PART I – FINANCIAL INFORMATIO N

ITEM 1. Condensed Consolidated Financial Statements

REMARK MEDIA, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



	June 30, 2013		December 31, 2012		September 30, 2013		December 31, 2012
Assets			(Restated)

Current assets
Cash and cash equivalents	$	1,576,381	$	1,355,332	$	415,289	$	1,355,332
Trade accounts receivable, net		122,962		101,865		119,699		101,865
Prepaid expenses and other current assets		1,076,300		503,256		1,099,176		503,256
Total current assets		2,775,643		1,960,453		1,634,164		1,960,453

Property and equipment, net		449,846		400,526		448,590		400,526
Investment in unconsolidated affiliate		229,929		452,636		229,929		452,636
Licenses to operate in China		100,000		100,000		100,000		100,000
Intangible assets, net		3,721,912		1,754,108		3,648,053		1,754,108
Goodwill		1,799,802		1,584,976		1,799,802		1,584,976
Other long-term assets		173,604		106,476		153,604		106,476
Total assets	$	9,250,736	$	6,359,175	$	8,014,142	$	6,359,175

Liabilities and Stockholders’ Equity

Current liabilities
Accounts payable	$	534,425	$	516,623	$	868,395	$	516,623
Advances from shareholder		85,745		85,745		85,745		85,745
Accrued expenses and other current liabilities		2,226,958		459,548		1,219,729		459,548
Derivative liability		478,765		277,646		640,676		277,646
Current portion of capital lease obligations		126,458		117,549		131,259		117,549
Total current liabilities		3,452,351		1,457,111		2,945,804		1,457,111

Long-term liabilities
Deferred tax liability		25,000		25,000		25,000		25,000
Other long-term liabilities		-		282,791		578,058		282,791
Capital lease obligations, less current portion		228,805		294,214		190,575		294,214
Long-term debt with related party		5,800,000		1,800,000
Long-term convertible debt with related party						5,800,000		1,800,000
Total liabilities		9,506,156		3,859,116		9,539,437		3,859,116

Stockholders’ equity
Stockholders’ equity (deficit)
Preferred stock, $0.001 par value; 1,000,000 shares authorized, none issued		-		-		-		-
Common stock, $0.001 par value; 20,000,000 shares authorized, 7,193,632 and 7,113,744 issued and outstanding at June 30, 2013 and December 31, 2012, respectively		7,194		7,114
Common stock, $0.001 par value; 20,000,000 shares authorized, 7,297,200 and 7,113,744 issued and outstanding at September 30, 2013 and December 31, 2012, respectively						7,297		7,114
Additional paid-in capital		108,685,526		107,300,077		107,747,836		107,300,077
Accumulated other comprehensive income (loss)		(1,024)		5,370		(2,916)		5,370
Accumulated deficit		(108,947,116)		(104,812,502)		(109,277,513)		(104,812,502)
Total stockholders’ equity		(255,420)		2,500,059
Total liabilities and stockholders’ equity	$	9,250,736	$	6,359,175
Total stockholders’ equity (deficit)						(1,525,296)		2,500,059
Total liabilities and stockholders’ equity (deficit)					$	8,014,142	$	6,359,175

See notes to condensed consolidated financial statements
The accompanying notes are an integral part of these condensed consolidated financial statements					The accompanying notes are an integral part of these condensed consolidated financial statements



	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
		2013		2012		2013		2012		2013		2012		2013		2012
			(Restated)				(Restated)
Operating revenue
Brands	$	663,163	$	33,003	$	871,328	$	57,114	$	133,703	$	263,119	$	1,066,312	$	320,233
Total revenue

Operating expenses
Sales and marketing		186,727		83,462		187,420		107,160		38,281		108,382		225,700		215,542
Content, technology and development		208,439		371,791		337,911		699,015		92,065		608,244		437,715		1,307,259
General and administrative		1,981,754		1,132,322		2,762,114		2,254,176		903,628		1,328,844		3,663,586		3,583,020
Depreciation and amortization expense		122,952		27,056		206,989		52,524		121,282		149,689		350,531		202,213
Total operating expenses		2,499,872		1,614,631		3,494,434		3,112,875		1,155,256		2,195,159		4,677,532		5,308,034

Operating loss		(1,836,709)		(1,581,628)		(2,623,106)		(3,055,761)		(1,021,553)		(1,932,040)		(3,611,220)		(4,987,801)

Other income (expense)
Gain (loss) on change in fair value of derivative liability		(218,361)		578,793		(201,119)		694,528		(161,911)		269,852		(363,030)		964,380
Interest expense		(113,191)		(2,441)		(157,545)		(27,125)		(110,363)		(11,505)		(267,908)		(38,630)
Other income (expense)		152		3,915		(5)		7,107
Other expense										(141)		(14,876)		(146)		(7,769)
Total other income (expense)		(331,400)		580,267		(358,669)		674,510		(272,415)		243,471		(631,084)		917,981

Loss before gain (loss) from equity-method investments		(2,168,109)		(1,001,361)		(2,981,775)		(2,381,251)		(1,293,968)		(1,688,569)		(4,242,304)		(4,069,820)

Change of interest gain of equity-method investment		-		(894,502)		-		(1,813,382)		-		-		-		2,494,990
Proportional share in loss of equity-method investment		-		302,235		(222,707)		2,494,990		-		(739,704)		(222,707)		(2,553,086)

Net gain (loss) from equity-method investment		-		(592,267)		(222,707)		681,608
Net loss from equity-method investment										-		(739,704)		(222,707)		(58,096)

Loss before benefit from income taxes		(2,168,109)		(1,593,628)		(3,204,482)		(1,699,643)
Loss before income taxes										(1,293,968)		(2,428,273)		(4,465,011)		(4,127,916)

Income tax (benefit) expense		-		-		-		-		-		-		-		-

Net loss	$	(2,168,109)	$	(1,593,628)	$	(3,204,482)	$	(1,699,643)	$	(1,293,968)	$	(2,428,273)	$	(4,465,011)	$	(4,127,916)

Net loss per share
Net loss per share, basic and diluted	$	(0.30)	$	(0.25)	$	(0.45)	$	(0.28)	$	(0.18)	$	(0.38)	$	(0.62)	$	(0.68)

Basic and diluted weighted average shares outstanding		7,193,632		6,414,200		7,193,632		6,089,553		7,224,810		6,414,200		7,224,810		6,089,553

Comprehensive loss
Net loss	$	(2,168,109)	$	(1,593,628)	$	(3,204,482)	$	(1,699,643)	$	(1,293,968)	$	(2,428,273)	$	(4,465,011)	$	(4,127,916)
Cumulative translation adjustments		(2,434)		1,179		(6,394)		(4,554)		(1,891)		1,179		(8,286)		(3,182)

Total comprehensive loss	$	(2,170,543)	$	(1,592,449)	$	(3,210,876)	$	(1,704,197)	$	(1,295,859)	$	(2,427,094)	$	(4,473,297)	$	(4,131,098)

See notes to condensed consolidated financial statements
The accompanying notes are an integral part of these condensed consolidated financial statements									The accompanying notes are an integral part of these condensed consolidated financial statements



	Six Months Ended June 30,				Nine Months Ended September 30,
	2013		2012		2013		2012

Cash flows from operating activities:
Net cash used in operating activities	$	(1,054,324)	$	(2,230,677)	$	(2,649,463)	$	(3,698,125)
Cash used in operating activities		(1,054,324)		(2,230,677)		(2,649,463)		(3,698,125)

Cash flows from investing activities:
Purchases of property, equipment and software		(10,335)		(451,834)		(120,135)		(641,782)
Cash paid for acquisition		(2,375,000)		(371,189)		(2,375,000)		(346,189)
Other long-term, net		(282,791)		-
Other long-term assets and liabilities, net						295,267		-
Cash used in investing activities		(2,668,126)		(823,023)		(2,199,868)		(987,971)

Cash flows from financing activities:
Proceeds from issuance of equity securities/debt		4,000,000		4,251,500
Proceeds from issuance of equity securities						-		4,251,500
Proceeds from issuance of convertible debt						4,000,000		-
Payment of capital leases		(56,500)		-		(89,930)		-
Stock issuance costs		-		(401,049)		-		(401,049)
Cash flows from financing activities		3,943,500		3,850,451		3,910,070		3,850,451

Net change in cash and cash equivalents		221,049		796,751		(939,260)		(835,645)
Impact of foreign currency translation on cash		-		(788)		(783)		(3,182)
Cash and cash equivalents at beginning of period		1,355,332		1,531,502		1,355,332		1,531,502
Cash and cash equivalents at end of period	$	1,576,381	$	2,327,465	$	415,289	$	692,675


	Six Months Ended June 30,				Nine Months Ended September 30,
	2013		2012		2013		2012

Supplemental disclosure of cash flow information

Other non-cash financing and investing activities
Debt issuance costs	$	-	$	133,567
Stock issuance costs in the form of warrants					$	-	$	133,567
Common shares issued for acquisition of business					$	-	$	2,387,708

See notes to condensed consolidated financial statements
The accompanying notes are an integral part of these condensed consolidated financial statements					The accompanying notes are an integral part of these condensed consolidated financial statements

Table of Contents

REMARK MEDIA INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2013 and 2012

(Unaudited)

1. DESCRIPTION OF BUSINESS

Principal Operations

Remark Media, Inc. (“Remark Media” or the “Company”) is a global digital media company focusing on the 18-to-34 year old demographic in primarily Asia and the United States with properties focused on Young Adult Lifestyle: Bikini.com; Personal Finance: DimeSpring.com, Banks.com, US Tax Center at IRS.com, FileLater, and MyStockFund; and International: BoWenWang and ComoTudoFunciona. We believe that we are one of the few publicly listed media companies targeting this highly sought after demographic; we will both organically develop new business through our assets and look to make acquisitions in verticals attractive to this demographic such as film, music, fashion, travel, and on-line gaming. The Company is incorporated in Delaware ~~and headquartered in Atlanta,~~ with ~~operations~~headquarters in Las Vegas and operations in Atlanta, Miami, Beijing and São Paulo. Remark Media is listed on The NASDAQ Capital Market.

Pop Factory Acquisition

On March 29, 2013, Remark Media acquired Pop Factory, LLC ("Pop Factory"), the owner and operator of Bikini.com, a digital beach lifestyle brand providing websites, branded merchandise, and mobile content, for total cash consideration of $2,375,000. In connection with the purchase, the two founders, who had remained executives of Pop Factory, entered into one year employment agreements with Pop Factory and noncompetition agreements with the Company. Bikini.com relaunched earlier this year, as a beach lifestyle destination, bringing fresh editorial and fashion content year-round. Additionally, Bikini.com will introduce retail e-commerce for swimwear and accessories in November 2013.

Banks.com Merger

On February 26, 2012, the Company entered into an agreement and plan of merger with Banks.com, Inc. (“Banks.com”), pursuant to which Banks.com became a wholly-owned subsidiary of Remark Media (the “Banks.com Merger”). Banks.com is a leading financial services portal operating a unique breadth and depth of financial products and services. The Company completed the acquisition on June 28, 2012 pursuant to which Remark Media issued approximately 702,267 shares of Common Stock to the shareholders of Banks.com, and paid $300,000 in cash, as consideration for the merger. Also, on the effective date of the merger, the Company paid $131,250 in settlement of a promissory note in the amount of $125,000 (and related unpaid interest), which matured on June 28, 2012.

Sale of Intersearch Corporate Services

On August 2, 2012 Remark Media sold Intersearch Corporate Services, Inc, a subsidiary of Banks.com, for a minimal consideration to better focus its resources on the Company’s core strategy.

