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 June 30, 2002, 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           (I.R.S. Employer
 incorporation or organization)         (Identification Number)


             44 West 18th Street, 6th Floor
                New York, New York                              10011
         (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 August 9,
2002:

Voting Common Stock,                       6,682,901
par value $0.01 per share         Number of shares outstanding
        Class

Non-Voting Common Stock,                   8,990,212
par value $0.01 per share         Number of shares outstanding
        Class

                                    INDEX


Part I.  FINANCIAL INFORMATION
Item 1.  Consolidated Financial Statements
     Consolidated Balance Sheets as of December 31, 2001 and June 30, 2002
       (Unaudited)
     Unaudited Consolidated Statements of Operations - Three and six months
       ended June 30, 2001 and 2002
     Unaudited Consolidated Statements of Cash Flows - Six months ended
       June 30, 2001 and 2002
     Notes to Unaudited Consolidated Financial Statements
Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations
Item 3.  Quantitative and Qualitative Disclosures About Market Risk
Part II. OTHER INFORMATION
Item 1.  Legal Proceedings
Item 2.  Changes in Securities
Item 3.  Defaults Upon Senior Securities
Item 4.  Submission of Matters to a Vote of Security Holders
Item 5.  Other Information
Item 6.  Exhibits and Reports on Form 8-K
SIGNATURES




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

                                                                                         December 31,          June 30,
                                                                                             2001                2002
                                                                                        ---------------     ---------------
                                                                                                              (Unaudited)
                                        Assets
Current assets:
<S>                                                                                              <C>                <C>
   Cash and cash equivalents                                                                     $7,061             $13,164
   Short-term investments                                                                         9,746               6,756
                                                                                        ---------------     ---------------
     Total cash, cash equivalents and short-term investments                                     16,807              19,920
   Accounts receivable, net                                                                         572                  --
   Investment in XM Satellite Radio                                                              91,800              36,250
   Prepaid expenses and other current assets                                                        936                 666
                                                                                        ---------------     ---------------
     Total current assets                                                                       110,115              56,836

Property and equipment, net                                                                         169                  66
Note receivable from the Mobile Satellite Venture, L.P.                                          50,486              53,010
Notes receivable from Motient Corporation, net                                                       --                  --
Investments in affiliates                                                                         2,600               2,643
Other assets                                                                                        346                 183
                                                                                        ---------------     ---------------
       Total assets                                                                            $163,716            $112,738
                                                                                        ===============     ===============

                          Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable                                                                              $5,299              $3,915
   Accrued liabilities                                                                            9,428               8,315
   Other current liabilities                                                                     10,030                 157
                                                                                        ---------------     ---------------
     Total current liabilities                                                                   24,757              12,387
Other noncurrent liabilities                                                                         --                  --
                                                                                        ---------------     ---------------
       Total liabilities                                                                         24,757              12,387
                                                                                        ---------------     ---------------
Series A Convertible Preferred Stock, $.01 par value, net of unamortized
  discount of $45,768 and $43,572, respectively                                                  59,558              65,742
                                                                                        ---------------     ---------------
Minority interest                                                                                10,097              10,585
                                                                                        ---------------     ---------------
Stockholders' equity:
   Preferred stock, $.01 par value.  Authorized 10,000,000 shares; issued 1,053,259
     shares as Series A Convertible Preferred Stock at December 31, 2001 and
     1,093,142 shares at June 30, 2002                                                               --                  --
   Common stock, $.01 par value.  Authorized 200,000,000 shares; issued and
     outstanding 6,532,496 shares at December 31, 2001 and 6,535,163 shares at
     June 30, 2002                                                                                   65                  65
   Non-voting common stock, $.01 par value.  Authorized 100,000,000 shares; issued
     and outstanding nil shares at December 31, 2001 and 3,876,584 shares at June
     30, 2002                                                                                        --                  39
   Additional paid-in capital                                                                   530,543             536,684
   Accumulated other comprehensive income                                                        60,336               4,779
   Accumulated deficit                                                                         (521,469)           (517,372)
   Treasury stock, at cost, 6,622 shares                                                          (171)               (171)
                                                                                        ---------------     ---------------
       Total stockholders' equity                                                                69,304              24,024
                                                                                        ---------------     ---------------
       Total liabilities and stockholders' equity                                              $163,716            $112,738
                                                                                        ===============     ===============


                                See accompanying notes to unaudited consolidated financial statements.
</TABLE>

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

                                                           Three Months Ended June 30,         Six Months Ended June 30,
                                                         -------------- -- --------------   -------------- -- -------------
                                                             2001              2002             2001              2002
                                                         -------------     --------------   -------------     -------------
<S>                                                               <C>                <C>           <C>                  <C>
Revenues                                                          $260               $--           $1,862               $--
Cost of revenues                                                    32                --            1,335                --
                                                         -------------     -------------    -------------     -------------
   Gross profit                                                    228                --              527                --
Expenses:
   Sales and marketing                                             136                --            1,229                --
   General and administrative                                    6,123             1,028           11,499             3,641
   Depreciation and amortization                                   646                30            2,583                59
   Restructuring charges                                            34                --              946                --
                                                         -------------     -------------    -------------     -------------
     Total expenses                                              6,939             1,058           16,257             3,700
                                                         -------------     -------------    -------------     -------------
Loss from operations                                            (6,711)           (1,058)         (15,730)           (3,700)
Interest income, net                                             2,521             1,372            4,471             2,704
Loss on investments in affiliates                              (12,687)              (57)         (23,633)              (57)
Unrealized gain on derivative instrument                        13,800                --           13,800                --
Minority interest                                                   --              (248)              --              (488)
Other income, net                                                  481                10              339                14
                                                         -------------     -------------    -------------     -------------
(Loss) income before taxes and discontinued operations          (2,596)               19          (20,753)           (1,527)
Income tax benefit                                                  --                --               --               350
                                                         -------------     -------------    -------------     -------------
(Loss) income before discontinued operations                    (2,596)               19          (20,753)           (1,177)
Discontinued operations:
   Loss from discontinued operations                           (23,268)               --          (66,970)               --
   Gain from wind-down of discontinued operations                   --            11,458               --            11,458
                                                         -------------     -------------    -------------     -------------
       (Loss) gain from discontinued operations                (23,268)           11,458          (66,970)           11,458
                                                         -------------     -------------
Net (loss) income                                              (25,864)           11,477          (87,723)           10,281
   Cumulative dividends and accretion of convertible
     preferred stock to liquidation value                       (2,966)           (3,111)          (5,898)           (6,184)
                                                         -------------     -------------    -------------     -------------
Net (loss) income attributable to common stockholders         $(28,830)           $8,366         $(93,621)           $4,097
                                                         =============     =============    =============     =============
Basic and diluted (loss) earnings per share:
  Continuing operations                                         $(0.88)           $(0.30)          $(4.21)           $(0.87)
  Discontinued operations                                        (3.67)             1.11           (10.57)             1.36
                                                         -------------     -------------    -------------     -------------
     Net (loss) earnings per share                              $(4.55)            $0.81          $(14.78)            $0.49
                                                         =============     =============    =============     =============
  Weighted average common shares outstanding                 6,333,482        10,352,824        6,333,780         8,445,767
                                                         =============     =============    =============     =============


                                See accompanying notes to unaudited consolidated financial statements.

