UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~September~~June 30, ~~2016~~2017

Commission File Number 001-33720

Remark ~~Media,~~Holdings, Inc.



	Delaware		33-1135689
	State of Incorporation		IRS Employer Identification Number

	3960 Howard Hughes Parkway, Suite 900 Las Vegas, NV 89169		702-701-9514
	Address, including zip code, of principal executive offices		~~Registrant's~~Registrant’s telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☑
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of ~~November 11, 2016,~~August 9, 2017, a total of ~~21,751,482~~22,653,322 shares of our common stock were outstanding.

TABLE OF CONTENTS



Table of Contents	i

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

The information included or incorporated by reference in this Quarterly Report on Form 10-Q contains forward-looking statements, including information relating to future events, future financial performance, strategies, expectations, competitive environment and regulation. You will find forward-looking statements principally in the sections entitled Risk Factors and Management’s Discussion and Analysis of Financial Condition and Results of Operations. Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, including those discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, ~~2015,~~2016, that could cause our actual results, levels of activity, performance or achievement to differ materially from those expressed or implied by these forward-looking statements.

Any forward-looking statements in this report reflect our current views with respect to future events, are based on assumptions and are subject to risks and uncertainties. Given such uncertainties, you should not place undue reliance on any forward-looking statements, which represent our estimates and assumptions only as of the date hereof. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements after the date hereof, whether as a result of new information, future events or otherwise.



Table of Contents	ii

PART I FINANCIAL INFORMATION


ITEM 1.	FINANCIAL STATEMENTS

REMARK ~~MEDIA,~~HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(dollars in thousands, except per share amounts)


	September 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
	(Unaudited)						(Unaudited)
Assets
Cash and cash equivalents	$	5,307		$	5,422		$	7,209		$	6,893
Restricted cash	9,406			9,416			9,406			9,405
Trade accounts receivable	1,167			746			672			1,372
Prepaid expense and other current assets	3,218			2,637			3,672			3,323
Notes receivable, current	181			172			190			181
Total current assets	19,279			18,393			21,149			21,174
Restricted cash	2,250			2,250			2,250			2,250
Notes receivable	190			371			—			190
Property and equipment, net	16,305			17,338			14,646			15,531
Investment in unconsolidated affiliate	1,030			1,030			1,030			1,030
Intangibles, net	40,170			34,867			34,303			37,406
Goodwill	26,607			20,337			26,775			26,763
Other long-term assets	1,323			—			1,168			1,355
Total assets	$	107,154		$	94,586		$	101,321		$	105,699
Liabilities and Stockholders’ Equity
Accounts payable	$	12,602		$	14,422		$	13,559		$	16,546
Accrued expense and other current liabilities	16,186			11,827			12,801			13,965
Deferred merchant booking	9,178			6,997			12,198			6,991
Deferred revenue	4,725			3,262			6,436			4,072
Note payable							3,000			—
Current maturities of long-term debt	100			100			37,871			100
Capital lease obligations	180			205			—			179
Total current liabilities	42,971			36,813			85,865			41,853
Long-term debt, less current portion and net of unamortized discount and debt issuance cost	37,839			23,616
Long-term debt, less current portion and net of debt issuance cost							—			37,825
Warrant liability	28,129			19,195			16,701			25,030
Other liabilities	1,845			2,904			3,631			3,591
Total liabilities	110,784			82,528			106,197			108,299

Commitments and contingencies (Note 13)

Preferred stock, $0.001 par value; 1,000,000 shares authorized; none issued	—			—			—			—
Common stock, $0.001 par value; 100,000,000 shares and 50,000,000 shares authorized; 20,711,078 and 19,659,362 shares issued and outstanding; each at September 30, 2016 and December 31, 2015, respectively	21			20
Common stock, $0.001 par value; 100,000,000 shares authorized; 22,653,322 and 22,232,004 shares issued and outstanding; each at June 30, 2017 and December 31, 2016, respectively							23			22
Additional paid-in-capital	180,856			173,477			192,591			190,507
Accumulated other comprehensive loss	(6		)	(5		)	(44		)	(16		)
Accumulated deficit	(184,501		)	(161,434		)	(197,446		)	(193,113		)
Total stockholders’ equity (deficit)	(3,630		)	12,058			(4,876		)	(2,600		)
Total liabilities and stockholders’ equity	$	107,154		$	94,586		$	101,321		$	105,699