Funding and Liquidity Considerations

As of ~~June~~September 30, 2013, the Company’s total cash and cash equivalents balance was approximately ~~$1.6~~$0.4 million.

The Company has incurred net losses and generated negative cash flow from operations in the ~~six~~nine months ended ~~June~~September 30, 2013 and in each fiscal year since its inception and has an accumulated deficit of ~~$108.6~~$109.3 million as of ~~June~~September 30, 2013. The ~~Company had minimal~~Company's revenues inwere $1.1 million for the ~~first two quarters of~~nine months ended September 30, 2013 ~~due to its transition to~~generated principally from owning and operating its own digital media properties. The Company has been focused on building and acquiring wholly-owned digital media properties.

On April 2, 2013, the Company entered into a $4.0 million Promissory Note, at a 6.67% annual interest rate for the first year and 8.67% for the second year, with a lender controlled by and in part owned by Mr. Kai-Shing Tao, the Company’s Chairman and Chief Executive Officer. The Promissory Note is secured pursuant to the Term Loan Agreement detailed below, as amended by Amendment Number One to that Term Loan Agreement, dated April 2, 2013. The principal and accrued interest under the Promissory Note is convertible into Common Stock of the Company at the rate of $2.00 per share, which represents an approximately 11% premium to the average of the volume weighted average prices of the Company’s common stock for the ten trading days prior to the entrance into the agreement and an approximately 16% premium to the closing price of the Company's common stock on the day of entrance into the agreement. The balance is due April 2015.

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REMARK MEDIA INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2013 and 2012

(Unaudited)

On November 23, 2012, the Company entered into a $1.8 million Term Loan Agreement, ~~with net proceeds of $1.7 million,~~ at a 6.67% annual interest rate with a lender controlled by and in part owned by Mr. Kai-Shing Tao, the Company’s Chairman and ~~Co-Chief~~Chief Executive Officer. Mr. Tao has been a director of the Company since 2007. The Term Loan is secured by substantially all the tangible and intangible assets of the Company, excluding its shares of common stock of Sharecare. The principal and accrued interest under the Term Loan Agreement is convertible into Common Stock of the Company at the rate of $1.30 per share, which represents an approximately 33% premium to the average closing prices of the Company’s common stock for the ten days prior to entrance into the agreement and an approximately 53% premium to the closing price of the Company’s common stock on the day of entrance into the agreement. The balance is due November 2014.

On November 12, 2013, Digipac, LLC notified the Company that it wished to convert the entire principal amounts of both the November 2012 Note and the April 2013 Note, and all accrued and unpaid interest thereon, into shares of the Company’s common stock, effective as of the same day. This conversion resulted in the issuance of 3,556,672 shares of the Company’s common stock to Digipac, LLC, and the extinguishing of a total of $5.8 million in debt issued by the Company and the approximately $281,236 in accrued and unpaid interest.

~~Table~~On November 14, 2013, the Company's total cash and cash equivalents balance was approximately $2.7 million. On November 13, 2013, the Company entered into a $2.5 million Term Loan Agreement, at 6.67% annual interest rate for the first year and 8.67% for the second year, with a lender controlled by and in part owned by Mr. Kai-Shing Tao, the Company's Chairman and Chief Executive Officer. The Term Loan Agreement is secured pursuant to the Term Loan Agreement detailed below, as amended by Amendment No. 2 to that Term Loan Agreement, dated April 2, 2013. The principal and accrued interest under the Term Loan Agreement is convertible into Common Stock of ~~Contents~~

~~REMARK MEDIA INC. and SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~For~~ the ~~Three and Six Months Ended June 30, 2013 and 2012~~

~~(Unaudited)~~Company at the rate of $3.75 per share, which was the closing price of the Company's common stock on the date of entrance into the agreement. The balance is due November 2015.

The Company intends to fund its future operations through ~~revenue~~ growth, particularly its ~~youth~~young adult lifestyle and personal finance properties. Additionally, the Company is actively engaged in evaluating future acquisitions to provide revenue growth and the sale of certain non-core assets to provide capital. The Company has taken steps to reduce operating costs and will continue to evaluate other opportunities to ~~control~~streamline costs.

Absent any acquisitions of new businesses or the material increase in revenues from its existing customers, current revenue growth ~~may~~will not be sufficient to sustain the Company’s operations in the long term. As such, the Company will, in all likelihood, need to obtain additional equity or debt financing and/or divest of certain assets or businesses, neither of which can be assured on commercially reasonable terms, if at all. In addition, any equity financing that might be obtained ~~would~~may substantially dilute existing stockholders. There is no certainty that the Company will be successful at raising capital, nor is there certainty around the amount of funds that may be raised. In addition, the success of the Company will be subject to performance of the markets and investor sentiment regarding the macro and micro economic conditions under which we operate including stock market volatility. There can be no assurance that the Company will be successful at generating more revenues or selling any of its assets. Any failure by the Company to successfully implement these plans would have a material adverse effect on the Company’s business, including the possible inability to continue operations.

If the November 2012 $1.8 million and the April 2013 $4 million convertible note financings are not converted into common stock of the Company, or if the Company’s shareholders do not approve the ability of the April 2013 $4 million convertible note to convert into common stock of the Company, the Company may be unable to repay such notes when either they or their interest payments become due in November 2014 and April 2015, respectively.

Based on the ~~Company’s current financial~~most recent cash flow projections, the Company believes it has sufficient existing cash and cash equivalents and cash resources as of November 14, 2013 to ~~fund operations~~provide sufficient funds through ~~December 2013.~~July 1, 2014. However, the projecting operating results is inherently uncertain. Anticipated expenses can exceed those that are projected. ~~Accordingly, the Company’s cash resources could be fully utilized prior to December 2013.~~

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation

The accompanying interim condensed consolidated financial statements for the three and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012 are unaudited. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for financial information have been omitted pursuant to the rules and regulations of Article 10 of SEC Regulation S-X. In the opinion of management, these condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary to state fairly the financial position, results of operations and cash flows for the periods indicated. The December 31, 2012 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. Operating results for the three and ~~six~~nine months ended ~~June~~September 30, 2013 are not necessarily indicative of results that may be expected for any other future interim period or for the year ending December 31, 2013. You should read the unaudited condensed

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REMARK MEDIA INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2013 and 2012

(Unaudited)

consolidated financial statements in conjunction with Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, as well as with Remark Media’s condensed consolidated financial statements and accompanying notes included in the Company’s Form 10-Q/A and Form 10-Q for the ~~quarter~~quarters ended March 31, 2013 and ~~the Annual Report on~~June 30, 2013, respectively, and Form ~~10-K~~10-K/A for the year ended December 31, 2012.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Remark Media and its subsidiaries (1) HSW Brasil – Tecnologia e Informação Ltda., (2) HSW (HK) Inc. Limited, (3) Bonet (Beijing) Technology Limited Liability Company, (4) BoWenWang Technology (Beijing) Limited Liability Company, (5) Banks.com, Inc., (6) My Stock Fund Securities, Inc., (7) Dotted Ventures, and (8) Pop Factory, LLC ("Pop Factory"). Banks.com, MyStockFund and DottedVentures are wholly-owned subsidiaries acquired through the Banks.com’s acquisition completed on June 28, 2012. Pop Factory is a wholly-owned subsidiary acquired through the Pop Factory acquisition completed on March 29, 2013. The equity of certain of these entities is partially or fully held by citizens of the country of incorporation to comply with local laws and regulations.

Equity investments in which the Company exercises significant influence but does not control and is not the primary beneficiary are accounted for using the equity method. In the event of a change in ownership, any gain or loss resulting from an investee share issuance is recorded in earnings. Investments in which the Company is not able to exercise significant influence over the investee are accounted for under the cost method. Controlling interest is determined by majority ownership interest and the ability to unilaterally

~~Table of Contents~~

~~REMARK MEDIA INC. and SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~For the Three and Six Months Ended June 30, 2013 and 2012~~

~~(Unaudited)~~

direct or cause the direction of management and policies of an entity after considering any third-party participatory rights. All inter-company accounts and transactions between condensed consolidated companies are eliminated in consolidation.

The Company uses qualitative analysis to determine whether or not it is the primary beneficiary of a variable interest entity ("VIE") in accordance with FASB ASC 810-10, "Consolidation Accounting for a Variable Interest Entity" ("FASB ASC 810"). The Company considers the rights and obligations conveyed by its implicit and explicit variable interest in each VIE and the relationship of these with the variable interests held by other parties to determine whether the variable interests will absorb a majority of a VIE’s expected losses, receive a majority of its expected residual returns, or both. If the Company determines that its variable interests will absorb a majority of the VIE’s expected losses, receive a majority of its expected residual returns, or both, it consolidates the VIE as the primary beneficiary, and if not, the Company does not consolidate.

The Company has determined that Bonet (Beijing) Technology Limited Liability Company is a variable interest entity as defined in FASB ASC 810. Remark Media is the primary beneficiary of this entity and accordingly, the results of this entity have been consolidated along with other subsidiaries.

Significant Accounting Policies

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. On an ongoing basis, the Company evaluates its estimates, including those related to accounts receivable, intangible assets, useful lives of property and equipment, stock-based compensation, equity-method investments, and income taxes, among other things.

Revenue Recognition

The Company generally recognizes revenue when a persuasive evidence of an arrangement exists; services have been provided; fees are fixed or determinable; and collectability is reasonably assured.

The Company generally recognizes revenue from its network of digital media businesses, which includes properties focused on Young Adult Lifestyle: Bikini.com; Personal Finance:DimeSpring.com, Banks.com, US Tax Center at IRS.com, FileLater, ~~MyStockFund,~~ and ~~Bikini.com.~~MyStockFund; and International: BoWenWang and ComoTudoFunciona. Revenue is recognized as visitors are exposed to or react to advertisements on its ~~websites.~~websites, or purchase goods or services. Revenue from advertising is generated in the form of sponsored links and ~~image~~display ads. This includes both pay-per-performance ads and paid-for-impression advertising. In the pay-per-performance model, revenue is generally earned based on the number of clicks or other actions taken associated with such ads; in the paid-for-impression model, revenue is derived from the display of ads.

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REMARK MEDIA INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2013 and 2012

(Unaudited)

The Company generally recognizes services revenue during the period services related to the design, development, hosting, and related web services are performed. Revenue is recorded on a gross versus net basis when Remark Media bears the risk of loss related to the services performed, the majority of which relates to services performed by the Company’s resources. The Company may also recognize content and platform services revenue on certain projects using a percentage of completion method. Sales are calculated based on the total costs incurred to date divided by total estimated costs at completion times the contract price.

Operating Expenses

In light of the change in RemarkMedia’s business strategy, the Company revised the presentation of operating expenses in its condensed consolidated statements of operations and completed the reclassification of the condensed consolidated statements of operations for the prior year periods presented. Beginning with the second quarter 2012, the Company’s operating expenses reflect sales and marketing; content, technology and development; general and administrative; and depreciation and amortization. Sales and marketing expenses include all selling and marketing expenses such as promotions, public relations and compensation of our sales and marketing departments. Content, technology and development expenses include costs of translating and localizing content and acquiring original content written by third-parties as well as costs associated with the design, development, hosting of websites in addition to user acquisition and user retentions and compensation of our technology, content, product and web design departments which does not qualify to be capitalized. General and administrative expenses include all legal, finance, accounting and administrative expenses such as professional fees and facilities costs. Depreciation and amortization include the depreciation of our acquired fixed assets and amortization of software and definite-lived intangible assets. All periods presented have been reclassified to conform to the new presentation.