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

                                                                                        Six Months Ended June 30,
                                                                                     --------------------------------
                                                                                         2001              2002
                                                                                     -------------     --------------
Cash flows from operating activities:
   Net (loss) income                                                                     $(87,723)            $10,281
   Adjustments to reconcile net loss to net cash used in operating activities:
     Loss (gain) from discontinued operations                                              66,970             (11,458)
     Depreciation and amortization                                                          2,583                 59
     Loss on investments in affiliates                                                     23,633                 57
     Unrealized gain on derivative instrument                                             (13,800)                --
     Non-cash restructuring charges                                                           578                 --
     Non-cash interest, net                                                                  (639)                --
     Non-cash compensation benefit                                                             --               (215)
     Changes in assets and liabilities, net of sale of businesses:
       Accounts receivable                                                                    279                 17
       Prepaid expenses and other assets                                                      208             (2,178)
       Deferred revenue                                                                       666                 --
       Accounts payable, accrued and other liabilities                                      2,171                225
                                                                                     -------------     --------------
           Net cash used in continuing operations                                          (5,074)            (3,212)
           Net cash used in discontinued operations                                       (22,260)            (1,282)
                                                                                     -------------     --------------
           Net cash used in operating activities                                          (27,334)            (4,494)
Cash flows from investing activities:
   Cash paid for investments in affiliates                                                 (6,199)              (400)
   Cash received from investment in affiliates                                                 --                300
   Cash received from sale of investment in affiliates                                      3,360                 --
   Purchase of note receivable                                                            (25,000)                --
   Purchases of property and equipment                                                        (61)                --
   Purchases of short-term investments                                                    (55,433)            (4,267)
   Sales of short-term investments                                                         62,409              6,809
                                                                                     -------------     --------------
           Net cash (used in) provided by continuing operations                           (20,924)             2,442
           Net cash (used in) provided by discontinued operations                          (3,618)               500
                                                                                     -------------     --------------
           Net cash (used in) provided by investing activities                            (24,542)             2,942
Cash flows from financing activities:
   Proceeds from issuance of common stock, net of costs                                        --              7,652
   Proceeds from issuance of common stock in connection with the exercise of
     warrants and options                                                                      22                  3
                                                                                     -------------     --------------
           Net cash provided by financing activities                                           22              7,655
                                                                                     -------------     --------------
Net (decrease) increase in cash and cash equivalents                                      (51,854)             6,103
Cash and cash equivalents, beginning of period                                            113,018              7,061
                                                                                     -------------     --------------
Cash and cash equivalents, end of period                                                  $61,164            $13,164
                                                                                     =============     ==============


                                See accompanying notes to unaudited consolidated financial statements.
</TABLE>




                             RARE MEDIUM GROUP, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(1)      Description of the Business

         Rare Medium Group, Inc. (the "Company") historically has conducted
its business through its subsidiaries. From 1998 through the third quarter of
2001, 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. As a result of the weakening of
general economic conditions which caused many companies to reduce spending on
Internet-focused business solutions, a decision to discontinue Rare Medium,
Inc.'s operations, along with those of its LiveMarket, Inc. subsidiary
("LiveMarket"), was made at the end of the third quarter of 2001 (see Note 4).

         From 1999 through the first quarter of 2001, the Company 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 ("Start-up Companies"). During the first quarter of 2001, the Company
reduced its focus on these businesses and substantially ceased providing
funding to its Start-up Companies. Additionally, the Company sold a majority
of its equity interest in the operations of three of its Start-up Companies:
ChangeMusic Network ("ChangeMusic") and ePrize in April 2001 and Regards.com
in December 2001. Currently, the Company is no longer actively seeking new
start-up opportunities or venture investments, nor is it managing or operating
any Start-up Companies.

         As a result of the decision to discontinue the operations of Rare
Medium, Inc. and LiveMarket, the operating results reported in our statements
of operations as continuing operations include the consolidated results of the
Company, its 80% owned MSV Investors, LLC subsidiary ("MSV Investors
Subsidiary"), and its Start-up Companies through their respective dates of
sale or shutdown. The results of Rare Medium, Inc. and LiveMarket are
reflected as discontinued operations.

         In November 2001, through its MSV Investors Subsidiary, the Company
became a participant in the Mobile Satellite Venture, L.P. joint venture ("MSV
Joint Venture"), a joint venture that includes TMI Communications, Inc.,
Motient Corporation ("Motient"), and certain other investors (collectively,
the "Other MSV Investors"). The MSV Joint Venture is currently a provider of
mobile digital voice and data communications services via satellite in North
America. The Company expects to become an increasingly active participant in
the MSV Joint Venture and has designated three members of the 12-member board
of directors of the MSV Joint Venture's corporate general partner. In
addition, in May 2002, the Company became affiliated with Miraxis, LLC
("Miraxis"), a development stage company holding a series of licenses with
which it intends to provide satellite based multi-channel, broadband data and
video service in North America (see Note 7).

         In addition to winding down Rare Medium, Inc., the Company's current
operations consist of actively managing its interest in the MSV Joint Venture
and seeking other complimentary operational opportunities. The Company's
principal assets consist of its interest in the MSV Joint Venture, five
million shares of XM Satellite Radio, Inc. ("XM Satellite Radio") common stock
(see Note 6), a promissory note from Motient (see Note 3), its remaining
investments in its venture portfolio companies, and cash, cash equivalents and
short-term investments.

         The Company is headquartered in New York, New York.

(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, 2001 which are contained in the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The results of the three months and six months ended June 30, 2002
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. In addition,
all share data, including per share amounts, have been restated to give effect
to the one for ten reverse stock split completed on July 18, 2002 (see Note 9).

(3)      Notes Receivable from Motient

         On April 2, 2001, the Company agreed to purchase from Motient 12.5%
secured promissory notes, issuable in two tranches, each in the principal
amount of $25.0 million. The notes were collateralized by five million shares
of XM Satellite 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 Satellite Radio, or any
combination thereof at Motient's option, as set forth in the agreement. At the
option of the Company, the notes were exchangeable for a number of XM
Satellite Radio shares based on a formula, as set forth in the agreement.

         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 five million shares of XM
Satellite Radio as payment for $26.2 million of the notes and accrued
interest. The maturity date for the remaining balance of the Motient Notes in
the principal amount of approximately $26.2 million, and interest thereon, was
extended for 60 days. On January 10, 2002, Motient and its subsidiaries filed
for protection under Chapter 11 of the United States Bankruptcy Code. As part
of its filing, Motient indicated that it would likely challenge the Company's
right to the $26.2 million outstanding principal balance and accrued interest
thereon, as well as the delivery of the shares of XM Satellite Radio common
stock as partial repayment of the aggregate $50.0 million principal amount of
the Motient Notes. At December 31, 2001, as a result of uncertainty with
respect to the ultimate collection on the Motient Notes, a reserve was
recognized for the entire amount of these notes.

         On May 1, 2002, to mitigate the risk, uncertainties and expenses
associated with Motient's plan of reorganization, the Company cancelled the
outstanding amounts due under the notes and accepted a new note in the
principal amount of $19.0 million that was issued by a new wholly-owned
subsidiary of Motient that owns 100% of Motient's interests in the MSV Joint
Venture. The new note is due in three years and bears interest at a rate of 9%
per annum. As a result of the uncertainty with respect to the ultimate
collection on the new note, a reserve continues to be maintained for the
entire amount of the note.

