABLE AND DERIVATIVE INSTRUMENT - (CONTINUED)

     On October 1, 2001, and again on October 8, 2001, the Company extended
the maturity date of the Notes. On October 12, 2001, in accordance with the
terms of the Notes, the Company received 5,000,000 shares of XM Radio as
payment for $26.2 million of the Notes and accrued interest. The maturity
date for the remaining balance of the Notes in the principal amount of
approximately $26.2 million, and interest thereon, was extended for 60
days. The Company may further extend the maturity date to October 12, 2002
upon satisfaction of certain conditions.

(8)  MERGER WITH MOTIENT CORPORATION

     On May 14, 2001, the Company entered into an agreement to merge with a
subsidiary of Motient. By a letter agreement dated October 1, 2001, Motient and
the Company terminated the planned merger. As a result of the termination,
neither the Company nor Motient shall have any obligation to the other party,
except for repayment by Motient to the Company of amounts outstanding under the
Notes (see Note 7).

 (9) RESTRUCTURING CHARGES

     During the first and second quarters of 2001, the Company recognized
restructuring charges of approximately $21.9 million primarily related to
its Internet services business, consisting of $16.7 million for the
consolidation of facilities and the disposition of property and equipment,
$2.0 million for the impairment of unamortized goodwill, $2.0 million for
severance and benefits related to headcount reductions and $1.2 million for
other office shutdown costs. These restructuring charges were aimed at
aligning Rare Medium, Inc.'s cost structure with changing market conditions
and decreased demand for its services. An additional $36.1 million was
recognized in the third quarter, consisting of $15.4 million for the
closing of facilities and the disposition of property and equipment, $17.0
million for the impairment of unamortized goodwill, $1.1 million for
further severance and benefits related to headcount reductions and $2.6
million for other office shutdown costs. These additional charges were
primarily a result of the discontinuance of the operations of the Rare
Medium, Inc. and LiveMarket subsidiaries. The plan resulted in head count
reductions of approximately 500 employees during the first nine months of
2001, and approximately an additional 100 subsequent to September 30, 2001.
Of the $58.0 million in restructuring charges for the nine months ended
September 30, 2001, $56.9 million are reflected in the loss from
discontinued operations.

     The total cash outlay and non-cash charges for the restructuring
activities will be approximately $14.5 million and $43.5 million,
respectively. As of September 30, 2001, approximately $4.9 million of cash
was used, $5.8 million is expected to be used in the remainder of 2001, and
the remaining cash outlay of approximately $3.8 million, primarily related
to the present value of the net future minimum lease payments for certain
real estate lease obligations, is expected to be used over the next seven
years.

     Restructuring activities during the nine months ended September 30, 2001
were as follows (in thousands):

<Table>
<Caption>
                                                                                      BALANCE
                                           RESTRUCTURING          AMOUNT            SEPTEMBER 30,
                                             CHARGES             UTILIZED               2001
                                           ------------         -----------          ----------
<S>                                        <C>                  <C>                  <C>
Facilities and property and equipment      $    32,133          $    26,185          $   5,948
Goodwill                                        19,001               19,001                 --
Severance and benefits                           3,107                2,349                758
Other office shutdown costs                      3,745                  873              2,872
                                           -----------          -----------          ---------
Total                                      $    57,986          $    48,408          $   9,578
                                           ===========          ===========          =========
</Table>



<Page>

                             RARE MEDIUM GROUP, INC.
       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

(10)  CONTINGENCIES

     The Company is aware of a number of purported class action lawsuits that
have been filed by the holders of the Company's common stock in the Court of
Chancery of the State of Delaware challenging the then proposed merger with
Motient (see Note 8). All of the complaints name the Company and members of the
Company's board of directors as defendants. Most of the complaints name the
holders of the Company's preferred stock, and certain of their affiliates, as
defendants, and some of the complaints name Motient as a defendant. On June 22,
2001, the Delaware court entered an order to consolidate all of the Delaware
lawsuits for all purposes into a single purported class action, IN RE RARE
MEDIUM GROUP, INC. SHAREHOLDERS LITIGATION, C.A. No. 18879-NC. On August 7,
2001, a Consolidated Amended Class Action Complaint was filed in Delaware
Chancery Court. The Delaware Chancery Court has not yet certified the
consolidated lawsuit as a class action. The lawsuit alleges that the defendants
breached duties allegedly owed to the holders of the Company's common stock in
connection with the merger agreement and sought to stop the merger and/or obtain
monetary damages. The Company has and intends to continue vigorously contesting
this lawsuit. On October 19, 2001, the Company filed a motion to dismiss the
Consolidated Amended Class Action Complaint on a variety of grounds, including
mootness.