~~Table of Contents~~

~~REMARK MEDIA INC. and SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~For the Three and Six Months Ended June 30, 2013 and 2012~~

~~(Unaudited)~~

Purchase Price Allocations

Occasionally, the Company enters into business combinations. The purchase price is allocated to the various assets acquired and liabilities assumed based on their estimated fair value. Fair values of assets acquired and liabilities assumed are based upon available information and may involve engaging an independent third party to perform an appraisal of tangible and intangible assets. Estimating fair values can be complex and subject to significant business judgment and most commonly impacts property, equipment, software, and definite- or indefinite-lived intangible assets.

Software Development Costs

The Company capitalizes qualifying costs of computer software and website development costs. Costs incurred during the application development stage as well as upgrades and enhancements that result in additional functionality are capitalized. The internally developed software costs capitalized were ~~$0.5~~$0.6 million and $0.5 million, at ~~June~~September 30, 2013 and December 31, 2012, respectively, and are included in “Property, equipment and software” in the condensed consolidated balance ~~sheet.~~sheets. Internally developed software and website development costs are being amortized utilizing the straight-line method over a period of three years, the expected period of the benefit. For the three and ~~six~~nine months ended ~~June~~September 30, 2013, there was approximately $0.1 million and $0.2 million of amortization recorded for these costs, respectively. ~~For the three and six months ended June 30, 2012, there was no amortization recorded.~~

Stock-Based Compensation

The Company measures stock-based compensation at the grant date based on the calculated fair value of the award. The Company recognizes the expense over the recipient’s requisite service period, generally the vesting period of the award. The Company estimates the fair value of stock options at the grant date using the Black-Scholes option pricing model with weighted average assumptions for the activity under its stock plans. Option pricing model input assumptions such as expected term, expected volatility and risk-free interest rate among others, impact the fair value estimate. These assumptions generally require significant analysis and use of judgment and estimates to develop. Options vest based on meeting a minimum service period or performance condition. Restricted stock grants are recorded using the fair value of the granted shares based on the market value at the grant date. In addition, the forfeiture rate impacts the amount of aggregate compensation. These assumptions are subjective and generally require significant analysis and judgment to develop.

The Company does not recognize a deferred tax asset for unrealized tax benefits associated with the tax deductions in excess of the compensation recorded (excess tax benefit). The Company applies the “with and without” approach for utilization of tax attributes upon realization of net operating losses in the future. This method allocates stock-based compensation benefits last among other tax benefits recognized. In addition, the Company applies the “direct only” method in calculating the amount of windfalls or shortfalls.

Table of Contents

REMARK MEDIA INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2013 and 2012

(Unaudited)

Derivative Liability for Warrants to Purchase Common Stock

The Company's derivative liability for warrants represents the fair value of warrants issued in connection with an equity financing related to the Banks.com acquisition consummated on February 26, 2012 ("Equity Financing").These warrants are presented as liabilities based on certain exercise price reductions provisions. The liability, which is recorded at the fair value on the balance sheet, is calculated using the Monte Carlo simulation valuation method. The change in the fair value of these warrants is recognized as a component of other income or expense in the condensed consolidated ~~statement~~statements of operations.

Recent Accounting Pronouncements

In January 2013, the Financial Accounting Standards Board (“FASB”) amended its guidance on the presentation of comprehensive income. Under the amended guidance, an entity must present information regarding reclassification adjustments from accumulated other comprehensive income in a single note or on the face of the financial statements. This is required for both annual and interim reporting. The amendment becomes effective for reporting periods beginning after December 15, 2012 and is applied prospectively. Early adoption is permitted. The Company’s adoption of the standard did not have an impact on the Company’s condensed consolidated balance ~~sheet, statement~~sheets, statements of operations or cash flows as it was disclosure-only in nature.

~~Table of Contents~~

~~REMARK MEDIA INC. and SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~For the Three and Six Months Ended June 30, 2013 and 2012~~

~~(Unaudited)~~

3. INVESTMENT IN SHARECARE

As of ~~June~~September 30, 2013, Remark Media owns approximately ~~9.4%~~8.65% of the outstanding common stock of Sharecare, Inc. ("Sharecare"). Until November 30, 2012, the Company accounted for its equity interest in Sharecare under the equity method of accounting. Under this method, the Company recorded its proportionate share of Sharecare’s net income or loss based on Sharecare’s financial results. As of December 1, 2012, the Company changed to the cost method of accounting due to a lower percentage of ownership, nonparticipation in policy-making processes, and limited existence of technology dependency by Sharecare on the Company.

The following table shows selected unaudited financial data of Sharecare including Remark Media’s proportional share of net loss in Sharecare as reported under the equity method for the three and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012. During the first quarter of 2013, the Company recorded a $0.2 million change in its estimate of its proportional share in loss of equity-method investment related to the period from January 1, 2012 through November 30, 2012, based on information that was finalized and provided to the Company subsequent to the issuance of its December 31, 2012 financial statements.


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012		2013		2012		2013		2012

Revenues	$	-	$	8,203,771	$	-	$	12,712,454	$	-	$	8,098,607	$	-	$	20,811,061
Gross profit		-		7,474,905		-		11,583,331		-		7,292,016		-		18,875,347
Loss from operations		-		(7,514,540)		-		(14,035,035)		-		(6,316,021)		-		(20,351,056)
Net loss		-		(7,565,642)		-		(14,170,584)		-		(6,466,551)		-		(20,637,135)
Proportionate share in loss of equity-method investment, including change in interest gain	$	-	$	(592,267)	$	(222,707)	$	681,608	$	-	$	(739,704)	$	(222,707)	$	(58,096)

The Company measures certain financial assets and liabilities at fair value on a recurring basis. The common stock warrants which are classified as liabilities are recorded at their fair market value as of each reporting period.

The measurement of fair market value requires the use of techniques based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. The inputs create the following fair market value hierarchy:

The Company uses model-derived valuations where inputs are both observable and unobservable in active markets to determine the fair value of certain common stock warrants on a recurring basis. The lowest level of significant inputs are classified as Level 3; thus, the common stock warrants are classified as Level 3. The Company utilized a Monte Carlo simulation valuation model to fair value the warrants. ~~The~~

Assumptions used in calculating the fair value of these warrants were noted as follows (including assumptions used in calculating the ~~model consist~~transaction date fair value for the warrants issued in the February 2012 Equity Financing):

In addition to the assumptions above, the Company takes into consideration whether or not it would participate in another round of equity financing and, if so, what the ~~following variables: (i) the closing~~stock price of Remark's common stock; (ii) the expected remaining life of the warrant; (iii) the historical stock-price trends; (iv) the risk-free interest rate; and (v) probability of Company issuing future equity and debt instruments to satisfywould be for such a financing ~~needs.~~ at that time.

At ~~June~~September 30, 2013 and December 31, 2012, the fair value of liability classified warrants were as follows:

The change in the fair value of the warrants accounted for as derivative liabilities is reflected below:

The Company will continue to adjust the warrant liability for changes in fair value until the earlier of the exercise or expiration of the warrants, at which time the liability will be reclassified to stockholders' ~~equity, or expiration of the warrants.~~equity.

On March 29, 2013, Remark Media acquired Pop Factory, LLC ("Pop Factory"), the owner and operator of Bikini.com, a digital beach lifestyle brand providing websites, branded merchandise, and mobile content, for total cash consideration of $2,375,000. In connection with the purchase, the two founders, who had remained executives of Pop Factory, entered into one year employment agreements with Pop Factory and noncompetition agreements with the Company. The Company further agreed to use the acquisition date cash to repay the outstanding liabilities of Pop Factory and remit the remaining cash balance forty five days subsequent to

closing date. As of ~~June~~September 30, 2013, the Company recorded $23 thousand of accrued expenses relating to this clawback provision in the Purchase Agreement.

~~The total consideration of the transaction was $2.4 million in cash.~~ The acquisition was accounted for under the purchase method and, accordingly, the purchase price was allocated to the assets and liabilities based on their estimated fair values on the date of the acquisition.

~~During~~In the ~~three months ended June 30,~~second quarter of 2013, the Company finalized the valuation of intangible assets related to this acquisition. Based on the valuation of the Pop Factory acquisition, the intangible assets on the acquisition date were $2.1 million. The condensed consolidated balance sheet for the quarter ended March 31, 2013, was ~~retrospectively~~ adjusted to increase the carrying amount of intangible assets by $1.5 million and decrease the carrying amount of goodwill by $1.5 million. Of the total intangibles acquired, $2.1 million related to domain names and has an amortization period of 12 years.

The table below illustrates the allocation of the purchase price over the identifiable assets and assumed liabilities on March 29, 2013.

The acquisition transaction costs incurred for the period ended ~~June~~September 30, 2013 totaled $0.1 million and were all expensed under the general and administrative expenses in the condensed consolidated ~~statement~~statements of operations for the ~~six and three~~nine months ended ~~June~~September 30, 2013. Pop Factory's revenue during the six and three months ended ~~June~~September 30, 2013 have been included in the condensed consolidated statement of operations.

On August 2, 2012, Remark Media sold Intersearch Corporate Services, Inc. a subsidiary of Banks.com for minimal consideration.

On June 28, 2012, Remark Media completed the merger (the “Merger”) contemplated by the Agreement and Plan of Merger dated as of February 26, 2012, among the Company, Banks.com and Remark Florida, Inc., a wholly-owned subsidiary of the Company (“Merger Sub”), pursuant to which Merger submerged with and into Banks.com and Banks.com survived the Merger as a wholly-owned subsidiary of Remark Media. At the effective time of the Merger, each share of the outstanding common stock of Banks.com was converted into the right to receive 0.0258 shares of Remark Media common stock, for an aggregate of 670,815 shares of Remark Media common stock. The outstanding shares of Banks.com preferred stock, including all accrued and unpaid dividends as of the date of closing of the Merger on such preferred stock, a Note and a Warrant, all of which are held by Daniel M. O’Donnell, President and Chief Executive Officer of Banks.com, and his affiliates, were converted into cash in the aggregate amount of $300,000 and the right to receive 31,452 shares of Remark Media common stock. In connection with the Merger, Banks.com issued an Amended and Restated Promissory Note in the principal amount of $125,000 to Mr. O’Donnell and his wife, which matured on June 28, 2012. The Company settled the cash consideration of $300,000 on the date of closing and $131,250 in settlement of the promissory note in the principal amount of $125,000 and related interest.

The table below reflects a summary of the unaudited pro forma results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012, as if Remark Media, Banks.com and Pop Factory were combined as of January 1, 2012. The pro forma results include estimates and assumptions which management believes are reasonable. However, pro forma results do not include any

anticipated cost savings or other effects of the planned integration of these entities, and are not necessarily indicative of the results that would have occurred if the business combinations had been in effect on the dates indicated, or which may result in the future.