(4)      Discontinued Operations

         At the end of the third quarter of 2001, 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 during 2002. As of June 30, 2002, the remaining
assets of Rare Medium, Inc. and LiveMarket totaled approximately $1.0 million,
consisting of cash (including cash collateralizing a letter of credit) and
other assets. The liabilities of these subsidiaries totaled approximately $5.9
million, consisting of accounts payable, accrued expenses and other current
liabilities. For the three months ended June 30, 2002, the Company recognized
a gain of $11.5 million as a result of the settlement of Rare Medium, Inc.
liabilities at amounts less than their recorded amounts (see Note 8).

(5)      Stockholders' Equity

         Common Stock Transactions

         In connection with the settlement of a purported class action lawsuit
(as described in Note 8), the Company distributed to each holder of record of
its common stock, warrants and preferred stock, as of the close of business on
May 16, 2002, one non-transferable right to purchase one additional share of
its common stock, for each share held, at a purchase price of $2.01 per
share. On July 11, 2002, the rights offering was approved by the Company's
stockholders and was concluded on July 16, 2002, with 9,138,105 shares of
common stock purchased for gross proceeds of $18.4 million (see Note 9).
Included in the rights offering, the Company's preferred stockholders
purchased 3,876,584 shares of non-voting common stock in April 2002 in the
advance purchase for total gross proceeds of $7.8 million as described in Note
8 and an additional 5,113,628 shares of non-voting common stock pursuant to
their over subscription privilege.

(6)      Investment in XM Satellite Radio

         The Company classifies its investment in XM Satellite Radio common
stock as an available-for-sale, marketable security and reports such
investment at fair value with net unrealized gains and losses recorded in
stockholders' equity. Gains and losses will be recognized in the accompanying
statements of operations when realized. At June 30, 2002, the reported value
of XM Satellite Radio in the accompanying balance sheet was approximately
$36.3 million, or $7.25 per share, resulting in an unrealized gain of
approximately $4.8 million. From January 1, 2002 to August 9, 2002, the market
price of XM Satellite Radio common stock traded in a range of $2.63 to $19.20
per share. As of the close of business on August 9, 2002, the market price of
XM Satellite Radio common stock was $2.80 per share.

(7)      Business Transaction

         On May 28, 2002, the Company acquired Series B Preferred Shares and a
warrant from Miraxis for approximately $0.4 million representing an
ownership on a fully diluted basis of approximately 37%. Miraxis is a
development stage, privately held telecommunications company that holds a
series of licenses with which it intends to provide satellite based
multi-channel, broadband data and video service in North America.
Additionally, the Company entered into a management support agreement with
Miraxis whereby the Company's Senior Vice President of Operations will provide
certain services to Miraxis through February 2003 in exchange for additional
Series B Preferred Shares and warrants. This investment is included in
"Investments in Affiliates" on the accompanying consolidated balance sheets
and is being accounted for under the equity method with the Company's share of
Miraxis' loss being recorded in "Loss on Investments in Affiliates" on the
accompanying consolidated statements of operations.

(8)      Contingencies

         Motient Notes

         On May 1, 2002, to mitigate the risk, uncertainties and expenses
associated with Motient's plan of reorganization, the Company cancelled the
outstanding amounts due under the Motient promissory notes and accepted a new
note in the principal amount of $19.0 million that was issued by a new
wholly-owned subsidiary of Motient that owns 100% of Motient's interests in
the MSV Joint Venture. As a result of uncertainty with respect to the ultimate
collection on the new note, the Company continues to maintain its reserve for
the entire amount of the note. If the Company recovers any amount on the new
note, adjustments to the reserve would be reflected as other income in the
accompanying consolidated statements of operations.

         Strategic Alliance

         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 were
adjustable based on Rare Medium, Inc.'s achievement of certain milestones in
accordance with the terms of the agreement. The Partner and Rare Medium, Inc.
had a dispute as to whether certain milestones were achieved. Efforts at
renegotiating the payment schedule and milestones were not successful. In July
2001, the Partner commenced an arbitration against Rare Medium, Inc. seeking
the return of the approximately $8.6 million, plus interest, that had been
advanced by the Partner. On May 6, 2002, Rare Medium, Inc. and the Partner
settled this dispute and certain related disputes with an affiliate of the
Partner, with Rare Medium, Inc. agreeing to pay the affiliate of the Partner
$0.9 million.

         Settlement of Purported Class Action Lawsuit

         A number of purported class action lawsuits were filed by the holders
of the Company's common stock in the Court of Chancery of the State of
Delaware challenging the plan of merger with Motient Corporation that was
ultimately terminated on October 1, 2001. 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.

         On April 2, 2002, the Company and its preferred stockholders entered
into a Stipulation of Settlement (the "Settlement") with the plaintiffs
relating to the purported class action lawsuit. In connection with the
Settlement, which is subject to court approval, the Company agreed to effect a
one for ten reverse stock split, to commence a rights offering and to take
certain other corporate actions. Also in connection with the Settlement, the
Company entered into an investment agreement with its preferred stockholders
who agreed to purchase in advance 3,876,584 of shares of the Company's
non-voting common stock. This purchase equals the number of shares of voting
common stock that they would otherwise have been entitled to purchase in the
rights offering, after giving effect to the cancellation of 20% of the
outstanding warrants in connection with the Settlement. An affiliate of the
preferred stockholders also commenced a cash tender offer for up to 1,500,291
shares of the Company's common stock on April 9, 2002.

         Reverse Split of our Common Stock. As part of the Settlement, the
Company agreed to effect a one for ten reverse stock split in order to assist
the Company in meeting the Nasdaq National Market's minimum closing bid price
requirement of $1.00 per share. The one for ten reverse stock split was
approved by the Company's stockholders on July 11, 2002 and became effective
on July 18, 2002 (see Note 9).

         Rights Offering. In the rights offering, the Company distributed to
each holder of record of common stock, warrants and preferred stock, as of the
close of business on May 16, 2002, one non-transferable right to purchase one
additional share of the Company's common stock, for each share held, at a
purchase price of $2.01 per share. The rights offering was concluded on July
16, 2002, with 9,138,105 shares of common stock purchased for total gross
proceeds of $18.4 million (see Note 9). Included in the rights offering, the
Company's preferred stockholders purchased 3,876,584 shares of non-voting
common stock in April 2002 in the advance purchase as described below and an
additional 5,113,628 shares of non-voting common stock pursuant to their over
subscription privilege.

         Advance Purchase by the Preferred Stockholders. Under an investment
agreement made in connection with the Settlement, the Company's preferred
stockholders purchased 3,876,584 shares of the Company's non-voting common
stock. This purchase equaled the number of shares of voting common stock that
the preferred stockholders would otherwise have been entitled to purchase in
the rights offering, after giving effect to the cancellation of 20% of the
outstanding warrants in connection with the Settlement. In connection with the
advance purchase, the preferred stockholders paid $2.01 per share for an
aggregate gross purchase price of approximately $7.8 million.