     A purported class action was filed in New York, titled BRICKELL PARTNERS V.
RARE MEDIUM GROUP, INC., ET AL., N.Y.S. Index No. 01602694, in the New York
State Supreme Court, making similar allegations to the Consolidated Amended
Class Action Complaint in Delaware. A motion to dismiss the complaint is
currently pending.

     In 2000, Rare Medium, Inc. entered into a strategic alliance
agreement, as amended, with a software company (the "Partner") to assist in
the training of personnel and development and delivery by Rare Medium, Inc.
of solutions built utilizing the Partner's technology. Under the terms of
the alliance, the Partner was to provide Rare Medium, Inc. with refundable
advances of approximately $17.1 million, on an interest free basis, to be
paid to Rare Medium, Inc. over the term of the two-year agreement, subject
to Rare Medium, Inc.'s compliance with certain requirements set forth in
the agreement. The amount and timing of the repayment of the advances may
be adjusted based on Rare Medium, Inc.'s achievement of certain milestones in
accordance with the terms of the agreement. The Partner and Rare Medium,
Inc. have a dispute as to whether certain milestones have been achieved.
Efforts at renegotiating the payment schedule and milestones were not
successful. In July 2001, Rare Medium, Inc. received a notice of
arbitration from the Partner seeking the return of the approximately $8.6
million, plus interest, that had been advanced by the Partner, who has
asserted that the agreement has terminated. Rare Medium, Inc. is contesting
the Partner's claims. There can be no assurance that Rare Medium, Inc. will
be successful in contesting this action and that accelerated repayment,
along with attorney's fees and interest, will not be required.

     The Company has been in settlement discussions with its former financial
public relations firm with respect to the Company's refusal to deliver options
covering approximately 124,000 shares of the Company's stock that are allegedly
owed relating to past services allegedly rendered. Based on the current state of
settlement discussions, the Company believes that it will be able to resolve
this contingency without it having a material adverse effect on the Company's
results of operations or financial position. However, if no settlement is
reached, the claimant has indicated that it will file a claim alleging its
entitlement to damages of approximately $12.8 million. While the Company does
not believe such a claim will be filed, until a formal settlement has been
executed, there can be no assurance of this outcome or the results of any
subsequent litigation.

     On May 16, 2001, plaintiffs Jay M. Wolff, David Bliss, Tim Barber and Steve
O'Brien filed suit against Rare Medium, Inc., ICC Technologies, Inc., and Rare
Medium Texas I, Inc. in the United States District Court for the Southern
District of New York, WOLFF, ET AL. V. RARE MEDIUM, INC., ET AL., CV No 01-4279.
The plaintiffs asserted claims for breach of contract, tortuous interference
with contractual relations, tortuous interference with prospective advantage,
and breach of implied obligation of good faith, arising out of the plaintiffs'
alleged attempt to engage in transactions involving some or all of the
approximately 1,200,000 shares of the Company's common stock that the plaintiffs
obtained in the Company's acquisition of Big Hand, Inc. The plaintiffs seek
unspecified compensatory and punitive damages, interest, attorneys' fees and
costs. On October 31, 2001, the Court dismissed the case without prejudice.



<Page>

                             RARE MEDIUM GROUP, INC.
       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

(10)  CONTINGENCIES - (CONTINUED)

     On July 23, 2001, plaintiff Microsoft Corporation filed suit against Rare
Medium, Inc. in the United States District Court for the Western District of
Washington, CO1-1130P. The plaintiff alleges breach of contract in connection
with a consulting agreement and an alliance agreement entered between the
parties seeking $2.3 million in damages, interest and attorney's fees. Rare
Medium, Inc. plans to defend the matter vigorously.

     Additionally, from time to time, the Company is subject to litigation in
the normal course of business. The Company is of the opinion that, based on
information presently available, the resolution of any such additional legal
matters will not have a material adverse effect on the Company's financial
position or results of its operations.

(11)  SUBSEQUENT EVENTS - COMMITMENT

     In October 2001, the Company, through a majority owned subsidiary,
committed to invest $50.0 million in the MSV joint venture, a satellite
communications venture that will integrate the satellite operations of Motient
with the satellite operations of TMI Communications, Inc., a wholly owned
subsidiary of BCE Inc. of Canada. The investment is contingent on customary
approvals by both the American and Canadian regulatory agencies. This investment
will represent a joint venture interest of approximately 30%.