On December 7, 2010, Banks.com entered into a sale-leaseback arrangement with Domain Capital, LLC, (“Domain Capital”) consisting of an agreement to assign the domain name, banks.com, to Domain Capital in exchange for $0.6 million in cash and a Lease Agreement to lease back the domain name from Domain Capital for a five year term. The lease provides for a bargain purchase option at the end of its term, effectively transferring ownership back to Banks.com. Effective June 28, 2012, Banks.com became a wholly-owned subsidiary of Remark Media and according to the Agreement and Plan of Merger, Remark Media assumed all outstanding liabilities on the effective date of close. As of ~~June~~September 30, 2013, total obligations under this agreement were ~~$0.4~~$0.3 million, $0.1 million of which is included under the current portion of capital lease obligations and the remainder is included under capital lease obligations, net of current portion of the Company’s condensed consolidated balance sheet at ~~June~~September 30, 2013. The following table represents the approximate future minimum capital lease payments due under this agreement as of ~~June~~September 30, 2013:

The Company has entered into operating leases for office space. The lease agreements required security deposits and included allowances, which were used against leasehold improvements. The security deposits and the allowances were recorded as an asset and a liability, respectively in the Company’s condensed consolidated financial statements. Rental expense for operating leases, which is recognized on a straight-line basis over the lease term, was $0.2 million and ~~$0.3~~$0.4 million for the three and ~~six~~nine months ended ~~June~~September 30, ~~2013.~~2013, respectively.

The following table represents the approximate future minimum lease payments at ~~June~~September 30, 2013 due under non-cancellable operating lease agreements with terms in excess of a year:

On May 1, 2013, Remark Media ~~abandoned the lease~~entered into a sublease for one of its office ~~spaces.~~spaces through the remainder of the lease term giving cause to an abandonment of lease analysis. Following the exit of the lease, Remark Media recognized an early termination liability of ~~$300 thousand~~$312,491 adjusted for sublease rental income, leasehold allowances, and the use of security deposits. The early termination liability principally represents the escalating lease payments inherent in the deferred rent as of the cease use date, net of the sub-lease income. The estimated fair value of the costs was based on the terms of the lease agreement and sub-lease agreement and, as such, represents the lease commitment over the next three years. The Company elected not to present value that obligation because the difference between the gross and discounted future cash flow settlements was immaterial to the financial statements. ~~Changes in~~

On the ~~liability subsequent to June 30, 2013 will be captured in~~cease use date, the Company recorded a early termination ~~costs.~~

~~The early termination cost as~~expense of ~~June 30, 2013 was~~ $16 thousand - which was adjusted for the remaining deferred rent, use of security deposits, and future sublease income. These fees were included in the general and administrative expenses in the condensed consolidated statement of operations and comprehensive loss.

For the three months ended September 30, 2013, the Company recorded a fair value adjustment of $17 thousand to reduce the early termination liability.

On July 23, 2012, a complaint was filed by FOLIOfn, Inc. (“FOLIOfn”), against the Company’s subsidiary MyStockFund Securities, Inc. (“MyStockFund”), alleging that MyStockFund has infringed six U.S. Patents held by FOLIOfn relating to investment methods. The complaint sought injunctive relief, damages, pre-judgment interest, and attorneys' fees. The case was settled between the parties, and on April 23, 2013 the litigation was terminated by the court, resulting in no liability to the Company.

The Company believes that there are no disputes, litigation or other legal proceedings asserted or pending against it that could have, individually or in the aggregate, a material adverse effect on its financial position, results of operations or cash flows, and believe that adequate provision for any probable and estimable losses has been made in the condensed consolidated financial statements. However, the ultimate result of any current or future litigation or other legal proceedings, audits or disputes is inherently unpredictable and could result in liabilities higher than currently predicted.

The following is a reconciliation of the numerators and denominators of our basic and diluted loss per share computations:



									Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended June 30,				Six Months Ended June 30,				2013		2012		2013		2012
	2013		2012		2013		2012
			(Restated)				(Restated)
Loss per share:
Net loss	$	(2,168,109)	$	(1,593,628)	$	(3,204,482)	$	(1,699,643)	$	(1,293,968)	$	(2,428,273)	$	(4,465,011)	$	(4,127,916)

Weighted average shares outstanding		7,193,632		6,414,200		7,193,632		6,089,553		7,224,810		6,414,200		7,224,810		6,089,553

Net loss per share, basic and diluted	$	(0.30)	$	(0.25)	$	(0.45)	$	(0.28)	$	(0.18)	$	(0.38)	$	(0.62)	$	(0.68)



Common shares and dilutive securities:
Weighted average shares outstanding		7,193,632		6,414,200		7,193,632		6,089,553		7,224,810		6,414,200		7,224,810		6,089,553
Dilutive securities		-		-		-		-		-		-		-		-

Total common shares and dilutive securities		7,193,632		6,414,200		7,193,632		6,089,553		7,224,810		6,414,200		7,224,810		6,089,553

Stock options and warrants are not included in the diluted earnings per share calculation above as they are anti-dilutive. The number of anti-dilutive shares outstanding excluded from the calculation above was 2,801,919 and 1,435,349 for the three and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012, respectively.

Remark Media has authorized 800,000 shares under the 2006 Equity Incentive Plan adopted April 13, 2006 (the “2006 Plan”), and an additional 525,000 shares authorized under the 2010 Equity Incentive Plan adopted June 15, 2010, and modified on December 30, 2011 (the “2010 Plan”), for grant as part of long-term incentive plans to attract, retain and motivate its eligible executives, employees, officers, directors and consultants. Options to purchase common stock under the 2006 and 2010 Plans have been granted to its officers and employees with an exercise price equal to the fair market value of the underlying shares on the date of grant.

During the first two quarters ended June 30, 2013, the Company reached an agreement with certain option holders to replace 442,000 out-of-the-money options with 64,601 options with an exercise price equal to the stock price on the date of the exchange.

On May 20, 2013, the Company agreed to exchange 20,000 vested options with 20,000 restricted shares issued at the price equal to the market value.

The Company measures stock-based compensation cost at the grant date based on the fair value of the award, and recognizes it as an expense over the requisite service period. Stock-based compensation expense for the three months ended ~~June~~September 30, 2013 and 2012 was approximately ~~$0.24 million~~$37 thousand and ~~$0.22~~$0.23 million, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012, stock-based compensation was ~~$0.37~~$0.4 million and ~~$0.45~~$0.7 million, respectively. An expense of $18 thousand was included in the stock compensation expense for the ~~six~~nine months ended ~~June~~September 30, 2013 related to the price modification in the terms of the exercise price of 62,242 shares of stock option grants in the second quarter of 2013. As of ~~June~~September 30, 2013, unrecognized compensation expense relating to non-vested stock options approximated ~~$1.0~~$0.4 million, and is expected to be recognized through 2017. During the ~~six~~nine months ended ~~June~~September 30, 2013, Remark Media granted 175,000 options at a per share exercise price of $5.00. The grant date fair value of grant options vesting during the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012 was approximately $0.48 million and $0.18 million, respectively. Additionally, the Company granted 203,398 shares of restricted stock related to consulting agreements and employee compensation plans for 2013. The shares of restricted stock vest according to varying terms, ranging from immediate to vesting through 2018. Through ~~June~~September 30, 2013, no options have been exercised under the 2006 Plan or the 2010 Plan.

At ~~June~~September 30, 2013, the Company had additional outstanding warrants to acquire 30,000 shares of common stock which had exercise prices ranging from $35.00 to $98.90 and which will expire through 2017.

As discussed in Note 1, the Company entered into promissory notes totaling $5.8 million with a lender controlled by and in part owned by Mr. Kai-Shing Tao, the Company’s Chairman and Chief Executive Officer.

The future maturity schedule of the long-term debt with related party was as follows as of ~~June~~September 30, 2013:

Proceeds of $5.8 million loan were received as of ~~June~~September 30, 2013, and all amounts mature by April 2, 2015.

The related party interest expense for the promissory notes was $0.1 million and ~~$0.1~~$0.3 million for the three and ~~six~~nine months ended ~~June~~September 30, 2013. No related party interest expense was recorded for the three and ~~six~~nine months ended ~~June~~September 30, 2012.

As of ~~June~~September 30, 2013, Remark Media owned approximately ~~10.8%~~8.65% of the outstanding common stock of Sharecare. Jeff Arnold, a former member of the Company’s Board of Directors, is the Chairman and Chief Executive Officer and a significant stockholder of Sharecare. Additionally, Discovery Communications, Inc., formerly the Company’s largest stockholder, is a significant stockholder of Sharecare.

In connection with the preparation of the Company's financial statements as of June 30, 2013, and for the three and six months then ended the Company determined that it should have used derivative liability accounting to account for the fair value of the warrants issued in the Company's February 28, 2012 Equity Financing in recording the proceeds received, due to the down round provision associated with the exercise price of the warrants. The Company previously recorded all of the proceeds from the Equity Financing as equity.

The Company has calculated the fair value of the warrants issued in February 2012 Equity Financing for each relevant reporting period using the Monte Carlo simulation method. The Company plans to file a Form 10Q/A for the quarterly periods ended March 31, 2013, September 30, 2012, June 30, 2012, and March 31, 2012 in which Form 10K/A for the year-ended December 31, 2012 and will restate its financial statements to correct the non-cash errors related to derivative liability accounting for warrants issued in February 2012 Equity Financing. The Company also will disclose the affected quarterly information for 2012 in the Form 10-K/A.

~~The effects of the revision on the unaudited financial statements are summarized below.~~

As of December 31, 2012

As of June 30, 2013

As previously reported

Adjustment

As restated

As previously reported

Adjustment

As restated
Balance sheets:

Total assets

$
6,359,175

$
-

$
6,359,175

$
9,250,736

$

$
9,250,736

Current liabilities

Derivative liabilities

-

277,646

277,646

-

478,765

478,765
All other current liabilities

1,179,465

-

1,179,465

2,973,586

-

2,973,586
Total current liabilities

1,179,465

277,646

1,457,111

2,973,586

478,765

3,452,351
All other liabilities

2,402,005

-

2,402,005

6,053,805

-

6,053,805
Total liabilities

3,581,470

3,859,116

9,027,391

9,506,156
Preferred shares

-

-

-

-

-

-
Common stock

7,114

-

7,114

7,194

-

7,194
Additional paid-in capital

108,507,855

(1,207,778)

107,300,077

108,963,172

(277,646)

108,685,526
Accumulated other comprehensive income (loss)

5,370

-

5,370

(1,024)

-

(1,024)
Accumulated deficit

(105,742,634)

930,132

(104,812,502)

(108,745,997)

(201,119)

(108,947,116)
Stockholders' equity

2,777,105

(277,646)

2,500,059

223,345

(478,765)

(255,420)
Total liabilities and stockholders' equity

$
6,358,575

$
(277,646)

$
6,359,175

$
9,250,736

$
(478,765)

$
9,250,736

As of December 31, 2012

As previously reported

Adjustment

As restated

Statement of operations:

Operating Loss

$
(6,513,987)

$
-

$
(6,513,987)
Gain (loss) on change in fair value of derivative  liability

-

930,132

930,132
All other income (expense) items

(454,747)

-

-
Net loss

$
(6,968,734)

$
-

$
(5,583,855)
Net loss per share (basic and diluted)

$
(1.05)

$
-

$
(0.85)

Weighted average shares outstanding

6,605,563

6,605,563

Three Months Ended June 30, 2012

As previously reported

Adjustment

As restated

Statement of operations:

Operating Loss

$
(1,581,628)

$
-

$
(1,581,628)
Gain (loss) on change in fair value of derivative  liability

-

578,793

578,793
All other income (expense) items

(590,793)

-

(590,793)
Net loss

$
(2,172,421)

$
-

$
(1,593,628)
Net loss per share (basic and diluted)

$
(0.34)

$
-

$
(0.25)

Weighted average shares outstanding

6,414,200

6,414,200

Six Months Ended June 30, 2012

As previously reported

Adjustment

As restated

Statement of operations:

Operating Loss

$
(3,055,761)

$
-

$
(3,055,761)
Gain (loss) on change in fair value of derivative  liability

-

694,528

694,528
All other income (expense) items

661,590

-

661,590
Net loss

$
(2,394,171)

$
-

$
(1,699,643)
Net loss per share (basic and diluted)

$
(0.39)

$
-

$
(0.28)

Weighted average shares outstanding

6,089,553

6,089,553

Three Months Ended March 31, 2013

As previously reported

Adjustment

As restated

Statement of operations:

Operating Loss

$
(830,690)

$
-

$
(830,690)
Gain (loss) on change in fair value of derivative  liability

-

17,242

17,242
All other income (expense) items

(222,707)

-

(222,707)
Net loss

$
(1,053,397)

$
-

$
(1,036,155)
Net loss per share (basic and diluted)

$
(0.164)

$
-

$
(0.16)

Weighted average shares outstanding

7,125,215

6,414,200

On November 23, 2012, the Company issued a $1.8 million Senior Secured Convertible Promissory Note (the “November 2012 Note”) to Digipac, LLC, a lender controlled by and in part owned by Mr. Kai-Shing Tao, the Company’s Chairman and Chief Executive Officer, and in part owned Mr. Douglas Osrow, who subsequently became the Company’s Chief Financial Officer. On April 2, 2013, the Company issued a $4.0 million Senior Secured Convertible Promissory Note (the “April 2013 Note”) to Digipac, LLC. Both notes were approved by independent members of the Company’s Board of Directors, who believed the related party transactions were negotiated as an arms-length transaction.