         Stipulation of Settlement. The Company and its preferred stockholders
have also agreed, among other things:

         o  that, in connection with the rights offering, the preferred
            stockholders will waive anti-dilution rights in their preferred
            stock and warrants with respect to the non-voting common stock
            acquired by the preferred stockholders in the advance purchase or
            their over-subscription privilege in the rights offering;

         o  subject to the final court approval of the Settlement, that 20% of
            the warrants held by the preferred stockholders to acquire shares
            of common stock will be cancelled; and

         o  subject to the final court approval of the Settlement, that the
            preferred stockholders will elect to receive dividends on their
            shares of preferred stock in the form of additional shares of
            preferred stock, in lieu of cash dividends, for any dividend
            payment date occurring after June 30, 2002 and on or prior to June
            30, 2004.

         Tender Offer. As part of the Settlement, on April 9, 2002, an
affiliate of the preferred stockholders commenced a cash tender offer at a
price of $2.80 per share for up to 1,500,291 shares, or approximately 23% of
the Company's outstanding common stock. In accordance with the Settlement, the
$2.80 per share tender offer price equaled 105% of the average closing prices
of the common stock for the five trading days prior to April 9, 2002. The
tender offer expired on May 10, 2002. The preferred stockholders agreed that
so long as any tendered shares are held by them or any of their affiliates,
the preferred stockholders and their affiliates will cause all such shares
held by them, which would otherwise entitle the preferred stockholders and
their affiliates, collectively, to cast more than 29.9% of voting power of our
outstanding capital stock, to be voted pro-rata with all other votes cast by
holders of common stock. The tender offer was intended to provide additional
liquidity for the Company's common stockholders and, thereby, provide near
term support for the market price of the Company's common stock in light of
the one for ten reverse stock split.

         Payment of Attorneys Fees and Expenses. As part of the Settlement,
the Company agreed to issue 357,142 shares of the Company's common stock
(worth $1.0 million based on the tender offer price of $2.80 per share) to the
plaintiff's counsel as attorney's fees and to pay them $0.1 million for
expenses. As of June 30, 2002, a reserve for the full amount of these fees and
expenses is included in accrued liabilities.

         Litigation

         On May 16, 2001, plaintiffs Jay M. Wolff, David Bliss, Tim Barber and
Steve O'Brien filed suit against Rare Medium, Inc., Rare Medium Group, 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, tortious
interference with contractual relations, tortious 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 (prior to the reverse stock split) that the plaintiffs obtained in the
Company's acquisition of Big Hand, Inc. The plaintiffs sought unspecified
compensatory and punitive damages, interest, attorneys' fees and costs. On
October 31, 2001, the Court dismissed the case without prejudice.

         Plaintiffs filed an amended complaint on December 7, 2001 based on
substantially the same alleged facts. The amended complaint asserts the
following causes of action: (1) breach of contract; (2) tortious interference
with contract; and, (3) tortious interference with prospective business
advantage. The amended complaint also sought an unspecified amount of actual
damages, punitive damages, interest, and costs. On June 27, 2002, the Court
dismissed the case with prejudice. On July 16, 2002, the plaintiffs filed a
notice of appeal. The Company intends to dispute any appeal vigorously.

         On November 19, 2001, five of the Company's shareholders filed a
complaint in the United States District Court for the Southern District of New
York against the Company, certain of its subsidiaries and certain of their
current and former officers and directors, Dovitz v. Rare Medium Group, Inc.
et al., No. 01 Civ. 10196. Plaintiffs became owners of restricted Company
stock when they sold the company that they owned to the Company. Plaintiffs
assert the following four claims against defendants: (1) common-law fraud; (2)
violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule
10b-5 promulgated thereunder; (3) violation of the Michigan Securities Act;
and (4) breach of fiduciary duty. These claims arise out of alleged
representations by defendants to induce plaintiffs to enter into the
transaction. The complaint seeks compensatory damages of approximately $5.6
million, exemplary and/or punitive damages in the same amount, as well as
attorney fees. On January 25, 2002, the Company filed a motion to dismiss the
complaint in its entirety. On June 3, 2002, the Court dismissed the matter
without prejudice. On or about July 17, 2002, the plaintiffs filed an amended
complaint asserting similar causes of action to those asserted in the original
complaint. The Company intends to dispute this matter vigorously.

         The Company and certain of its subsidiaries (and the Engelhard
Corporation) are parties to an arbitration relating to certain agreements that
existed between or among the claimant and ICC Technologies, Inc., the
Company's former name, and the Engelhard/ICC ("E/ICC") joint venture arising
from the desiccant air conditioning business that the Company and its
subsidiaries sold in 1998. The claimant has sought $8.5 million for (a) its
alleged out of pocket losses in investing in the E/ICC's technology, (b)
unjust enrichment resulting from the reorganization of E/ICC in 1998, and (c)
lost profits arising from the fact that it was allegedly forced to leave the
air conditioning business when the E/ICC joint venture was dissolved. The
claimants have indicated that they would accept a $1.6 million settlement. The
Company intends to vigorously dispute this action.

         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.

(9)      Subsequent Events

         Rights Offering and Reverse Stock Split

         In connection with the Settlement, the Company distributed to each
holder of record of its common stock, warrants and preferred stock, as of the
close of business on May 16, 2002, one non-transferable right to purchase one
additional share of its common stock, for each share held, at a purchase price
of $2.01 per share. On July 11, 2002, the rights offering was approved by the
Company's stockholders and was concluded on July 16, 2002, with 9,138,105
shares of common stock purchased for total gross proceeds of $18.4 million.
Included in the rights offering, the Company's preferred stockholders
purchased 3,876,584 shares of non-voting common stock in April 2002 in the
advance purchase described in Note 8 and an additional 5,113,628 shares of
non-voting common stock pursuant to their over subscription privilege.

         Also in connection with the Settlement, the Company agreed to effect
a one for ten reverse stock split in order to assist the Company in meeting
the Nasdaq National Market's minimum closing bid price requirement of $1.00
per share. The one for ten reverse stock split was approved by the Company's
stockholders on July 11, 2002 and became effective on July 18, 2002. All share
data in the accompanying consolidated financial statements, including per
share amounts, have been restated to give effect to this reverse stock split.

         MSV Joint Venture Rights Offering

         On August 13, 2002, the MSV Joint Venture held a rights offering
allowing its investors to purchase their pro rata share of an aggregate $3.0
million worth of newly issued convertible notes with terms similar to the
convertible note already held by the Company's 80% owned MSV Investors
Subsidiary. The MSV Investors Subsidiary exercised its basic and over
subscription rights and purchased approximately $1.1 million of the
convertible notes.

         Listing under Nasdaq National Market

         By letter dated May 16, 2002, Nasdaq notified the Company that the
closing bid price of our common stock had not exceeded the $1.00 minimum, and
accordingly, its common stock would be delisted from the Nasdaq National
Market for failure to satisfy the minimum bid price requirement. On May 17,
2002, the Company requested a hearing before the Nasdaq Listing Qualification
Panel. On June 20, 2002, the hearing was held in which the Company presented
its case for maintaining the listing of its common stock on the Nasdaq
National Market. At the hearing and in communication prior to the hearing, the
Company explained to Nasdaq that in order to regain compliance with the
requirements for continued listing on the Nasdaq National Market, its board of
directors had approved a one for ten reverse stock split, subject to
stockholder approval. On July 11, 2002, the Company's stockholders approved
the reverse stock split which became effective on July 18, 2002.