<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 and Section 21E of the Securities
Exchange Act of 1934 that involve risks and uncertainties, including statements
regarding our capital needs, business strategy, expectations and intentions. We
urge you to consider that statements that 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 conduct our business primarily through our subsidiaries. Since
1998, our principal business was conducted through Rare Medium, Inc., which
developed Internet e-commerce strategies, business processes, marketing
communications, branding strategies and interactive content using
Internet-based technologies and solutions. A decision to discontinue Rare
Medium, Inc.'s operations was made at the end of the quarter.

     Through our investment business, we have historically made venture
investments by taking strategic minority equity positions in other independently
managed companies. Additionally, in the past, we have developed, managed and
operated companies in selected Internet-focused market segments ("Incubator
Companies"). During the first quarter of 2001, we reduced our focus on the
investment business and substantially ceased providing funding to our Incubator
Companies. Additionally, in April 2001, we sold a majority of our equity
interest in ChangeMusic Network ("CMJ") and ePrize, two of our Incubator
Companies.

     Currently, through our newly formed subsidiary, MSV Investors Holdings,
Inc., we expect to be an active participant in the Mobile Satellite Ventures
("MSV") joint venture, which includes TMI Communications, Inc., Motient
Corporation, Telcom Ventures, LLC, Columbia Capital and Spectrum Equity
Investors. MSV is a provider of mobile satellite services in North America,
providing its customers with digital voice and data services, including circuit
switched voice, nationwide voice and data dispatch, and packet data services.

     In addition to our joint venture interest in MSV, subject to closing,
our principal assets consist of our venture portfolio, 5,000,000 shares of
XM Radio common stock, a promissory note from Motient with a face value of
$26.2 million and cash.

     As a result of the decision to discontinue the operations of Rare
Medium, Inc. and LiveMarket, the reported operating results include the
operations of our Incubator Companies and our investment activities and not
those of Rare Medium, Inc. and LiveMarket.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO
THE THREE MONTHS ENDED SEPTEMBER 30, 2000

   REVENUES

     Revenues for the three months ended September 30, 2001 decreased to
approximately $25,000 from $2.3 million for the three months ended September 30,
2000, a decrease of approximately $2.3 million. Current period revenues are
driven by our remaining Incubator Companies. The decrease from the same period
of the prior year is due primarily to the sale of our majority interest in two
Incubator Companies in April 2001.



<Page>


   COST OF REVENUES

     Cost of revenues includes salaries, payroll taxes and related benefits and
other direct costs associated with the generation of revenues. Cost of revenues
for the three months ended September 30, 2001 decreased to approximately $2,000
from $0.9 million for the three months ended September 30, 2000, a decrease of
approximately $0.9 million. This decrease is due primarily to the sale of our
majority interest in two Incubator Companies in April 2001.

   SALES AND MARKETING EXPENSE

     Sales and marketing expense represents the actual costs associated with our
sales force, marketing and advertising. Sales and marketing expense for the
three months ended September 30, 2001 decreased to approximately $28,000 from
$3.6 million for the three months ended September 30, 2000, a decrease of
approximately $3.5 million. The decrease is primarily the result of the sale of
our majority interest in two Incubator Companies in April 2001.

   GENERAL AND ADMINISTRATIVE EXPENSE

     General and administrative expense includes facilities costs,
recruiting, training, finance, legal and other corporate costs, as well as
the salaries and related employee benefits for those employees that support
such functions. General and administrative expense for the three months
ending September 30, 2001 decreased to $2.7 million from $13.4 million for
the three months ended September 30, 2000, a decrease of $10.7 million.
This decrease was primarily related to the reduced infrastructure needed to
manage our continuing operations and the sale of our majority interest in
two Incubator Companies in April 2001, partially offset by the legal and
advisory costs associated with our terminated merger with Motient
Corporation. We expect these costs to continue to decrease as we reduce our
overhead.

   DEPRECIATION AND AMORTIZATION EXPENSE

     Depreciation and amortization expense substantially consists of the
depreciation of property and equipment. Depreciation and amortization
expense for the three months ended September 30, 2001 decreased to $0.4
million from $2.5 million for the three months ended September 30, 2000, a
decrease of $2.1 million. This decrease resulted primarily from the sale of
two Incubator Companies in April 2001, as well as the disposal of property
and equipment associated with our restructuring activities. As we have
reduced our capital expenditures and have written off all remaining
goodwill, we expect depreciation and amortization expense to decrease in
future periods.