See Notes to Unaudited Condensed Consolidated Financial Statements



Table of Contents	1	Financial Statement Index

REMARK ~~MEDIA,~~HOLDINGS, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

(dollars in thousands, except per share amounts)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015			2017			2016			2017			2016
Revenue, net	$	15,142		$	816		$	44,371		$	2,440		$	17,256		$	14,975		$	32,555		$	29,229
Cost and expense
Cost of revenue (excluding depreciation and amortization)	2,864			136			7,837			256			3,965			2,624			6,629			4,973
Sales and marketing	4,887			469			15,349			845			5,774			4,934			11,649			10,462
Technology and development	1,066			61			1,904			233			884			434			1,792			838
General and administrative	7,921			8,859			24,251			15,364			8,359			7,910			16,685			16,330
Depreciation and amortization	2,525			459			7,401			909			2,894			2,479			5,755			4,876
Other operating expense	77			142			506			189			57			97			102			429
Total cost and expense	19,340			10,126			57,248			17,796			21,933			18,478			42,612			37,908
Operating loss	(4,198		)	(9,310		)	(12,877		)	(15,356		)	(4,677		)	(3,503		)	(10,057		)	(8,679		)
Other income (expense)
Debt conversion expense	—			(1,469		)	—			(1,469		)
Interest expense	(1,224		)	(303		)	(3,649		)	(708		)	(1,181		)	(1,215		)	(2,199		)	(2,425		)
Other income (loss), net	(1		)	(80		)	29			(79		)
Loss on extinguishment of debt	(9,157		)	—			(9,157		)	—
Other income, net													1			1			20			30
Change in fair value of warrant liability	(647		)	20			2,691			241			1,760			(647		)	8,329			3,338
Other gain (loss)	(33		)	6			(104		)	6
Other loss													(21		)	(68		)	(52		)	(71		)
Total other income (expense), net	(11,062		)	(1,826		)	(10,190		)	(2,009		)	559			(1,929		)	6,098			872
Loss before income taxes	(15,260		)	(11,136		)	(23,067		)	(17,365		)	(4,118		)	(5,432		)	(3,959		)	(7,807		)
Provision for income taxes	—			—			—			—			(190		)	—			(374		)	—
Net loss	$	(15,260	)	$	(11,136	)	$	(23,067	)	$	(17,365	)	$	(4,308	)	$	(5,432	)	$	(4,333	)	$	(7,807	)
Other comprehensive income (loss)
Foreign currency translation adjustments	—			25			—			—
Comprehensive loss	$	(15,260	)	$	(11,111	)	$	(23,067	)	$	(17,365	)

Weighted-average shares outstanding, basic and diluted	20,359			14,830			20,104			13,884			22,637			20,069			22,553			19,903

Net loss per share, basic and diluted	$	(0.75	)	$	(0.75	)	$	(1.15	)	$	(1.25	)	$	(0.19	)	$	(0.27	)	$	(0.19	)	$	(0.39	)

See Notes to Unaudited Condensed Consolidated Financial Statements



Table of Contents	2	Financial Statement Index

REMARK ~~MEDIA,~~HOLDINGS, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(dollars in thousands)


	Nine Months Ended September 30,						Six Months Ended June 30,
	2016			2015			2017			2016
Net cash used in operating activities (net of effects of acquisitions)	$	(1,950	)	$	(9,896	)
Net cash provided by (used in) operating activities							$	(2,034	)	$	1,957
Cash flows from investing activities:
Purchases of property, equipment and software	(2,465		)	(1,448		)	(1,785		)	(1,469		)
Business acquisitions, net of cash received	(7,330		)	(257		)
Net cash used in investing activities	(9,795		)	(1,705		)	(1,785		)	(1,469		)
Cash flows from financing activities:
Change in restricted cash	10			(11,666		)
Proceeds from issuance of common stock, net	4,368			6,815			1,315			2,300
Proceeds from debt issuance	7,597			27,921			3,000			—
Payment of debt issuance cost	(163		)	—
Repayments of debt	—			(1,350		)
Payments of capital lease obligations	(182		)	(128		)	(179		)	(182		)
Net cash provided by financing activities	11,630			21,592			4,136			2,118
Net increase (decrease) in cash and cash equivalents	(115		)	9,991
Cash and cash equivalents:
Net increase in cash, cash equivalents and restricted cash							317			2,606
Cash, cash equivalents and restricted cash:
Beginning of period	5,422			1,525			18,548			17,088
End of period	$	5,307		$	11,516		$	18,865		$	19,694

Supplemental cash flow information:
Cash paid for interest	$	2,661		$	—		$	1,997		$	1,827

Supplemental schedule of non-cash investing and financing activities:
Common stock issued in business acquisition transactions	$	—		$	9,743
Warrants issued in business acquisition transactions	$	7,993		$	10,181
Other non-cash consideration issued in business acquisition transactions	$	—		$	2,700
Issuance of common stock upon conversion of debt instruments	$	—		$	10,278		$	121		$	—
Exchange of note receivable for intangible asset	$	—		$	1,350