On May 21, 2013, The NASDAQ Stock Market (“NASDAQ”) notified the Company that it did not comply with Listing Rule 5550(b) (the “Rule”), which requires a minimum $2,500,000 stockholders’ equity, $35,000,000 market value of listed securities, or $500,000 net income from continuing operations. As a result of the November 12, 2013, conversion of the November 2012 Note and April 2013 Note into equity, the Company believes it has regained compliance with the stockholders’ equity requirement for continued listing set forth in Listing Rule 5550(b). NASDAQ will continue to monitor the Company’s ongoing compliance with the stockholders’ equity requirement and, if at the time of the Company’s next periodic report the Company does not evidence continued compliance with Listing Rule 5550(b), it may be subject to delisting. The Company believes it will be in compliance with Listing Rule 5550(b) at the time of its next periodic report.

On November 14, 2013, the Company's total cash and cash equivalents balance was approximately $2.7 million. On November 13, 2013, the Company entered into a $2.5 million Term Loan Agreement, at 6.67% annual interest rate for the first year and 8.67% for the second year, with a lender controlled by and in part owned by Mr. Kai-Shing Tao, the Company's Chairman and Chief Executive Officer, and in part owned by Mr. Douglas Osrow, the Company's Chief Financial Officer. The Term Loan Agreement is secured pursuant to the Term Loan Agreement detailed below, as amended by Amendment No. 2 to that Term Loan Agreement, dated April 2, 2013. The principal and accrued interest under the Term Loan Agreement is convertible into Common Stock of the Company at the rate of $3.75 per share, which was the closing price of the Company's common stock for the trading session immediately prior to entrance into the agreement. The balance is due November 2015.

Effective October 31, 2013, the Company appointed a new Chief Financial Officer and as a component of his compensation issued him options to acquire 50,000 of the Company's common stock at a per-share price of $5.00, and 50,000 restricted shares of the Company's common stock. The appointment and the issuances of the equity were approved by the Board of Directors. He holds an equitable position in Digipac, LLC, a related party convertible debt holder that is owned in part and controlled by Remark Media's Chairman and Chief Executive Officer, and will recuse himself from any Company matters pertaining to Digipac, LLC.

~~Table of Contents~~

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of our Financial Condition and Results of Operations should be read in conjunction with the condensed consolidated financial statements and notes thereto included as part of this Form 10-Q. Our disclosure and analysis in this report concerning our operations, cash flows and financial position, including, in particular, the likelihood of our success in expanding our business, the likelihood of our success in closing upon and achieving the desired benefits from the Banks.com ~~Merger~~and Pop Factory mergers and our assumptions regarding the regulatory environment and international markets, include forward-looking statements. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “may” and similar expressions are forward-looking statements. Although these statements are based upon reasonable assumptions, they are subject to risks and uncertainties that are described more fully in our Annual Report on Form ~~10-K~~10-K/A for the year ended December 31, 2012. These forward-looking statements represent our estimates and assumptions only as of the date of this filing and are not intended to give any assurance as to future results. As a result, undue reliance should not be placed on any forward-looking statements. We assume no obligation to update any forward-looking statements to reflect actual results, changes in assumptions or changes in other factors, except as required by applicable securities laws.

Mission

Our mission is to provide unique and dynamic digital media experiences across multiple verticals, with a focus on compelling content, trusted brands, and valuable resources for consumers.

Business Overview and Recent Events

Remark Media, Inc. (“Remark Media” or the “Company”) is a global digital media company focused on developing, owning and operating next-generation digital platforms that combine traditional web publishing, ~~and~~ social media and e-commerce with the goal of revolutionizing the way people search and exchange information over the Internet.

The Company’s current leading brands, BoWenWang (bowenwang.com.cn) and ComoTudoFunciona (hsw.com.br), provide readers in China and Brazil with thousands of articles about how the world around them works, serving as destinations for credible, easy-to-understand reference information. Remark Media is the exclusive digital publisher in China and Brazil for translated content from HowStuffWorks.com, a subsidiary of Discovery Communications, and in China for certain content from World Book, Inc., publisher of World Book Encyclopedia. Revenue in these international subsidiaries has not yielded any significant revenues in 2012 or to date in 2013.

The Company’s website services business seeks to create innovative content and platform solutions for leading media and entertainment companies as well as Fortune 500 brands and boutique businesses. The solutions the Company offers center on helping clients generate value with the objective of maximizing content utilization, enhancing online engagement and customer experience and by driving online and offline actions. Remark Media is also a founding partner and developer of the U.S.-based ~~product~~business Sharecare, a highly searchable social Q&A healthcare platform organizing and answering health and medical questions. The Company generates revenue primarily through service and licensing fees as well as online advertising sales on its owned and operated websites.

The Company was incorporated in Delaware in March 2006 ~~and is headquartered in Atlanta~~ with ~~additional operations~~headquarters in Las Vegas and operations in Atlanta, Miami, Beijing and São Paulo.

On February 27, 2012, the Company entered into definitive equity financing agreements with accredited and institutional investors to raise funds in the amount of $4.25 million through a private placement. In connection with the transaction, the Company issued to investors common stock priced at $4.50 per share. Investors also received warrants to acquire shares of common stock at an exercise price of $6.81 per share, in the amount of 25% of the number of shares of common stock that the investors purchased. On February 29, 2012, the Company received $4.25 million in cash and issued to the investors a total of 944,777 shares of common stock and warrants to acquire an additional 236,194 shares of common stock.

On February 26, 2012, the Company entered into an agreement and plan of merger with Banks.com, Inc. (“Banks.com”), pursuant to which Banks.com becomes a wholly-owned subsidiary of Remark Media (the “Banks.com Merger”). Banks.com is a leading financial services portal operating a unique breadth and depth of financial products and services. Upon the closing of the merger on June 28, 2012, Remark Media issued approximately 702,267 shares of Common Stock to the shareholders of Bank.com, plus $300,000 in cash, as consideration for the merger. Also, on the effective date of the merger, the Company paid $131,250 in settlement of a promissory note in the amount of $125,000 which matured on June 28, 2012 and related unpaid interest.

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convertible into Common Stock of the Company at the rate of $1.30 per share, which represents an approximately 33% premium to the average closing prices of the Company’s common stock for the ten days prior to entrance into the agreement and an approximately 53% premium to the closing price of the Company’s common stock on the day of entrance into the agreement. This Term Loan Agreement was approved by the Audit Committee of the Board, which believes the related party transaction was negotiated as an arms-length transaction. The balance is due November 2014.

On March 29, 2013, Remark Media acquired Pop Factory, LLC, the owner and operator of Bikini.com, a digital beach lifestyle brand providing websites, branded merchandise, and mobile content, for total cash consideration of $2,375,000. In connection with the purchase, the two founders, who had remained executives of Pop Factory, entered into one year employment agreements with Pop Factory and noncompetition agreements with the Company.

On April 2, 2013, the Company entered into a $4.0 million Senior Secured Convertible Promissory Note (“Promissory Note”), at a 6.67% annual interest rate for the first year and 8.67% for the second year, with a lender controlled by and in part owned by Mr. Kai-Shing Tao, the Company’s Chairman and Chief Executive Officer. The Promissory Note is secured pursuant to the Term Loan Agreement detailed above, as amended by Amendment Number One (“Amendment”) to that Term Loan Agreement, dated April 2, 2013. The principal and accrued interest under the Promissory Note is convertible into Common Stock of the Company at the rate of $2.00 per share, which represents an approximately 11% premium to the average of the volume weighted average prices of the Company’s common stock for the ten trading days prior to the entrance into the agreement and an approximately 16% premium to the closing price of the Company's common stock on the day of entrance into the agreement. $4.0 million of the proceeds were received as of ~~June~~September 30, 2013, and the balance is due April 2015.

Our Strategy

~~Our Strategy~~ This year, we are focusing on creating an 18-to-34 year old, young adult lifestyle digital media vertical, and commenced the development in March 2013 with the acquisition of Pop Factory, the owner and operator of Bikini.com. We have redeveloped the website and will add retail e-commerce from swimwear and accessories in November 2013. Additionally, we intend to continue to acquire other complimentary digital media properties.

During 2012, we focused on the development and growth of our personal finance digital media vertical. We launched DimeSpring, a new website combining high-quality, credible content with an expert community, and acquired Banks.com, Inc., which brought us the portfolio of personal finance properties including Banks.com, US Tax Center at IRS.com, FileLater.com, and MyStockFund.com.

In 2013, we are focusing on creating an 18-to-34 year old lifestyle digital medial vertical, and commenced the development in March 2013 with the acquisition of Pop Factory, the owner and operator of Bikini.com. We have redeveloped the website and intend to add an e-commerce component and continue to acquire other complimentary digital media properties.

Our Operations

Domestic

In September 2012, we launched DimeSpring.com, a U.S.-focused personal finance website that intends to utilize rich content and advice from a wide array of professionals to build a community of people interested in managing life’s financial hurdles and opportunities. DimeSpring.com is part of a larger product strategy to leverage our experience and expertise to create leading destination websites that offer a dynamic online experience around a given topic with access to relevant content and subject matter experts. The Banks.com merger was successfully completed on June 28, 2012. Assets obtained through the Banks.com Merger complement DimeSpring and serve to build a network of personal finance digital media businesses. These include Banks.com, the US Tax Center at www.irs.com, FileLater, and MyStockFund. We continue to invest in technology and product development to support this initiative. Bikini.com relaunched earlier this year and will introduce retail e-commerce for swimwear and accessories in November 2013.

~~We intend~~In 2013, we acquired Bikini.com, and relaunched the brand and website as a beach lifestyle destination with a focus on fashion, style, fitness, travel and fun for 18-to-34 year old women. In November 2013, we will add retail e-commerce to ~~expand our services business~~Bikini.com, allowing end users to purchase swimwear and accessories. Further, we additionally continue to focus on ~~developing the~~our personal finance and 18-to-34 year old ~~lifestyle verticals.~~ demographic based properties.