   RESTRUCTURING CHARGES

     During the three months ended September 30, 2001, we recorded restructuring
charges of approximately $0.1 million primarily relating to the disposition of
property and equipment. These restructuring charges were the result of the
reduction of our infrastructure needed to manage our continuing operations.

   INTEREST INCOME, NET

     Interest income, net for the three months ended September 30, 2001 is
mainly comprised of the interest earned on our cash, cash equivalents, and
short-term investments, interest on our Motient promissory note, as well as the
accretion of the $48.5 million carrying value of the Motient promissory notes up
to the face value of $50.0 million over the terms of the notes.

   LOSS ON INVESTMENT IN AFFILIATES

     Loss on investments in affiliates consists primarily of $16.2 million for
the impairment to the carrying value of certain affiliates accounted for under
the cost method, $0.1 million for the realized loss on the sale of publicly
traded securities, $0.5 million for our proportionate share of affiliates'
operating losses and amortization of our net excess investment over our equity
in each affiliate's net assets for those affiliates accounted for under the
equity method and $1.4 million for the impairment of the goodwill and net assets
related to one of our Incubator Companies. We will continue to monitor the
carrying value our investments in affiliates for further impairment.



<Page>


   UNREALIZED LOSS ON DERIVATIVE INSTRUMENT

     At the purchase dates of the promissory notes from Motient, we ascribed
$1.5 million to the fair value of the exchange feature allowing us to convert
the notes to shares of XM Radio common stock held by Motient. We recognized an
unrealized gain of approximately $13.8 million as of June 30, 2001 related to
the increase in the fair value of the exchange feature. As a result of the
decrease in the price of XM Radio stock since June 30, 2001, we recognized an
unrealized loss of $15.3 million for the three months ending September 30, 2001
relating to a decrease in the fair value of the exchange feature.

   LOSS FROM DISCONTINUED OPERATIONS

     At the end of the quarter, a decision to discontinue the operations of
Rare Medium, Inc. and the LiveMarket subsidiary was made in light of their
performance and prospects. The wind-down of these businesses is expected to
be completed by the first quarter 2002. In connection with the
discontinuance of these businesses, we recorded a charge in the third
quarter of 2001 of $35.9 million related to severance and benefits
resulting from headcount reductions, an accrual for estimated losses of
$3.1 million during the wind-down period and the write-off of unamortized
goodwill and property and equipment, net of expected proceeds. The
remaining loss of $17.9 million resulted from operations prior to the
decision to discontinue the businesses.

   NET LOSS

     For the three months ended September 30, 2001, we recorded a net loss of
$87.0 million. The loss was primarily due to the factors described in "Cost of
Revenues," "General and Administrative Expense," "Sales and Marketing Expense,"
"Restructuring Charges," "Loss on Investments in Affiliates," "Unrealized Loss
on Derivative Instrument" and "Loss from Discontinued Operations."

     Included in net loss attributable to common shareholders of $90.0 million
was $3.0 million of non-cash deemed dividends and accretion related to the
issuance of our Series A convertible preferred stock. Dividends were accrued
related to the pay-in-kind dividends payable quarterly on Series A convertible
preferred stock and to the accretion of the carrying amount of the Series A
convertible preferred stock up to its $100 per share face redemption amount over
13 years.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO
THE NINE MONTHS ENDED SEPTEMBER 30, 2000

   REVENUES

     Revenues for the nine months ended September 30, 2001 decreased to $1.9
million from $5.6 million for the nine months ended September 30, 2000, a
decrease of $3.7 million. Current period revenues are driven by our remaining
Incubator Companies. The decrease from the prior year is due primarily to the
sale of our majority interest in two Incubator Companies in April 2001.

   COST OF REVENUES

     Cost of revenues includes salaries, payroll taxes and related benefits and
other direct costs associated with the generation of revenues. Cost of revenues
for the nine months ended September 30, 2001 decreased to $1.3 million from $4.0
million for the nine months ended September 30, 2000, a decrease of $2.7
million. This decrease is due primarily to the sale of our majority interest in
two Incubator Companies in April 2001.

   SALES AND MARKETING EXPENSE

     Sales and marketing expense represents the actual costs associated with our
sales force, marketing and advertising. Sales and marketing expense for the nine
months ended September 30, 2001 decreased to $1.3 million from $8.3 million for
the nine months ended September 30, 2000, a decrease of $7.0 million. The
decrease is primarily the result of the sale of our majority interest in two
Incubator Companies in April 2001.