See Notes to Unaudited Condensed Consolidated Financial Statements



Table of Contents	3	Financial Statement Index

REMARK ~~MEDIA,~~HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 1. ORGANIZATION AND BUSINESS

Organization and Business

Remark ~~Media,~~Holdings, Inc. and subsidiaries (“Remark”, “we”, “us”, or “our”) own, operate and acquire innovative digital media properties across multiple verticals, such as travel ~~personal finance, social media,~~and entertainment, technology and data intelligence, young adult lifestyle and ~~entertainment,~~personal finance, that deliver culturally relevant, dynamic content that attracts and engages users around the world. We leverage our unique digital media assets to target the Millennial demographic, which provides us with access to fast-growing, lucrative markets. Our common stock is listed on the Nasdaq Capital Market under the ticker symbol MARK.

Liquidity Considerations

During the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, and in each fiscal year since our inception, we have incurred net losses and generated negative cash flow from operations, resulting in an accumulated deficit of ~~$184.5~~$197.4 million and a cash and cash equivalents balance of ~~$5.3~~$7.2 million, both amounts as of ~~September~~June 30, ~~2016.~~2017. Also as of ~~September~~June 30, ~~2016,~~2017, we had a negative working capital balance of ~~$23.7~~$64.7 million. Our net revenue during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 was ~~$44.4~~$32.6 million.

During the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, we issued a total of ~~963,922~~382,308 shares of our common stock to accredited investors in certain private placements in exchange for approximately ~~$4.3~~$1.3 million in cash.

We are a party to a financing agreement dated as of September 24, 2015 (as amended, the “Financing Agreement”) with certain of our subsidiaries as borrowers (together with Remark, the “Borrowers”), certain of our subsidiaries as guarantors (the “Guarantors”), the lenders from time to time party thereto (the “Lenders”) and MGG Investment Group LP, in its capacity as collateral agent and administrative agent for the Lenders (“MGG”), pursuant to which the Lenders initially extended credit to the Borrowers consisting of a term loan in the aggregate principal amount of $27.5 million (the “Loan”). On September 20, 2016, we entered into Amendment No. 1 to Financing Agreement (the ~~“Amendment”~~“Financing Amendment”) which, among other changes, increased the Loan by $8.0 million to a total aggregate principal amount of $35.5 million. The terms of the Financing Agreement and related documents are described in Note 11~~, and we describe the terms of the Amendment and related documents in~~ ~~Note 3~~10.

As of June 30, 2017, we were not in compliance with the covenant under the Financing Agreement requiring minimum consolidated EBITDA of Remark and its subsidiaries for the trailing twelve-month period ended June 30, 2017 of $(2.7) million, as our actual consolidated EBITDA for such period was $(3.5) million. Also, as of July 13, 2017, we were not in compliance with the covenant under the Financing Agreement requiring a minimum restricted cash balance of $2.25 million, and as of the date of this report, the actual restricted cash balance was $1.56 million. The foregoing instances of non-compliance constitute events of default under the Financing Agreement for which we have not received a waiver as of the date of this report. As a result, the Lenders may declare our obligations under the Financing Agreement, including all unpaid principal and interest, due and payable immediately and exercise such other rights available to them under the Financing Agreement. Our available cash and other liquid assets are not sufficient to pay such obligations in full. We are pursuing discussions with the Lenders with respect to obtaining a waiver under or modifications to the Loan Agreement, but we cannot provide assurance that we will obtain such waiver or modifications.

We cannot provide assurance that revenue generated from our businesses will be sufficient to sustain our operations in the long term; therefore, we have implemented measures to reduce operating costs, and we continuously evaluate other opportunities to reduce costs. Additionally, we are actively assessing the sale of certain non-core assets, considering sales of minority interests in certain of our operating businesses, and evaluating potential acquisitions that would provide additional revenue. However, we may need to obtain additional capital through equity financing, debt financing, or by divesting of certain assets or businesses. Conditions in the debt and equity markets, as well as the volatility of investor sentiment regarding macroeconomic and microeconomic conditions, will play primary roles in determining whether we can successfully obtain additional capital. ~~Pursuant~~Additionally, pursuant to the Financing Agreement, we are subject to certain limitations on our ability and the ability of our subsidiaries to, among other things, incur additional debt and transfer, sell or otherwise dispose of assets, without the consent of the Lenders. We cannot be certain that we will be successful at raising capital, whether in an equity financing, debt financing, or by divesting of certain assets or businesses, on commercially reasonable terms, if at all. In addition, if we obtain capital by issuing equity, such transaction(s) may dilute existing stockholders.additional capital.