         On August 5, 2002, the Nasdaq appeal panel raised concerns and
requested additional information concerning the extent of the Company's
tangible business operations and stockholders' equity and sought updated
financial statements reflecting the impact of the rights offering and the
current value of its XM Satellite Radio common stock. The Company responded to
these requests on August 12, 2002. The Nasdaq appeal panel has not yet
informed the Company of its decision. If its common stock is delisted from the
Nasdaq National Market, the Company would seek to transfer the listing of its
common stock to the OTC Bulletin Board. However, trading on the OTC Bulletin
Board would result in a reduction in the liquidity and the trading volume of
the Company's common stock. This lack of liquidity would also make it
difficult for the Company to raise additional capital, if necessary. In
addition, the delisting of its common stock from the Nasdaq National Market
would result in an event of non-compliance under the provisions of the
Company's preferred stock. If the Company is unable to obtain a waiver of this
event of non-compliance, the preferred stockholders would be entitled to elect
a majority of the members of the board of directors which would provide them
with the ability to control management and policies.

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

         From 1998 through the third quarter of 2001, our principal business
was conducted through our subsidiary Rare Medium, Inc., which developed
Internet e-commerce strategies, business processes, marketing communications,
branding strategies and interactive content using Internet-based technologies
and solutions. As a result of the weakening of general economic conditions
which caused many companies to reduce spending on Internet-focused business
solutions, a decision to discontinue Rare Medium, Inc.'s operations, along
with those of its LiveMarket, Inc. subsidiary, was made at the end of the
third quarter of 2001.

         From 1999 through the first quarter of 2001, we made venture
investments by taking strategic minority equity positions in other
independently managed companies. Additionally, in the past, we have developed,
managed and operated our Start-up Companies. During the first quarter of 2001,
we reduced our focus on these businesses and substantially ceased providing
funding to our Start-up Companies. Additionally, we sold a majority of our
equity interest in the operations of three of our Start-up Companies:
ChangeMusic and ePrize in April 2001 and Regards.com in December 2001.
Currently, we are no longer actively seeking new start-up opportunities or
venture investments, nor are we managing or operating any Start-up Companies.

         As a result of the decision to discontinue the operations of Rare
Medium, Inc. and LiveMarket, the operating results reported in our statements
of operations as continuing operations include the consolidated results of
Rare Medium Group, Inc., our MSV Investors Subsidiary, and our Start-up
Companies, through their respective dates of sale or shutdown. The results of
Rare Medium, Inc. and LiveMarket are reflected as discontinued operations.

         In November 2001, through our MSV Investors Subsidiary, we became a
participant in the MSV Joint Venture, a joint venture which includes TMI
Communications, Inc., Motient and the Other MSV Investors. The MSV Joint
Venture is currently a provider of mobile digital voice and data
communications services via satellite in North America. We expect to become an
increasingly active participant in the MSV Joint Venture and have designated
three members of the 12-member board of directors of the MSV Joint Venture's
corporate general partner. In addition, in May 2002, we became affiliated with
Miraxis, a development stage company holding a series of licenses with which
it intends to provide satellite based multi-channel, broadband data and video
service in North America.

         In addition to winding down Rare Medium, Inc., our current operations
consist of actively managing our interest in the MSV Joint Venture and seeking
other complimentary operational opportunities. Our principal assets consist of
our interest in the MSV Joint Venture, five million shares of XM Satellite
Radio common stock, a promissory note from Motient Corporation, our remaining
investments in our venture portfolio companies and cash, cash equivalents and
short-term investments. As a result of uncertainty with respect to the
ultimate collection on the Motient notes, we recognized a reserve for the
entire amount of these notes. See "Liquidity and Capital Resources" under this
Item 2.

Results of Operations for the Three Months Ended June 30, 2002 Compared
to the Three Months Ended June 30, 2001

   Revenues

         Revenues for the three months ended June 30, 2002 decreased to nil
from approximately $0.3 million for the three months ended June 30, 2001, a
decrease of approximately $0.3 million. The decrease is the result of the sale
of our majority interest in the operations of three Start-up Companies in 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 three months ended June 30, 2002 decreased to nil
from approximately $32,000 for the three months ended June 30, 2001, a
decrease of approximately $32,000. The decrease is the result of the sale of
our majority interest in the operations of three Start-up Companies in 2001.

   Sales and Marketing Expense

         Sales and marketing expense primarily includes the costs associated
with the respective sales force of each Start-up Company, marketing and
advertising. Sales and marketing expense for the three months ended June 30,
2002 decreased to nil from approximately $0.1 million for the three months
ended June 30, 2001, a decrease of approximately $0.1 million. The decrease is
primarily the result of the sale of our majority interest in the operations of
three Start-up Companies in 2001.

   General and Administrative Expense

         General and administrative expense includes facilities costs,
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 ended June 30, 2002 decreased to
$1.0 million from $6.1 million for the three months ended June 30, 2001, a
decrease of $5.1 million. This decrease was primarily related to the reduced
infrastructure needed to manage our continuing operations and the sale of our
majority interest in the operations of three Start-up Companies in 2001. We
currently expect our general and administrative expense, as it relates to our
existing operations, to remain at this level in future periods.

   Depreciation and Amortization Expense

         Depreciation and amortization expense substantially consists of the
depreciation of property and equipment and amortization of intangible assets
as a result of the acquisitions of our Start-up Companies. Depreciation and
amortization expense for the three months ended June 30, 2002 decreased to
approximately $30,000 from $0.6 million for the three months ended June 30,
2001, a decrease of approximately $0.6 million. This decrease is primarily the
result of the sale or shutdown of the operations of our Start-up Companies in
2001 and 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 currently expect depreciation expense,
as it relates to our existing operations, to remain at this level in future
periods.

   Restructuring Charges

         For the three months ended June 30, 2002, we did not record any
restructuring charges. For the three months ended June 30, 2001, we recorded
restructuring charges of approximately $34,000 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 June 30, 2002 is
mainly comprised of the interest earned on our cash, cash equivalents, and
short-term investments and on our convertible note receivable from the MSV
Joint Venture.

   Loss on Investment in Affiliates

         For the three months ended June 30, 2002, we recorded a loss on
investments in affiliates of approximately $0.1 million, consisting of our
proportionate share of affiliates' operating losses and amortization of our
net excess investment over our equity in an affiliate's net assets accounted
for under the equity method. For the three months ended June 30, 2001, we
recorded a loss on investments in affiliates of $12.7 million, consisting
primarily of $8.2 million for the impairment to the carrying value of certain
affiliates accounted for under the cost method, $3.1 million for the realized
loss on the sale of publicly traded securities, $1.1 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 $0.3 million related to
our Start-Up Companies. We will continue to monitor the carrying value our
remaining investments in affiliates for further impairment.

   Unrealized Gain on Derivative Instrument

         In accordance with Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No.
133"), we recognized a gain of approximately $13.8 million for the three
months ended June 30, 2001 related to the increase in the fair value of the
exchange feature allowing us to convert the first tranche of the promissory
notes from Motient to shares of XM Radio common stock held by Motient.

   Minority Interest

         We received $10.0 million from unaffiliated persons as an investment
into our MSV Investors Subsidiary. Minority interest relates to the equity in
earnings, primarily the interest income earned on the $50.0 million
convertible note from the MSV Joint Venture, which is attributable to those
unaffiliated investors.