<Page>

   GENERAL AND ADMINISTRATIVE EXPENSE

     General and administrative expense includes facilities costs,
recruiting, training, finance, legal and other corporate costs, as well as
the salaries and related employee benefits for those employees that support
such functions. General and administrative expense for the nine months
ending September 30, 2001 decreased to $14.2 million from $31.8 million for
the nine months ended September 30, 2000, a decrease of $17.6 million. This
decrease was primarily related to the reduced infrastructure needed to
manage our continuing operations and the sale of our majority interest in
two Incubator Companies in April 2001, partially offset by the legal and
advisory costs associated with our terminated merger with Motient
Corporation. We expect these costs to continue to decrease as we reduce our
overhead.

   DEPRECIATION AND AMORTIZATION EXPENSE

     Depreciation and amortization expense substantially consists of the
depreciation of property and equipment. Depreciation and amortization
expense for the nine months ended September 30, 2001 decreased to $3.0
million from $6.2 million for the nine months ended September 30, 2000, a
decrease of $3.2 million. This decrease resulted primarily from the sale of
two Incubator Companies in April 2001, as well as the disposal of property
and equipment associated with our restructuring activities. As we have
reduced our capital expenditures and have written off all remaining
goodwill, we expect depreciation and amortization expense to decrease in
future periods.

   RESTRUCTURING CHARGES

     During the nine months ended September 30, 2001, we recorded restructuring
charges of approximately $1.1 million primarily relating to the disposition of
property and equipment. These restructuring charges were the result of the
reduction of our infrastructure needed to manage our continuing operations.

   INTEREST INCOME, NET

     Interest income, net for the nine months ended September 30, 2001 is mainly
comprised of the interest earned on our cash, cash equivalents, and short-term
investments, interest on our Motient promissory note, as well as the accretion
of the $48.5 million carrying value of the Motient promissory notes up to the
face value of $50.0 million over the terms of the notes.

   LOSS ON INVESTMENT IN AFFILIATES

     Loss on investments in affiliates consists primarily of $31.8 million for
the impairment to the carrying value of certain affiliates accounted for under
the cost method, $3.2 million for the realized loss on the sale of publicly
traded securities, $2.7 million for our proportionate share of affiliates'
operating losses and amortization of our net excess investment over its equity
in each affiliate's net assets for those affiliates accounted for under the
equity method, and $4.1 million related to our incubator companies. We will
continue to monitor the carrying value our investments in affiliates for further
impairment.

   UNREALIZED LOSS ON DERIVATIVE INSTRUMENT

     At the purchase date of the promissory notes from Motient, we ascribed $1.5
million to the fair value of the exchange feature allowing us to convert the
notes to shares of XM Radio common stock held by Motient. As a result of the
decrease in the price of XM Radio stock since the purchase of the notes, we
recognized an unrealized loss of $1.5 million for the nine months ended
September 30, 2001 relating to the decrease in the fair value of the exchange
feature.

   LOSS FROM DISCONTINUED OPERATIONS

     At the end of the third quarter, a decision to discontinue the
operations of Rare Medium, Inc. and the LiveMarket subsidiary was made in
light of their performance and prospects. The wind-down of these businesses
is expected to be completed by the first quarter 2002. In connection with
the discontinuance of these businesses, we recorded a charge in the third
quarter of 2001 of $35.9 million related to severance and benefits
resulting from headcount reductions, an accrual for estimated losses of
$3.1 million during the wind-down period and the write-off of unamortized
goodwill and property and equipment, net of expected proceeds. The
remaining loss of $84.8 million resulted from operations prior to the
decision to discontinue the businesses.



<Page>

   NET LOSS

     For the nine months ended September 30, 2001, we recorded a net loss of
$174.8 million. The loss was primarily due to the factors described in "Cost of
Revenues," "General and Administrative Expense," "Sales and Marketing Expense,"
"Restructuring Charges," "Loss on Investments in Affiliates," "Unrealized Loss
on Derivative Instrument" and "Loss from Discontinued Operations."

     Included in net loss attributable to common shareholders of $183.7 million
was $8.9 million of non-cash deemed dividends and accretion related to the
issuance of our Series A convertible preferred stock. Dividends were accrued
related to the pay-in-kind dividends payable quarterly on Series A convertible
preferred stock and to the accretion of the carrying amount of the Series A
convertible preferred stock up to its $100 per share face redemption amount over
13 years.