Although Remark Media is no longer providing services for Sharecare, the Company maintains equity ownership in the venture. As of ~~June~~September 30, 2013, we own approximately ~~9.4%~~8.65% of Sharecare’s common stock and had representation on Sharecare’s board of directors. Through November 30, 2012, the Company accounted for its equity interest in Sharecare under the equity method of

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accounting. Under this method, the Company recorded its proportionate share of Sharecare’s net income or loss based on Sharecare’s financial results. As of December 1, 2012, the Company changed to the cost method of accounting due to a lower percentage of ownership, nonparticipation in policy-making processes, and limited existence of technology dependency.

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International

~~We have implemented certain cost-savings measures in our Brazil and China operations in connection with a strategic shift towards operations in the United States.~~ We believe that the value of our international assets will be recognized over a longer-term horizon, as online advertising markets develop for Brazil and China and the websites’ traffic fundamentals improve. In the near term, we are focused on leveraging the traffic that our BoWenWang and ComoTudoFunciona websites receive in China and Brazil, respectively. We believe ~~our resources can be better applied to developing and establishing new brands and expanding our services business~~there are significant opportunities in the ~~United States;~~gaming, travel, and ~~as a result, are managing~~other consumer verticals that our ~~costs in Brazil and China while evaluating our opportunities.~~

~~ComoTudoFunciona~~ (~~http://hsw.com.br~~) is Brazil’s online source for credible, unbiased and easy-to-understand explanations of how the world actually works. The Portuguese-language site is the exclusive digital publisher in Brazil of translated and localized content from the leading Discovery Communications brand HowStuffWorks, and is published from Remark Media’s São Paulo operations. We recognized approximately $1 thousand and $20 thousand of revenue from Brazil during the three months ended June 30, 2013 and 2012, respectively. We do not expectplatforms provide us broad access to ~~see major growth in our Brazil operations in the near term unless we increase investment in the brand.~~develop.

BoWenWang (http://www.bowenwang.com.cn) is an information and reference website that provides China with encyclopedic knowledge and easy-to-understand explanations of how the world works. The website is published from Beijing in the Chinese language. Launched in June 2008, BoWenWang features a combination of original content authored by the Company, translated and localized articles from the leading Discovery Communications brand HowStuffWorks, and content from World Book, Inc. Revenue generated from the operations based in China was minimal during the three and nine months ended ~~June~~September 30, 2013 and 2012. We do not expect to see ~~major~~meaningful growth in our China operations in the near term ~~unless~~without an increased investment, which we ~~increase investment~~do not contemplate.

ComoTudoFunciona (http://hsw.com.br) is Brazil’s online source for credible, unbiased and easy-to-understand explanations of how the world actually works. The Portuguese-language site is the exclusive digital publisher in Brazil of translated and localized content from the leading Discovery Communications brand HowStuffWorks, and is published from Remark Media’s São Paulo operations. We recognized minimal revenues from Brazil during the three months and nine months ended September 30, 2013 and 2012, respectively. We do not expect to see meaningful growth in our Brazil operations in the ~~brand.~~near term without an increased investment, which we do not contemplate.

Further, we have established media distribution relationships in Asia with a focus on China. We are the official digital distributor in China, Taiwan, Hong Kong, Macao, and South Korea of the live internet broadcast of the Clash in Cotai / Pacquiao vs. Rios boxing event, promoted by Las Vegas Sands and Top Rank, occurring in Macau, China on November 23rd. We are providing digital and social media, marketing, streaming operations, and establishing brand partners and sponsors for the event. We are in the process of developing additional rich media opportunities to deliver original sports and entertainment content to the evolving Chinese media market through our strategic relationships in Asia and, more specifically, in China.

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Results of Operations

The following table sets forth our operations for the three and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012:



									Three Months Ended September 30,				Nine Months Ended September 30,
										2013		2012		2013		2012
	Three Months Ended June 30,				Six Months Ended June 30,
		2013		2012		2013		2012
Operating revenue			(Restated)				(Restated)
Brands	$	663,163	$	33,003	$	871,328	$	57,114	$	133,703	$	263,119	$	1,066,312	$	320,233
Total revenue

Operating expenses
Sales and marketing		186,727		83,462		187,420		107,160		38,281		108,382		225,700		215,542
Content, technology and development		208,439		371,791		337,911		699,015		92,065		608,244		437,715		1,307,259
General and administrative		1,981,754		1,132,322		2,762,114		2,254,176		903,628		1,328,844		3,663,586		3,583,020
Depreciation and amortization expense		122,952		27,056		206,989		52,524		121,282		149,689		350,531		202,213
Total operating expenses		2,499,872		1,614,631		3,494,434		3,112,875		1,155,256		2,195,159		4,677,532		5,308,034

Operating loss		(1,836,709)		(1,581,628)		(2,623,106)		(3,055,761)		(1,021,553)		(1,932,040)		(3,611,220)		(4,987,801)

Other income (expense)
Gain (loss) on change in fair value of derivative liability		(218,361)		578,793		(201,119)		694,528		(161,911)		269,852		(363,030)		964,380
Interest expense		(113,191)		(2,441)		(157,545)		(27,125)		(110,363)		(11,505)		(267,908)		(38,630)
Other income (expense)		152		3,915		(5)		7,107
Other expense										(141)		(14,876)		(146)		(7,769)
Total other income (expense)		(331,400)		580,267		(358,669)		674,510		(272,415)		243,471		(631,084)		917,981

Loss before gain (loss) from equity-method investments		(2,168,109)		(1,001,361)		(2,981,775)		(2,381,251)		(1,293,968)		(1,688,569)		(4,242,304)		(4,069,820)

Change of interest gain of equity-method investment		-		(894,502)		-		(1,813,382)		-		-		-		2,494,990
Proportional share in loss of equity-method investment		-		302,235		(222,707)		2,494,990		-		(739,704)		(222,707)		(2,553,086)

Net gain (loss) from equity-method investment		-		(592,267)		(222,707)		681,608
Net loss from equity-method investment										-		(739,704)		(222,707)		(58,096)

Loss before benefit from income taxes		(2,168,109)		(1,593,628)		(3,204,482)		(1,699,643)
Loss before income taxes										(1,293,968)		(2,428,273)		(4,465,011)		(4,127,916)

Income tax (benefit) expense		-		-		-		-		-		-		-		-

Net loss	$	(2,168,109)	$	(1,593,628)	$	(3,204,482)	$	(1,699,643)	$	(1,293,968)	$	(2,428,273)	$	(4,465,011)	$	(4,127,916)

Net loss per share
Net loss per share, basic and diluted	$	(0.30)	$	(0.25)	$	(0.45)	$	(0.28)	$	(0.18)	$	(0.38)	$	(0.62)	$	(0.68)

Basic and diluted weighted average shares outstanding		7,193,632		6,414,200		7,193,632		6,089,553		7,224,810		6,414,200		7,224,810		6,089,553

Comprehensive loss
Net loss	$	(2,168,109)	$	(1,593,628)	$	(3,204,482)	$	(1,699,643)	$	(1,293,968)	$	(2,428,273)	$	(4,465,011)	$	(4,127,916)
Cumulative translation adjustments		(2,434)		1,179		(6,394)		(4,554)		(1,891)		1,179		(8,286)		(3,182)

Total comprehensive loss	$	(2,170,543)	$	(1,592,449)	$	(3,210,876)	$	(1,704,197)	$	(1,295,859)	$	(2,427,094)	$	(4,473,297)	$	(4,131,098)

Total revenue for the three months ended ~~June~~September 30, 2013 was approximately ~~$663 thousand, an increase~~$0.1 million, a decrease of approximately ~~$630 thousand~~$0.1 million from the same period in 2012. For the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012, revenue was ~~$871 thousand,~~$1.1 million, an increase of approximately ~~$814 thousand~~$0.8 million from the same period in 2012. The increase from the prior year's period relates primarily to the revenues from ~~Banks.com.~~Banks.com and Pop Factory. Only minimal revenues were generated from international operations.

Sales and marketing expenses were ~~$186 thousand~~$0.1 million and ~~$83 thousand~~$0.1 million in the three months ended ~~June~~September 30, 2013 and 2012, respectively, and ~~$187 thousand~~$0.2 million and ~~$107 thousand~~$0.2 million in the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012, respectively. The ~~increase from the prior year's period relates primarily to~~ marketing efforts ~~for Banks.com and Pop Factory's Bikini.com.~~ to drive traffic to the sites have remained constant from period-to-period because of cost monitoring measures.

Content, technology and development expenses include the ongoing third-party costs to acquire original content, translate and localize content from English to Portuguese and Chinese, as well as costs of designing and developing our products, including labor, content and third party platform support services. For the three months ended ~~June 30, 2013, the expense was $208 thousand, and $372 thousand for the three months ended June 30, 2012, and $338 thousand and $700 thousand for the six months ended June~~September 30, 2013 and 2012, the expense was $0.1 and $0.6 million, respectively. For the nine months ended September 30, 2013 and 2012, the expense was $0.4 million and $1.3 million, respectively. The decrease ~~primarily~~ is due to a reduction in expense realized from reimbursements from ~~and termination of~~ the ~~Company’s~~Company's agreement with ~~TheStreet.~~The Street - this agreement was terminated on May 31, 2013.

Our total general and administrative expenses were approximately ~~$1.8~~$0.9 million and ~~$1.1~~$1.3 million in the three months ended ~~June~~September 30, 2013 and 2012, respectively, and ~~$2.6~~$3.6 million and ~~$2.3~~$3.5 million in the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012, respectively. The increase primarily relates to legal fees associated with potential acquisitions and stock-based compensation issued to both employees, directors, and consultants in 2013. The increase was offset by the significant reduction in headcount as a result of the Company's restructuring efforts at the end of 2012.

Depreciation and amortization expense was ~~$121 thousand~~$0.1 million and ~~$27 thousand~~$0.1 million for the three months ended ~~June~~September 30, 2013 and 2012, respectively, and ~~$207 thousand~~$0.4 million and ~~$53 thousand~~$0.2 million for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012. The increase is primarily due to amortization of the software capitalized in 2012 and amortization of intangible assets from the Banks.com and Pop Factory acquisitions.

Interest expense for the three months ended ~~June~~September 30, 2013 and 2012 was ~~$113 thousand~~$0.1 million and $2$11 thousand, respectively, and ~~$157 thousand~~$0.3 million and ~~$27~~$39 thousand for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012, respectively. The increase in interest expense is due to the additional debt funding on both November 23, 2012 and April 2, 2013.

The change in fair value of the derivative liability for the three months ended ~~June~~September 30, 2013 and 2012 was ~~$192 thousand~~a loss of $0.2 million and ~~$695 thousand,~~a gain of $0.3 million, respectively. The ~~increase is due~~decrease relates to the ~~November 2012 and April 2013 financings.~~increased probability of an anti-dilutive event occurring subsequent to quarter end.

We accounted for our investment in Sharecare under the equity method of accounting through November 2012. In December 2012, the Company changed to the cost method of accounting. Under the equity method, for the ~~three~~nine months ended ~~June~~September 30, 2012, we recorded a ~~loss~~gain of ~~$0.9~~$2.5 million as a result of the change in interest ownership in Sharecare. Additionally, we recorded a ~~gain~~loss of ~~$0.3~~$0.7 million and ~~$2.5~~$2.6 million for the three and ~~six~~nine months ended ~~June~~September 30, 2012, representing the Company’s share in Sharecare’s income. In the first quarter of 2013, the Company recorded a $0.2 million change in the estimate of its proportional share in loss of equity-method investment related to the period from January 1, 2012 through November 30, 2012.