   (Loss) Gain from Discontinued Operations

         At the end of the third quarter of 2001, a decision to discontinue
the operations of Rare Medium, Inc. and its LiveMarket subsidiary was made in
light of their performance and prospects. The wind-down of these businesses is
expected to be completed during 2002. For the three months ended June 30,
2002, we recognized a gain of $11.5 million as a result of the settlement of
Rare Medium, Inc. liabilities at amounts less than their recorded amounts. For
the three months ended June 30, 2001, we recognized a loss from operations of
$23.3 million relating to these businesses.

   Net (Loss) Income

         For the three months ended June 30, 2002, we recorded net income of
$11.5 million. The net income was primarily due to the factors described in
"General and Administrative Expense," "Depreciation and Amortization Expense,"
"Interest Income, Net," "Minority Interest" and "(Loss) Gain from Discontinued
Operations."

         Included in net income attributable to common shareholders of $8.4
million was $3.1 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 Six Months Ended June 30, 2002 Compared to
the Six Months Ended June 30, 2001

   Revenues

         Revenues for the six months ended June 30, 2002 decreased to nil from
approximately $1.9 million for the six months ended June 30, 2001, a decrease
of approximately $1.9 million. The decrease is the result of the sale of our
majority interest in the operations of three Start-up Companies in 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 six months ended June 30, 2002 decreased to nil from
approximately $1.3 million for the six months ended June 30, 2001, a decrease
of approximately $1.3 million. The decrease is the result of the sale of our
majority interest in the operations of three Start-up Companies in 2001.

   Sales and Marketing Expense

         Sales and marketing expense primarily includes the costs associated
with the respective sales force of each Start-up Company, marketing and
advertising. Sales and marketing expense for the six months ended June 30,
2002 decreased to nil from approximately $1.2 million for the six months ended
June 30, 2001, a decrease of approximately $1.2 million. The decrease is
primarily the result of the sale of our majority interest in the operations of
three Start-up Companies in 2001.

   General and Administrative Expense

         General and administrative expense includes facilities costs,
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 six months ended June 30, 2002 decreased to
$3.6 million from $11.5 million for the six months ended June 30, 2001, a
decrease of $7.9 million. This decrease was primarily related to the reduced
infrastructure needed to manage our continuing operations and the sale of our
majority interest in the operations of three Start-up Companies in 2001,
partially offset by the legal and advisory costs associated with our
negotiations and settlement with the plaintiffs in the purported class action
lawsuit. We currently expect our general and administrative expense, as it
relates to our existing operations, to remain at this level in future periods.

   Depreciation and Amortization Expense

         Depreciation and amortization expense substantially consists of the
depreciation of property and equipment and amortization of intangible assets
as a result of the acquisitions of our Start-up Companies. Depreciation and
amortization expense for the six months ended June 30, 2002 decreased to
approximately $0.1 million from $2.6 million for the six months ended June 30,
2001, a decrease of approximately $2.5 million. This decrease is primarily the
result of the sale or shutdown of the operations of our Start-up Companies in
2001 and 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 currently expect depreciation expense,
as it relates to our existing operations, to remain at this level in future
periods.

   Restructuring Charges

         For the six months ended June 30, 2002, we did not record any
restructuring charges. For the six months ended June 30, 2001, we recorded
restructuring charges of approximately $1.0 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 six months ended June 30, 2002 is mainly
comprised of the interest earned on our cash, cash equivalents, and short-term
investments and on our convertible note receivable from the MSV Joint Venture.

   Loss on Investment in Affiliates

         For the six months ended June 30, 2002, we recorded a loss on
investments in affiliates of approximately $0.1 million, consisting of our
proportionate share of affiliates' operating losses and amortization of our
net excess investment over our equity in an affiliate's net assets accounted
for under the equity method. For the six months ended June 30, 2001, we
recorded a loss on investments in affiliates of $23.6 million, $15.6 million
for the impairment to the carrying value of certain affiliates accounted for
under the cost method, $3.1 million for the realized loss on the sale of
publicly traded securities, $2.2 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 $2.7 million related to our Start-Up
Companies. We will continue to monitor the carrying value our remaining
investments in affiliates for further impairment.

   Unrealized Gain on Derivative Instrument

         In accordance with SFAS No. 133, we recognized a gain of
approximately $13.8 million for the three months ended June 30, 2001 related
to the increase in the fair value of the exchange feature allowing us to
convert the first tranche of the promissory notes from Motient to shares of XM
Radio common stock held by Motient.

   Minority Interest

         We received $10.0 million from unaffiliated persons as an investment
into our MSV Investors Subsidiary. Minority interest relates to the equity in
earnings, primarily the interest income earned on the $50.0 million
convertible note from the MSV Joint Venture, which is attributable to those
unaffiliated investors.

   (Loss) Gain from Discontinued Operations

         At the end of the third quarter of 2001, a decision to discontinue
the operations of Rare Medium, Inc. and its LiveMarket subsidiary was made in
light of their performance and prospects. The wind-down of these businesses is
expected to be completed during 2002. For the six months ended June 30, 2002,
we recognized a gain of $11.5 million as a result of the settlement of Rare
Medium, Inc. liabilities at amounts less than their recorded amounts. For the
six months ended June 30, 2001, we recognized a loss from operations of $67.0
million relating to these businesses.

   Net Income

         For the six months ended June 30, 2002, we recorded net income of
$10.3 million. The net income was primarily due to the factors described in
"General and Administrative Expense," "Depreciation and Amortization Expense,"
"Interest Income, Net," "Minority Interest" and "(Loss) Gain from Discontinued
Operations."

         Included in net income attributable to common shareholders of $4.1
million was $6.2 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 $19.9 million in cash, cash equivalents and short-term
investments as of June 30, 2002. Cash used in operating activities from
continuing operations was $3.2 million for the six months ended June 30, 2002
and resulted primarily from cash used for general corporate overhead including
professional fees associated with the settlement of certain litigation
matters. Cash used in operating activities from discontinued operations was
$1.3 million for the six months ended June 30, 2002 which primarily relates to
settlements of existing liabilities and, to a lesser extent, legal fees
associated with the wind down of Rare Medium, Inc. and other businesses. We
expect cash used in continuing operations, as it relates to our existing
operations, to remain at approximately this level in future periods.

         Cash used in investing activities from continuing operations was $0.1
million, excluding the $2.5 million resulting from the net sale of short-term
investments, for the six months ended June 30, 2002, which primarily consists
of the $0.4 million used to purchase an investment in Miraxis, LLC, partially
offset by $0.3 million of cash received from an investment in an affiliate
with whom we had a dispute. We do not have any future funding commitments with
respect to any of our investments. However, on August 13, 2002, in connection
with the MSV Joint Venture rights offering, we purchased, through our MSV
Investors Subsidiary, $1.1 million of newly issued convertible notes with
terms similar to the convertible note already held by the MSV Investors
Subsidiary. Furthermore, we expect that the MSV Joint Venture will require
additional funding from time to time, and we may choose to exercise our
preemptive rights to provide our pro rata share of such funding, subject to
our liquidity and capital resources at the time.

         Cash provided by financing activities was $7.7 million for the six
months ended June 30, 2002, which primarily consists of the proceeds from the
advance purchase, by our preferred stockholders, of 3,876,584 shares of our
non-voting common that they would otherwise have been entitled to purchase as
part of the rights offering, partially offset by the costs of the rights
offering.