LIQUIDITY AND CAPITAL RESOURCES

     We had $65.8 million in cash, cash equivalents, and short-term
investments as of September 30, 2001. Cash used in operating activities
from continuing operations was $8.4 million for the nine months ended
September 30, 2001 and resulted primarily from the loss before discontinued
operations of $54.0 million, partially offset by non-cash items of $45.5
million (which consists of depreciation, amortization, loss on investments
in affiliates, unrealized loss on derivative instrument, investments in
affiliates received for services rendered, non-cash restructuring charges
and non-cash interest) and changes in working capital. Cash used in
operating activities from discontinued operations was $27.0 for the nine
months ended September 30, 2001. We expect cash used in continuing
operations to decrease in future periods as we have reduced our
infrastructure needed to manage our remaining business activities and sold
our majority interest in two Incubator Companies in April 2001.

     Cash used in investing activities was $56.3 million, net of $10.7
million resulting from the net sale of short-term investments, for the nine
months ended September 30, 2001, which primarily consists of the $50.0
million used to purchase the promissory notes from Motient, cash paid for
venture investments of $6.2 million and capital expenditures of $3.7
million (including discontinued operations), partially offset by $3.6
million of cash received from the sale of investments in affiliates.
Capital expenditures have generally been comprised of purchases of computer
hardware and software, as well as leasehold improvements related to leased
facilities, and are not expected to increase at the same level in future
periods.

     In April 2001, we agreed to purchase from Motient 12.5% secured promissory
notes (the "Notes"), issuable in two tranches, each in the principal amount of
$25.0 million. The Notes were collateralized by 5,000,000 shares of XM Radio
common stock owned by Motient. The first tranche was purchased on April 4, 2001,
and the second tranche was purchased on July 16, 2001. The principal of and
accrued interest on the Notes were payable on October 1, 2001 in either cash,
shares of XM Radio, or any combination thereof at Motient's option, as set forth
in the agreement. At our option, the Notes may have been exchanged for a number
of XM Radio shares equivalent to the principal of the Notes and any accrued
interest thereon, as set forth in the agreement. As of June 30, 2001, we
recognized an unrealized gain of approximately $13.8 million related to the
increase in the fair value of the exchange feature allowing us to convert the
first tranche of the Notes to XM Radio shares. As a result of the decrease in
the price of XM Radio stock since June 30, 2001 and the $1.5 million value
ascribed to the exchange feature at the purchase date of the Notes, we
recognized an unrealized loss of $15.3 million for the three months ending
September 30, 2001 relating to a decrease in the fair value of the exchange
feature.

     On October 1, 2001, and again on October 8, 2001, we extended the maturity
date of the Notes. On October 12, 2001, in accordance with the terms of the
Notes, we received 5,000,000 shares of XM Radio as payment for $26.2 million of
the Notes and related interest. The maturity date for the remaining Notes in the
principal amount of approximately $26.2 million, and interest thereon, was
extended for 60 days. We may further extend the maturity date to October 12,
2002 upon satisfaction of certain conditions.

     In 2000, Rare Medium, Inc. entered into a strategic alliance
agreement, as amended, with the Partner to assist in the training of
personnel and development and delivery by Rare Medium, Inc. of solutions
built utilizing the Partner's technology. Under the terms of the alliance,
the Partner was to provide Rare Medium, Inc. with refundable advances of
approximately $17.1 million, on an interest free basis, to be paid to Rare
Medium, Inc., over the term of the two-year agreement, subject to Rare
Medium, Inc.'s compliance with certain requirements set forth in the
agreement. The amount and timing of the repayment of the advances may be
adjusted based on Rare Medium, Inc.'s achievement of certain milestones in
accordance with the terms of the agreement. The Partner and Rare Medium,
Inc. have a dispute as to whether certain milestones have been achieved.
Efforts at renegotiating the payment schedule and milestones were not
successful. In July 2001, Rare Medium, Inc. received a notice of
arbitration demand from the Partner seeking the return of the approximately
$8.6 million, plus interest, that had been advanced by the Partner, who has
asserted that the agreement has terminated. Rare Medium, Inc. intends to
contest the Partner's claims. There can be no assurance that Rare Medium,
Inc. will be successful in contesting this action and that accelerated
repayment, along with attorney's fees and interest, will not be required.

     Through our newly formed subsidiary, MSV Investors Holdings, Inc., we
expect to be an active participant in the MSV joint venture, which includes TMI
Communications, Inc., Motient Corporation, Telcom Ventures, LLC, Columbia
Capital and Spectrum Equity Investors. MSV is a provider of mobile satellite
services in North America, providing its customers with digital voice and data
services, including circuit switched voice, nationwide voice and data dispatch,
and packet data services. In October 2001, we committed to invest $50.0 million
in the MSV joint venture. The investment is contingent on customary approvals by
both the American and Canadian regulatory agencies. We will own approximately
30% of the joint venture interest in MSV.