In January 2013, the Financial Accounting Standards Board (“FASB”) amended its guidance on the presentation of comprehensive income. Under the amended guidance, an entity must present information regarding reclassification adjustments from accumulated other comprehensive income in a single note or on the face of the financial statements. This is required for both annual and interim reporting. The amendment becomes effective for reporting periods beginning after December 15, 2012 and is applied prospectively. Early adoption is permitted. The Company’s adoption of the standard did not have an impact on the Company’s condensed consolidated balance sheet, statement of operations or cash flows as it was disclosure-only in nature.

The Company generally recognizes revenue when a persuasive evidence of an arrangement exists; services have been provided; fees are fixed or determinable; and collectability is reasonably assured.

The Company capitalizes qualifying costs of computer software and website development costs. Costs incurred during the application development stage as well as upgrades and enhancements that result in additional functionality are capitalized. The internally developed software costs capitalized were $0.5 million and $0.5 million, at ~~June~~September 30, 2013 and December 31, 2012, respectively and are included in “Property, equipment and software” in the condensed consolidated balance sheet. Internally developed software and website development costs are being amortized utilizing the straight-line method over a period of three years, the expected period of the benefit. For the three and ~~six~~nine months ended ~~June~~September 30, 2013, there was approximately $0.1 million and $0.2 million of amortization recorded for these costs, respectively. ~~For the three and six months ended June 30, 2012, there was no amortization recorded.~~

The Company's derivative liability for warrants represents the fair value of warrants issued in connection with an equity financing related to the Banks.com acquisition consummated on February 26, 2012 ("Equity Financing").These warrants are presented as liabilities based on certain exercise price reductions provisions. The liability, which is recorded at the fair value on the balance sheet, is calculated using the Monte Carlo simulation valuation method. The change in the fair value of these warrants is recognized as other income or expense in the condensed consolidated statement of operations.

Our cash balance was approximately ~~$1.6~~$0.4 million as of ~~June~~September 30, 2013 compared to $1.4 million at December 31, 2012. The ~~increase~~decrease in cash is primarily due to the ~~proceeds provided through the funding completed in November 2012 and April 2013 offset by use of~~ cash used to fund our ~~operating activities.~~operations, the Pop Factory acquisition, offset by the proceeds received from the April 2013 Promissory Note.

On November 14, 2013, the Company's total cash and cash equivalents balance was approximately $2.7 million. On November 13, 2013, the Company entered into a $2.5 million Term Loan Agreement, at 6.67% annual interest rate for the first year and 8.67% for the second year, with a lender controlled by and in part owned by Mr. Kai-Shing Tao, the Company's Chairman and Chief Executive Officer. The Term Loan Agreement is secured pursuant to the Term Loan Agreement detailed below, as amended by Amendment No. 2 to that Term Loan Agreement, dated April 2, 2013. The principal and accrued interest under the Term Loan Agreement is convertible into Common Stock of the Company at the rate of $3.75 per share, which was the closing price of the Company's common stock on the date of entrance into the agreement. The balance is due November 2015.

As stated in Note 9, on April 2, 2013, the Company entered into a $4.0 million Senior Secured Convertible Promissory Note (“Promissory Note”), at a 6.67% annual interest rate for the first year and 8.67% for the second year, with a lender controlled by and in part owned by Mr. Kai-Shing Tao, the Company’s Chairman and Chief Executive Officer. The Promissory Note is secured pursuant to the Term Loan Agreement detailed above, as amended by Amendment Number One (“Amendment”) to that Term Loan Agreement, dated April 2, 2013. The principal and accrued interest under the Promissory Note is convertible into Common Stock of the Company at the rate of $2.00 per share, which represents an approximately 11% premium to the average of the volume weighted average prices of the Company’s common stock for the ten trading days prior to the entrance into the agreement and an approximately 16% premium to the closing price of the Company's common stock on the day of entrance into the agreement. $4.0 million of proceeds were received as of June 30, 2013, and the balance is due April 2, 2015.

has been a director of the Company since 2007. The Term Loan is secured by substantially all the tangible and intangible assets of the Company, excluding its shares of common stock of Sharecare. The principal and accrued interest under the Term Loan Agreement is convertible into Common Stock of the Company at the rate of $1.30 per share, which represents an approximately 33% premium to the average closing prices of the Company’s common stock for the ten days prior to entrance into the agreement and an approximately 53% premium to the closing price of the Company’s common stock on the day of entrance into the agreement. The balance is due November 2014.

The Company intends to fund its future operations through ~~revenue~~ growth, particularly its ~~personal~~ finance and young adult properties. In 2013, the Company focused on the ~~18-34~~18-to-34 year old, young adult lifestyle digital media vertical through its acquisition of Pop Factory, owner and operator of Bikini.com. The Company has invested ~~into the website~~in software development, content, and ~~photography on this website~~marketing for Bikini.com, and believes it will achieve revenue growth through the ~~traffic on the site will increase, resulting~~addition of retail e-commerce in ~~a substantial increase in revenues.~~November 2013. Additionally, the Company is ~~actively engaged in~~ evaluating future acquisitions to provide revenue growth and the sale of certain non-core assets to provide capital. ~~The Company has also taken steps to reduce operating costs, primarily payroll through a reduction in headcount, and will continue to evaluate other opportunities to control costs.~~

Absent any acquisitions of new businesses or the material increase in revenue from its existing customers, current revenue growth may not be sufficient to sustain the Company’s operations in the long term. As such, the Company will, in all likelihood, need to obtain additional equity financing and/or divest of certain assets or businesses, neither of which can be assured on commercially reasonable terms, if at all. In addition, any equity financing that might be obtained ~~would~~may substantially dilute existing stockholders. There is no certainty that the Company will be successful at raising capital, nor is there certainty around the amount of funds that may be raised. In addition, the success of the Company will be subject to performance of the markets and investor sentiment regarding the macro and micro economic conditions under which we operate including stock market volatility. There can be no assurance that the Company will be successful at generating more revenues or selling any of its assets. Any failure by the Company to successfully implement these plans would have a material adverse effect on the Company’s business, including the possible inability to continue operations.

If the November 2012 $1.8 million and April 2013 $4 million convertible note financings are not converted into common stock of the Company, or if the Company’s shareholders do not approve the ability of the April 2013 $4 million convertible note to convert into common stock of the Company, the Company may be unable to repay such notes when either they or their interest payments become due in November 2014 and April 2015, respectively.

Based on the ~~Company’s current financial~~most recent cash flow projections, ~~which incorporates the new Term Loan Agreements, the acquisition and integration of Pop Factory, and the reduction in expenses, all discussed above,~~ the Company believes it has sufficient existing cash and cash equivalents and cash resources as of November 14, 2013 to ~~fund operations~~provide sufficient funds through ~~December 2013.~~July 1, 2014. However, the projecting operating results is inherently uncertain. Anticipated expenses can exceed those that are projected. ~~Accordingly, the Company’s cash resources could be fully utilized prior to December 2013.~~

The table below summarizes the change in our statement of cash flows for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012:

Our net cash used in operating activities during the ~~six~~nine months ended ~~June~~September 30, 2013 was ~~$1.0~~$2.6 million, a decrease of ~~$1.2~~$1.0 million compared to the same period in the prior year due to a ~~significant decrease~~substantial reduction in revenues and operating income partially offset by a decrease in expenses as a result of our continued cost monitoring measures.

During the ~~six~~nine months ended ~~June~~September 30, 2013, our net cash used in investing activities was approximately ~~$2.7~~$2.2 million compared to ~~$0.8~~$1.0 million for the same period in 2012. The cash used in the ~~six~~nine months ended ~~June~~September 30, 2013 consisted primarily of the acquisition of Pop Factory.

For the ~~six~~nine months ended ~~June~~September 30, 2013, the net cash provided by financing activities consists of the cash proceeds of $3.9 million provided by the Senior Secured Convertible Promissory Note.

We translate the foreign currency financial statements of our international operations into U.S. dollars at current exchange rates, except revenue and expenses, which we translate at average exchange rates during each reporting period. We accumulate net exchange gains or losses resulting from the translation of assets and liabilities in a separate caption of stockholders’ equity titled “accumulated other comprehensive income (loss)”. Generally, our foreign expenses are denominated in the same currency as the associated foreign revenue, and at this stage of our development, the exposure to rate changes is minimal.

Financial instruments that potentially subject us to a concentration of credit risk consist principally of cash and accounts receivables. At ~~June~~September 30, 2013, less than 1% of our cash was denominated in Brazilian Reais, Chinese Renminbi or Hong Kong Dollars, with nearly 100% of our cash denominated in US Dollars. The majority of our cash is placed with financial institutions we believe are of high credit quality. Our cash is maintained in bank deposit accounts, which, at times, exceed federally insured limits. We have not experienced any losses in such accounts and do not believe our cash is exposed to any significant credit risk.

We do not use financial instruments to hedge our foreign exchange exposure because the effects of the foreign exchange rate fluctuations are not currently significant. We do not use financial instruments for trading purposes. We do not use any derivative financial instruments to mitigate any of our currency risks.

We have established disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934, or the Exchange Act. Our disclosure controls and procedures are designed to ensure that material information relating to us is made known to our principal executive officer, principal financial officer, and principal accounting officer by others within our organization. Under the supervision and with the participation of our management, including our principal executive officer, ~~and~~ principal financial officer, and principal accounting officer; we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of ~~June~~September 30, 2013 to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

In ~~light~~the second quarter of ~~the pending restatements~~2013, we identified a material weakness in our internal control over financial reporting which resulted in a restatement of our financial statements as described in the amended quarterly reports and annual report, specifically those filed on September 26, 2013 for the ~~year-ended December 31, 2012 and~~ quarterly ~~period~~periods ended March 31, 2012, June 30, 2012, September 30, 2012, and March 31, 2013 ~~that are described in Note 10~~and for the annual period ended December 31, 2012. This weakness was originally identified by our auditors and communicated to us on August 14, 2013. As a result of such material weakness, we added to our internal accounting personnel by hiring a new Chief Financial Officer and adding additional personnel to the ~~accompanying condensed~~finance department. We believe that the addition of such personnel has remedied the material weakness identified previously. Otherwise, there have been no changes in our internal control over financial ~~statements, our principal executive officer~~reporting (as defined in Rules 13a-15(f) and ~~principal accounting officer concluded that our disclosure controls and procedures were not effective as of June 30, 2013.~~

~~During~~15d-15(f) under the Securities Exchange Act) during the quarter ended ~~June~~September 30, 2013 ~~there were no changes in internal controls over financial reporting~~ that have materially affected, or ~~that~~ are reasonably likely to materially affect, our internal controls over financial reporting. We are committed to a strong internal control environment. Therefore, we are currently taking steps to remediate the accounting errors described in Note 10 to the accompanying condensed financial statements.

The Company may from time to time be involved in claims, proceedings and litigation arising from our business and property ownership. The Company believes, based on currently available information, that the results of such proceedings, in the aggregate, will not have a material adverse effect on the condensed consolidated balance sheet, statement of operations and comprehensive loss, or liquidity.

For a discussion of risk factors regarding our company, see “Item 1A. – Risk Factors” in our Annual Report on Form ~~10-K~~10-K/A for the fiscal year ended December 31, 2012. There have been no material changes from the risk factors previously disclosed in our Annual Report on Form ~~10-K~~10-K/A for the fiscal year ended December 31, 2012 except for the risk factor noted below related to our liquidity.