   Motient Promissory Note

         On May 1, 2002, to mitigate the risk, uncertainties and expenses
associated with Motient's plan of reorganization, we cancelled the
outstanding promissory notes with an aggregate principal amount of $26.2
million and accepted a new note in the principal amount of $19.0 million that
was issued by a new wholly-owned subsidiary of Motient that owns 100% of
Motient's interests in the MSV Joint Venture. The new note is due in three
years and bears interest at a rate of 9% per annum. As a result of uncertainty
with respect to the ultimate collection on the new note, we continue to
maintain a reserve for the entire amount of the note. If we recover any amount
on the new note, adjustments to the reserve would be reflected as other income
in the accompanying consolidated statements of operations.

   MSV Joint Venture Convertible Note Receivable

         Through our 80% owned MSV Investors Subsidiary, we are an active
participant in the MSV Joint Venture, a joint venture that includes TMI
Communications, Inc., Motient, and the Other MSV Investors. The MSV Joint
Venture is currently a provider of mobile digital voice and data
communications services via satellite in North America. On November 26, 2001,
through our MSV Investors Subsidiary, we purchased a $50.0 million interest in
the MSV Joint Venture in the form of a convertible note (the "MSV Note").
Immediately prior to the purchase of the convertible note, Rare Medium Group
contributed $40.0 million to the MSV Investors Subsidiary and a group of
unrelated third parties contributed $10.0 million. The MSV Note bears interest
at a rate of 10% per year, has a maturity date of November 26, 2006, and is
convertible at any time at the option of our MSV Investors Subsidiary into
equity interests in the MSV Joint Venture. The MSV Note automatically converts
into equity interests upon the MSV Joint Venture obtaining certain approvals
from the FCC and its Canadian equivalent, Industry Canada. Upon conversion,
our MSV Investors Subsidiary would own approximately 30.8% of the equity
interests in the MSV Joint Venture. However, in the event that the MSV Joint
Venture receives approval from the FCC by March 31, 2003 with regard to its
plans for a next-generation satellite system complemented by ancillary
terrestrial base stations, certain other investors in MSV are obligated to
invest an additional $50.0 million in the MSV Joint Venture and, thereafter,
our MSV Investors Subsidiary would own approximately 23.6% of the equity
interests in the MSV Joint Venture. The fair value of the MSV Note
approximates book value based on the equity value of the MSV Joint Venture's
recent funding transactions assuming conversion of such note.

         On August 13, 2002, the MSV Joint Venture held a rights offering
allowing its investors to purchase their pro rata share of an aggregate $3.0
million worth of newly issued convertible notes with terms similar to the
convertible note already held by our MSV Investors Subsidiary. The MSV
Investors Subsidiary exercised its basic and over subscription rights and
purchased approximately $1.1 million of the convertible notes.

   Rights Offering and Advance Purchase

         In connection with the settlement of the purported class action
lawsuit, we distributed to each holder of record of our common stock, warrants
and preferred stock, as of the close of business on May 16, 2002, one
non-transferable right to purchase one additional share of our common stock,
for each share held, at a purchase price of $2.01 per share. On July 11,
2002, the rights offering was approved by our stockholders and was concluded
on July 16, 2002, with 9,138,105 shares of our common stock purchased for
total gross proceeds of approximately $18.4 million. Included in the rights
offering, the preferred stock holders purchased 3,876,584 shares of
non-voting common stock in April 2002 in the advance purchase for total gross
proceeds of approximately $7.8 million and an additional 5,113,628 shares of
non-voting common stock pursuant to their over subscription privilege.

   Listing under the Nasdaq National Market

         By letter dated May 16, 2002, Nasdaq notified us that the closing bid
price of our common stock had not exceeded the $1.00 minimum, and accordingly,
our common stock would be delisted from the Nasdaq National Market for failure
to satisfy the minimum bid price requirement. On May 17, 2002, we requested a
hearing before the Nasdaq Listing Qualification Panel. On June 20, 2002, the
hearing was held in which we presented our case for maintaining the listing of
our common stock on the Nasdaq National Market. At the hearing and in
communication prior to the hearing, we explained to Nasdaq that in order to
regain compliance with the requirements for continued listing on the Nasdaq
National Market, our board of directors had approved a one for ten reverse
stock split, subject to stockholder approval. On July 11, 2002, our
stockholders approved the reverse stock split which became effective on July
18, 2002.

         On August 5, 2002, the Nasdaq appeal panel raised concerns and
requested additional information concerning the extent of our tangible
business operations and stockholders' equity and sought updated financial
statements reflecting the impact of the rights offering and the current vaue
of our XM Satellite Radio common stock. We responded to these requests on
August 12, 2002. The Nasdaq appeal panel has not yet informed us of their
decision. Despite our response and the reverse stock split, there can be no
assurances that the panel will not recommend that our common stock be delisted
from the Nasdaq National Market. If our common stock is delisted from the
Nasdaq National Market, we would seek to transfer the listing of our common
stock to the OTC Bulletin Board. However, trading on the OTC Bulletin Board
would result in a reduction in the liquidity and the trading volume of our
common stock. This lack of liquidity would also make it difficult for us to
raise capital. Furthermore, there can be no assurance that we would be
permitted to trade on the OTC Bulletin Board. In addition, the delisting of
our common stock from the Nasdaq National Market would result in an event of
non-compliance under the provisions of our preferred stock. If we are unable
to obtain a waiver of this event of non-compliance, the preferred stockholders
would be entitled to elect a majority of the members of our board of directors
which would provide them with the ability to control our management and
policies.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

         We are exposed to certain market risks from changes in the price of
the XM Satellite Radio publicly traded common stock. We account for our
investment in XM Satellite Radio common stock as an available-for-sale,
marketable security and report such investment at fair value with net
unrealized gains and losses recorded in stockholders' equity. Gains and losses
will be recognized in our statements of operations when realized. At June 30,
2002, the reported value of XM Satellite Radio common stock in our balance
sheet was approximately $36.3 million, or $7.25 per share, resulting in an
unrealized gain of approximately $4.8 million. Changes in the market price of
XM Satellite Radio common stock could cause fluctuations in our earnings and
financial position. From January 1, 2002 to August 9, 2002, the market price
of XM Satellite Radio common stock traded in a range of $2.63 to $19.20 per
share. As of the close of business on August 9, 2002, the market price of XM
Satellite Radio common stock was $2.80 per share.

                                    PART II
                               OTHER INFORMATION

Item 1.  Legal Proceedings

         A number of purported class action lawsuits were filed by the holders
of the Company's common stock in the Court of Chancery of the State of
Delaware challenging the plan of merger with Motient Corporation that was
ultimately terminated on October 1, 2001. 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. On April 2, 2002, the
Company entered into a Stipulation of Settlement, subject to court approval,
in which it agreed to effectuate a reverse stock split, commence a rights
offering and take certain other corporate actions. In connection with the
settlement, the Company agreed to issue 357,142 shares of the Company's common
stock (worth $1.0 million based on the tender offer price of $2.80 per share)
to the plaintiff's counsel as attorney's fees and pay the plaintiff's counsel
$0.1 million for expenses.

         On May 16, 2001, plaintiffs Jay M. Wolff, David Bliss, Tim Barber and
Steve O'Brien filed suit against Rare Medium, Inc., Rare Medium Group, 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, tortious
interference with contractual relations, tortious 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 (prior to the reverse stock split) that the plaintiffs obtained in the
Company's acquisition of Big Hand, Inc. The plaintiffs sought unspecified
compensatory and punitive damages, interest, attorneys' fees and costs. On
October 31, 2001, the Court dismissed the case without prejudice.