     On June 29, 2001, we received a notice from the Nasdaq National Market that
our common stock had failed to maintain the required minimum closing bid price
of $1.00 for a period of 30 consecutive trading days. As a result, Nasdaq has
provided us 90 calendar days, or until September 27, 2001, to regain compliance
with this requirement or be delisted from trading on the Nasdaq National Market.
In order to regain compliance, the closing bid price of our common stock must
stay above $1.00 for 10 consecutive trading days. We were unable to gain
compliance with this requirement during this time period; however, on September
27, 2001, the Nasdaq suspended this requirement for all companies traded on the
Nasdaq until January 2, 2002. If we are unable to gain compliance with this
requirement during this time period, and any appeal to Nasdaq for relief from
this requirement is unsuccessful, our common stock will be delisted from trading
on the Nasdaq National Market. If this were to happen, trading in our common
stock would decrease substantially or cease altogether.

RECENTLY ISSUED ACCOUNTING STANDARDS

     In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, "Business Combinations" ("SFAS No. 141"). SFAS No. 141 requires the
purchase method of accounting for business combinations initiated after June 30,
2001 and eliminates the pooling-of-interests method. The adoption of SFAS No.
141 did not have a significant impact on our results of operations.

     In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets," ("SFAS No. 142") which is
effective January 1, 2002. SFAS No. 142 eliminates the current requirement to
amortize goodwill and indefinite-lived intangible assets and replaces the
amortization with an impairment test which must be performed at least annually.
For intangible assets with definite useful lives, SFAS 142 requires amortization
over their respective expected useful lives to their estimated residual values
and review for impairment in accordance with Statement of Financial Accounting
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." Additionally, SFAS No. 142 requires that a
transitional goodwill impairment test be completed six months from the date of
adoption. The adoption of SFAS No. 142 is not expected to have a significant
impact on our results of operations.

     In June 2001, the FASB issued Statement of Financial Accounting
Standards No. 143 ("SFAS No. 143"), "Accounting for Asset Retirement
Obligations," which is effective January 1, 2003. SFAS No. 143 addresses the
financial accounting and reporting for obligations and retirement costs
related to the retirement of tangible long-lived assets. The Company does
not expect that the adoption of SFAS No. 143 will have a significant impact on
its financial statements.

     In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 144 ("SFAS No. 144"), "Accounting for the Impairment or Disposal
of Long-Lived Assets," which is effective January 1, 2002. SFAS No. 144
supersedes FASB Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of," and the
accounting and reporting provisions relating to the disposal of a segment
of a business of Accounting Principles Board Opinion No. 30. The Company
does not expect that the adoption of SFAS No. 144 will have a significant
impact on its financial statements.

<Page>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to certain market risks from changes in the price of the XM
Radio publicly traded stock which was collateralizing our promissory notes from
Motient until October 12, 2001. As of September 30, 2001, we have purchased
$50.0 million of 12.5% promissory notes from Motient. Embedded within these
notes is an exchange feature that allows us to convert the notes to shares of XM
Radio owned by Motient at a ratio set forth in the purchase agreement. As of
June 30, 2001, we recognized an unrealized gain of approximately $13.8 million
related to the increase in the fair value of the exchange feature. As a result
of the decrease in the price of XM Radio stock since June 30, 2001 and the $1.5
million value ascribed to the exchange feature at the purchase date of the
notes, we recognized an unrealized loss of $15.3 million for the three months
ending September 30, 2001 relating to a decrease in the fair value of the
exchange feature.

     On October 12, 2001, in accordance with the terms of the notes, we
received 5,000,000 shares of XM Radio as payment for $26.2 million of the
notes and related interest. The maturity date for the remaining balance of
the notes in the principal amount of approximately $26.2 million, and
interest thereon, was extended for 60 days. We may further extend the
maturity date to October 12, 2002 upon satisfaction of certain conditions.
Any change in the market price of XM Radio stock could cause fluctuations
in our earnings.



<Page>

                                     PART II
                                OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     The Company is aware of a number of purported class action lawsuits that
have been filed by the holders of the Company's common stock in the Court of
Chancery of the State of Delaware challenging the proposed merger with Motient
Corporation. All of the complaints name the Company and members of the Company's
board of directors as defendants. Most of the complaints name the holders of the
Company's preferred stock, and certain of their affiliates, as defendants, and
some of the complaints name Motient as a defendant. On June 22, 2001, the
Delaware court entered an order to consolidate all of the Delaware lawsuits for
all purposes into a single purported class action, IN RE RARE MEDIUM GROUP, INC.
SHAREHOLDERS LITIGATION, C.A. No. 18879-NC. On August 7, 2001, a Consolidated
Amended Class Action Complaint was filed in Delaware Chancery Court. The
Delaware Chancery Court has not yet certified the consolidated lawsuit as a
class action. The lawsuit alleges that the defendants breached duties allegedly
owed to the holders of the Company's common stock in connection with the merger
agreement and sought to stop the merger and/or obtain monetary damages.