As of ~~June~~September 30, 2013, the Company’s total cash and cash equivalents balance was approximately ~~$1.6~~$0.4 million. The Company has incurred net losses and generated substantial negative cash flow from operations in the ~~six~~nine months ended ~~June~~September 30, 2013 and in each fiscal year since its inception and has an accumulated deficit of ~~$108.6~~$109.3 million as of ~~June~~September 30, 2013. The Company had ~~minimal~~$0.1 million and $0.3 million of revenues ~~in 2012 and~~ for the ~~six~~three months ended ~~June~~September 30, 2013 ~~due~~and 2012, respectively, and $1.0 million and $0.3 million of revenues for the nine months ended September 30, 2013 and 2012, respectively.

On November 14, 2013, the Company's total cash and cash equivalents balance was approximately $2.7 million. On November 13, 2013, the Company entered into a $2.5 million Term Loan Agreement, at 6.67% annual interest rate for the first year and 8.67% for the second year, with a lender controlled by and in part owned by Mr. Kai-Shing Tao, the Company's Chairman and Chief Executive Officer. The Term Loan Agreement is secured pursuant to the ~~termination~~Term Loan Agreement detailed below, as amended by Amendment No. 2 to that Term Loan Agreement, dated April 2, 2013. The principal and accrued interest under the Term Loan Agreement is convertible into Common Stock of ~~certain agreements~~the Company at the ~~end~~rate of ~~2011 and its transition to owning and operating its own digital media properties. Since that time,~~$3.75 per share, which was the ~~Company has been focused~~closing price of the Company's common stock on ~~building and acquiring wholly owned digital media properties.~~the date of entrance into the agreement. The balance is due November 2015.

On November 23, 2012, the Company entered into a $1.8 million Term Loan Agreement, at a 6.67% annual interest rate with a lender controlled by and in part owned by Mr. Kai-Shing Tao, the Company’s Chairman and Chief Executive Officer. Mr. Tao has been a director of the Company since 2007. The Term Loan is secured by substantially all the tangible and intangible assets of the Company, excluding its shares of common stock of Sharecare. The principal and accrued interest under the Term Loan Agreement is convertible into Common Stock of the Company at the rate of $1.30 per share, which represents an approximately 33% premium to the average closing prices of the Company’s common stock for the ten days prior to entrance into the agreement and an approximately 53% premium to the closing price of the Company’s common stock on the day of entrance into the agreement. The balance is due November 2014.

On April 2, 2013, the Company entered into a $4.0 million Promissory Note, at a 6.67% annual interest rate for the first year and 8.67% for the second year, with a lender controlled by and in part owned by Mr. Kai-Shing Tao, the Company’s Chairman and Chief Executive Officer. The Promissory Note is secured pursuant to the Term Loan Agreement detailed above, as amended by Amendment Number One to that Term Loan Agreement, dated April 2, 2013. The principal and accrued interest under the Promissory Note is convertible into Common Stock of the Company at the rate of $2.00 per share, which represents an approximately 11% premium to the average of the volume weighted average prices of the Company’s common stock for the ten trading days prior to the entrance into the agreement and an approximately 16% premium to the closing price of the Company's common stock on the day of entrance into the agreement. The balance is due April 2015.

~~If these two notes are not converted into Common Stock of~~On November 12, 2013, Digipac, LLC notified the Company ~~or if the Company’s shareholders do not approve the ability~~that it wished to convert the entire principal amounts of both the November 2012 Note and the April 2013 ~~$4 million Promissory~~ Note, and all accrued and unpaid interest thereon, into ~~Common Stock~~shares of the ~~Company,~~Company’s common stock, effective as of the ~~Company may be~~same day. This conversion resulted in ~~a position where it is unable~~the issuance of 3,556,672 shares of the Company’s common stock to ~~repay the notes.~~

Digipac, LLC, and the extinguishing of a total of $5.8 million in debt issued by the Company ~~has taken steps to reduce operating costs, primarily payroll through a reduction~~and the approximately $281,236 in ~~personnel, which will result in a decline in annual salary expense of approximately $1.2 million. The Company will continue to evaluate other opportunities to control costs.~~accrued and unpaid interest.

The Company intends to fund its future operations through ~~revenue~~ growth, particularly its personal finance and 18-to-34 year old, young adult lifestyle properties. Additionally, the Company is actively engaged in evaluating future acquisitions to provide revenue growth and the sale of certain non-core assets to provide capital.

Absent any acquisitions of new businesses, the addition of new customers, or the material increase in revenue from its existing customers, current revenue growth may not be sufficient to sustain the Company’s operations in the long term. As such, the Company may need to obtain additional equity financing and/or divest of certain assets or businesses, neither of which can be assured on commercially reasonable terms, if at all. In addition, any equity financing that might be obtained would substantially dilute existing stockholders. There is no certainty that the Company will be successful at raising capital, nor is there certainty around the amount of funds that may be raised. In addition, the success of the Company will be subject to performance of the markets and investor sentiment regarding the macro and micro economic conditions under which we operate including stock market volatility. There can be no assurance that the Company will be successful at generating more revenues or selling any of its assets. Any failure by the Company to successfully implement these plans would have a material adverse effect on the Company’s business, including the possible inability to continue operations.

Based on the ~~Company’s current financial~~most recent cash flow projections, ~~which incorporate the Term Loan Agreement and the Promissory Note, and the reduction in expenses, all discussed above,~~ the Company believes it has sufficient existing cash and cash equivalents and cash resources as of November 14, 2013 to ~~fund operations~~provide sufficient funds through ~~December 2013.~~July 1, 2014. However, the projecting operating results is inherently uncertain. Anticipated expenses can exceed those that are projected. ~~Accordingly, the Company’s cash resources could be fully utilized prior to December 2013.~~

**These exhibits are furnished to the SEC as accompanying documents and are not to be deemed “filed” for purposes of Sections 11 and 12 of the Securities Act of 1933, as amended, and Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of these Sections nor shall they be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Delaware		33-1135689
(State of Incorporation)		(I.R.S. Employer
		Identification Number)


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



		Page
PART I – FINANCIAL INFORMATION

ITEM 1.	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets as of ~~June~~September 30, 2013 and December 31, 2012	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2013 and 2012	2
	Condensed Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~June~~September 30, 2013 and 2012	3
	Notes to Condensed Consolidated Financial Statements	4

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1716

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	2524

ITEM 4.	Controls and Procedures	2524

PART II – OTHER INFORMATION

ITEM 1.	Legal Proceedings	25

ITEM 1A.	Risk Factors	2625

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2826

ITEM 3.	Defaults Upon Senior Securities	2826

ITEM 4.	Mine Safety Disclosures	2826

ITEM 5.	Other Information	2826

ITEM 6.	Exhibits	2927

Signature		3028



	September 30, 2013		December 31, 2012

Annual rate of quarterly dividend		0.00%		0.00%
Expected volatility		100.0%		110.0%
Risk free interest rate		0.98%		0.66%
Expected remaining term (in years)		1.41 - 3.91		2.16 - 4.65



Balance at January 1, 2012	$	-
Fair value of warrants issued in February 2012		1,207,778
Decrease in fair value resulting in gain		(964,380)
Fair value at September 30, 2012	$	243,398

Balance at January 1, 2013	$	277,646
Increase in fair value resulting in loss		363,030
Fair value at September 30, 2013	$	640,676



	September 30, 2013		December 31, 2012

Derivative liabilities	$	640,676	$	277,646


Tangible assets
Current assets	$	23,245
Fixed assets		5,282
Total tangible assets		28,527

Intangible assets
Customer contracts		33,000
Domain names		2,100,000
Other intangible assets		5,715
Total intangible assets		2,138,715

Accounts payable		(7,068)
Total identifiable net assets		2,160,174

Goodwill		214,826

Total purchase price	$	2,375,000



									Unaudited Pro Forma Results of				Unaudited Pro Forma Results
									Operations Results of Operations				Operations Results of Operations
	Unaudited Pro Forma Results of Operations Results of Operations Three Months Ended June 30,				Unaudited Pro Forma Results of Operations Results of Operations Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
		2013		2012		2013		2012		2013		2012		2013		2012

Revenues	$	663,163	$	87,122	$	908,017	$	1,204,222	$	133,703	$	317,081	$	1,107,441	$	482,119
Operating Loss		(1,836,709)		(1,001,361)		(2,641,102)		(2,461,295)		(1,021,553)		(1,940,675)		(4,018,005)		(5,013,705)
Net Loss	$	(1,949,748)	$	(1,593,628)	$	(3,003,261)	$	(1,799,445)	$	(1,293,968)	$	(2,436,908)	$	(4,508,766)	$	(4,153,820)


	Capital Lease Commitments
			Capital Lease
July through December 2013	$	99,688
			Commitments

October through December 2013			$	42,822
2014		171,288		171,288
2015		171,288		157,014
Total commitments		442,264		371,124
Interest on capital leases		(87,000)		(49,290)
Present value of minimum capital lease payments	$	355,264	$	321,834


	Operating Lease Commitments

July through December 2013	$	176,000
2014		412,373
2015		297,282
2016		177,684
Total commitments	$	1,063,338



	Operating Lease
	Commitments

October through December 2013	$	164,476
2014		412,373
2015		297,282
2016		177,684
Total commitments	$	1,051,815


	As of December 31, 2012						As of June 30, 2013
	As previously reported		Adjustment		As restated		As previously reported		Adjustment		As restated
Balance sheets:

Total assets	$	6,359,175	$	-	$	6,359,175	$	9,250,736	$		$	9,250,736

Current liabilities
Derivative liabilities		-		277,646		277,646		-		478,765		478,765
All other current liabilities		1,179,465		-		1,179,465		2,973,586		-		2,973,586
Total current liabilities		1,179,465		277,646		1,457,111		2,973,586		478,765		3,452,351
All other liabilities		2,402,005		-		2,402,005		6,053,805		-		6,053,805
Total liabilities		3,581,470				3,859,116		9,027,391				9,506,156
Preferred shares		-		-		-		-		-		-
Common stock		7,114		-		7,114		7,194		-		7,194
Additional paid-in capital		108,507,855		(1,207,778)		107,300,077		108,963,172		(277,646)		108,685,526
Accumulated other comprehensive income (loss)		5,370		-		5,370		(1,024)		-		(1,024)
Accumulated deficit		(105,742,634)		930,132		(104,812,502)		(108,745,997)		(201,119)		(108,947,116)
Stockholders' equity		2,777,105		(277,646)		2,500,059		223,345		(478,765)		(255,420)
Total liabilities and stockholders' equity	$	6,358,575	$	(277,646)	$	6,359,175	$	9,250,736	$	(478,765)	$	9,250,736



Exhibit
Number		Description of Document
10.1 10.2		Senior Secured Convertible Note dated November 14, 2013 Amendment Number Two to Security Agreement between Remark Media, Inc. and Digipac, LLC dated November 24, 2013
31.1		Certification by the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer pursuant to Section 240.13a-14 or section 240.15d-14 of the Securities and Exchange Act of 1934, as amended

32.1**		Certification by the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS**		XBRL Instance Document

101.SCH**		XBRL Taxonomy Extension Schema

101.CAL**		XBRL Taxonomy Extension Calculation Linkbase

101.LAB**		XBRL Taxonomy Extension Label Linkbase

101.PRE**		XBRL Taxonomy Extension Presentation Linkbase
101.DEF**		XBRL Taxonomy Extension Definition Linkbase


	REMARK MEDIA, INC.


Date: ~~August 19,~~November 14, 2013	By:	/s/ ~~Kai-Shing Tao~~Douglas Osrow
		~~Kai-Shing Tao~~Douglas Osrow
		Chief ~~Executive~~Financial Officer (Principal ~~Executive Officer, Principal~~ Financial Officer and Principal Accounting Officer)