         Plaintiffs filed an amended complaint on December 7, 2001 based on
substantially the same alleged facts. The amended complaint asserts the
following causes of action: (1) breach of contract; (2) tortious interference
with contract; and, (3) tortious interference with prospective business
advantage. The amended complaint also sought an unspecified amount of actual
damages, punitive damages, interest, and costs. On June 27, 2002, the Court
dismissed the case with prejudice. On July 16, 2002, the plaintiffs filed a
notice of appeal. The Company intends to dispute any appeal vigorously.

         On November 19, 2001, five of the Company's shareholders filed a
complaint against the Company, certain of its subsidiaries and certain of
their current and former officers and directors in the United States District
Court for the Southern District of New York, Dovitz v. Rare Medium Group, Inc.
et al., No. 01 Civ. 10196.  Plaintiffs became owners of restricted Company
stock when they sold the company that they owned to the Company. Plaintiffs
assert the following four claims against defendants: (1) common-law fraud; (2)
violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule
10b-5 promulgated thereunder; (3) violation of the Michigan Securities Act;
and (4) breach of fiduciary duty. These claims arise out of alleged
representations by defendants to induce plaintiffs to enter into the
transaction. The complaint seeks compensatory damages of approximately $5.6
million, exemplary and/or punitive damages in the same amount, as well as
attorney fees. On January 25, 2002, the Company filed a motion to dismiss the
complaint in its entirety. On June 3, 2002, the Court dismissed the matter
without prejudice. On or about July 17, 2002, the plaintiffs filed an amended
complaint asserting similar causes of action to those asserted in the original
complaint. The Company intends to dispute this matter vigorously.

         The Company and certain of its subsidiaries (and the Engelhard
Corporation) are parties to an arbitration relating to certain agreements that
existed between or among the claimant and ICC Technologies, Inc., the
Company's former name, and the Engelhard/ICC ("E/ICC") joint venture arising
from the desiccant air conditioning business that the Company and its
subsidiaries sold in 1998. The claimant has sought $8.5 million for (a) its
alleged out of pocket losses in investing in the E/ICC's technology, (b)
unjust enrichment resulting from the reorganization of E/ICC in 1998, and (c)
lost profits arising from the fact that it was allegedly forced to leave the
air conditioning business when the E/ICC joint venture was dissolved. The
claimants have indicated that they would accept a $1.6 million settlement. The
Company intends to vigorously dispute this action.

         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 were
adjustable based on Rare Medium, Inc.'s achievement of certain milestones in
accordance with the terms of the agreement. The Partner and Rare Medium, Inc.
had a dispute as to whether certain milestones were achieved. Efforts at
renegotiating the payment schedule and milestones were not successful. In July
2001, the Partner commenced an arbitration against Rare Medium, Inc. seeking
the return of the approximately $8.6 million, plus interest, that had been
advanced by the Partner. On May 6, 2002, Rare Medium, Inc. and the Partner
settled this dispute and certain related disputes with an affiliate of the
Partner, with Rare Medium, Inc. agreeing to pay the affiliate of the Partner
$0.9 million.

Item 2.  Changes in Securities

(a)      Not applicable

(b)      Not applicable

(c)      On April 2, 2002, the Company sold 3,876,584 shares of its non-voting
         common stock, par value $0.01 per share, for cash proceeds
         of $7.8 million in a private placement under Section 4(2) of the
         Securities Act. The private placement was made to the holder of all
         of our preferred stock (the "Apollo Stockholders") pursuant to an
         investment agreement. The net proceeds from this offering will be
         used to supplement our cash resources, to satisfy our ongoing cash
         requirements, including general and administrative expenses, and to
         take advantage of business opportunities, including maintaining or
         increasing our stake in the MSV Joint Venture.

         Pursuant to the Investment Agreement, and approved by the Company's
         stockholders on July 11, 2002, the Apollo Stockholders are permitted
         to exchange their shares of non-voting common stock for shares of
         voting common stock only in the following two circumstances: (1) as
         part of a transfer of the Apollo Stockholders' holdings to a person
         not affiliated with the Apollo Stockholders, in an amount not to
         exceed 10% of our voting power, and such transferee, to the knowledge
         of the Apollo Stockholders, will not, as a result of the transfer,
         hold more than 15% of our voting power; and (2) at any time, so long
         as the voting power of the Apollo Stockholders, after giving effect
         to any such exchange, does not exceed 29.9% of the outstanding voting
         power which is the percentage of the outstanding voting power which
         the Apollo Stockholders were entitled to cast prior to the April 2,
         2002 advance purchase.

(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:

           Exhibit        Description
            Number

             10.1   -     Investment Agreement, dated as of April 2, 2002,
                          between the Company and the Apollo Stockholders,
                          which was filed as Exhibit 99.2 to the Company's
                          Current Report on Form 8-K, filed on April 4, 2002,
                          and is hereby incorporated by reference.

             10.2   -     Stipulation of Settlement in the matter of In Re
                          Rare Medium Group, Inc. Shareholders Litigation,
                          Consolidated C.A. No. 18879 NC, which was filed as
                          Exhibit 99.3 to the Company's Current Report on Form
                          8-K, filed on April 4, 2002, and is hereby
                          incorporated by reference.

             10.3   -     Senior Indebtedness Note in the amount of $19.0
                          million, dated May 1, 2002, issued by MVH Holdings,
                          Inc. to the Company.

             10.4   -     Employment Agreement, dated as of May 23, 2002,
                          between Rare Medium Group, Inc. and Jeffrey Leddy.

             99.1   -     Certification Pursuant to 18 U.S.C Section 1350,
                          as adopted pursuant to Section 906 of the
                          Sarbanes-Oxley Act of 2002.

(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:

         On April 4, 2002, the Company filed a report on Form 8-K (i)
         announcing and describing the settlement of a purported class action
         lawsuit filed in Delaware Chancery Court challenging the proposed
         merger between the Company and Motient Corporation, (ii) announcing
         the Company's intention to effectuate a one for ten reverse stock
         split and (iii) announcing the Company's intention to commence a
         rights offering.

         On May 13, 2002, the Company filed a report on Form 8-K (i)
         announcing that the Board of Directors had fixed May 16, 2002 as the
         record date for the special meeting of stockholders and (ii)
         stockholders of record at close of business on May 16, 2002 will
         receive rights to purchase additional shares of common stock in the
         rights offering.

         On May 17, 2002, the Company filed a report on Form 8-K announcing
         that it received notice from Nasdaq indicating that the Company
         failed to comply with the minimum bid price requirement for continued
         listing on the Nasdaq National Market and that it had requested a
         hearing to appeal the Nasdaq determination.


                                  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: August 14, 2002     By: /s/ GLENN S. MEYERS
                              -------------------------------------------------
                                  Glenn S. Meyers
                                  Chief Executive Officer

Date: August 14, 2002     By: /s/ CRAIG C. CHESSER
                              -------------------------------------------------
                                  Craig C. Chesser
                                  Senior Vice President Finance and Treasurer
                                  (Principal Financial Officer)

Date: August 14, 2002     By: /s/ MICHAEL A. HULTBERG
                              -------------------------------------------------
                                  Michael A. Hultberg
                                  Senior Vice President and Controller
                                  (Principal Accounting Officer)