     The Company has and intends to continue vigorously contesting this lawsuit.
On October 19, 2001, the Company filed a motion to dismiss the Consolidated
Amended Class Action Complaint on a variety of grounds, including mootness.

     A purported class action was filed in New York, titled BRICKELL PARTNERS V.
RARE MEDIUM GROUP, INC., ET AL., N.Y.S. Index No. 01602694, in the New York
State Supreme Court, making similar allegations to the Consolidated Amended
Class Action Complaint in Delaware. A motion to dismiss the complaint is
currently pending.

     On May 16, 2001, plaintiffs Jay M. Wolff, David Bliss, Tim Barber and Steve
O'Brien filed suit against Rare Medium, Inc., ICC Technologies, Inc., and Rare
Medium Texas I, Inc. in the United States District Court for the Southern
District of New York, WOLFF, ET AL. V. RARE MEDIUM, INC., ET AL., CV No 01-4279.
The plaintiffs asserted claims for breach of contract, tortuous interference
with contractual relations, tortuous interference with prospective advantage,
and breach of implied obligation of good faith, arising out of the plaintiffs'
alleged attempt to engage in transactions involving some or all of the
approximately 1.2 million shares of the Company's common stock that the
plaintiffs obtained in the Company's acquisition of Big Hand, Inc. The
plaintiffs seek unspecified compensatory and punitive damages, interest,
attorneys' fees and costs. On October 31, 2001, the Court dismissed the case
without prejudice.

     In July 2001, Rare Medium, Inc. received a notice of arbitration the
Partner with whom it had entered a strategic alliance agreement, as amended
(the "Agreement"), to assist in the training of personnel and development
and delivery by Rare Medium, Inc. of solutions built utilizing the
Partner's technology. Under the terms of the Agreement, the Partner was to
provide Rare Medium, Inc. with refundable advances of approximately $17.1
million, on an interest free basis, to be paid to Rare Medium, Inc. over
the term of the two-year Agreement, subject to Rare Medium, Inc.'s
compliance with certain requirements set forth in the agreement. The amount
and timing of the repayment of the advances was subject to adjustment based
on Rare Medium, Inc.'s achievement of certain milestones in accordance with
the terms of the Agreement. A dispute arose with respect to Rare Medium,
Inc.'s achievement of the milestones. As a result, the Partner has asserted
that the Agreement has terminated and commenced an arbitration seeking the
return of all of the approximately $8.6 million that had been advanced
under the Agreement. Rare Medium, Inc. intends to contest the Partner's
claims. There can be no assurance that Rare Medium, Inc. will be successful
in contesting this action and that accelerated repayment, along with
attorney's fees and interest, will not be required.

     On July 23, 2001, plaintiff Microsoft Corporation filed suit against Rare
Medium, Inc. in the United States District Court for the Western District of
Washington, CO1-1130P. The plaintiff alleges breach of contract in connection
with a consulting agreement and an alliance agreement entered between the
parties seeking $2.3 million in damages, interest and attorney's fees. Rare
Medium, Inc. plans to defend the matter vigorously.



<Page>

ITEM 2.  CHANGES IN SECURITIES

     (a) Not applicable
     (b) Not applicable
     (c) Not applicable
     (d) Not applicable

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     Not applicable

ITEM 4.  SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None

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-K:

         None

     (b) The following sets forth the Company's reports on Form 8-K that have
         been filed during the quarter for which this report is filed:

         None



<Page>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.


Date: November 14, 2001                By:  /s/ GLENN S MEYERS
                                            ------------------------------------
                                            Glenn S. Meyers
                                            Chief Executive Officer


Date: November 14, 2001                By:  /s/ CRAIG C. CHESSER
                                            ------------------------------------
                                            Craig C. Chesser
                                            Vice President Finance and Treasurer
                                            (Principal Financial Officer)


Date: November 14, 2001                By:  /s/ MICHAEL A. HULTBERG
                                            ------------------------------------
                                            Michael A. Hultberg
                                            Vice President and Controller
                                            (Principal Accounting Officer)