A variety of factors, many of which are outside of our control, affect our cash flow; those factors include regulatory issues, competition, financial markets and other general business conditions. Based ~~upon~~on our ~~most recent cash flow~~historical track record and projections, we believe that we ~~have sufficient existing cash, cash equivalents and cash resources~~will be able to meet our ongoing requirements through ~~September~~June 30, ~~2017, including~~2018 (including repayment of our existing debt as it matures. However, projecting operating results is inherently uncertain because anticipated expenses may exceed current forecasts; therefore, we cannot assure you that we will generate sufficient income and cash flow to meet all of our liquidity requirements.



Table of Contents	4	Financial Statement Index

as it matures) with existing cash, cash equivalents and cash resources, and based on the probable success of one or more of the following plans:

monetize existing assets

work with our creditors to modify existing arrangements or refinance our debt

obtain additional capital through equity issuances, including but not limited to equity issuances to Aspire Capital Fund, LLC under its existing purchase commitment (which equity issuances may dilute existing stockholders)

However, projections are inherently uncertain and we cannot assure you that we will generate sufficient income and cash flow to meet all of our liquidity requirements.

Comparability

We reclassified ~~certain amounts~~an amount in the December 31, ~~2015~~2016 Consolidated Balance Sheet ~~and in the 2015 unaudited Condensed Consolidated Statement of Operations~~ to conform to the ~~2016~~current presentation ~~for the three and nine months ended September~~as of June 30, 2016. Our reclassification of a net $9.9 million internally-developed software asset from Intangibles, net to Property and equipment, net had no impact on our total assets, results of operations or cash flows as previously reported. Our reclassification for the three and nine months ended September 30, 2015, respectively, of $142 thousand and $189 thousand from the Technology and development line item to the Other operating expense line item had no impact on our results of operations, cash flows or owners’ equity as previously reported.2017.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

We prepared the accompanying unaudited Condensed Consolidated Balance Sheet as of ~~September~~June 30, ~~2016,~~2017, with the audited Consolidated Balance Sheet amounts as of December 31, ~~2015~~2016 presented for comparative purposes, and the related unaudited Condensed Consolidated Statements of Operations and Statements of Cash Flows in accordance with the instructions for Form 10-Q. In compliance with those instructions, we have omitted certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), though management believes the disclosures made herein are sufficient to ensure that the information presented is not misleading.

Our results of operations and our cash flows as of the end of the interim periods reported herein do not necessarily indicate the results we may experience for the remainder of the year or for any other future period.

Management believes that we have included all adjustments (including those of a normal, recurring nature) considered necessary to fairly present our unaudited Condensed Consolidated Balance Sheet as of ~~September~~June 30, ~~2016,~~2017, our unaudited Condensed Consolidated Statements of Operations and our unaudited Condensed Consolidated Statements of Cash Flows for all periods presented. You should read our unaudited condensed consolidated interim financial statements and footnotes in conjunction with our consolidated financial statements and footnotes included within our Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016 (the ~~“2015~~“2016 Form 10-K”).

Consolidation

We include all of our subsidiaries in our consolidated financial statements, eliminating all significant intercompany balances and transactions during consolidation. The equity of certain of our subsidiaries is either partially or fully held by citizens of the country of incorporation to comply with local laws and regulations.

Use of Estimates

We prepare our consolidated financial statements in conformity with GAAP. While preparing our financial statements, we make estimates and assumptions that affect amounts reported and disclosed in the consolidated financial statements and accompanying notes. Accordingly, actual results could differ from those estimates. On an ongoing basis, we evaluate our estimates, including those related to accounts receivable, intangible assets, the useful lives of property and equipment, stock-based compensation, the fair value of the warrant liability, ~~and~~ income taxes, inventory reserve and purchase price allocation, among other items.

~~Changes to Significant Accounting Policies~~

~~We have made no material changes to our significant accounting policies as reported in our 2015 Form 10-K.~~

~~Recently Issued Accounting Pronouncements~~

~~In May 2014, the Financial Accounting Standards Board (the “FASB”) modified the Accounting Standards Codification by issuing Accounting Standards Update (“ASU”) 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606), which outlines a~~



Table of Contents	5	Financial Statement Index

Changes to Significant Accounting Policies

We have made no material changes to our significant accounting policies as reported in our 2016 Form 10-K.

Recently Issued Accounting Pronouncements

In July 2017, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2017-11, Accounting for Certain Financial Instruments with Down Round Features, which changes how an entity determines whether certain financial instruments should be classified as liabilities or equity instruments. Under ASU 2017-11, a down round feature no longer precludes equity classification when an entity assesses whether the instrument is indexed to the entity's own stock. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. The amendments also require entities to recognize the effect of the down round feature as a dividend when the feature is triggered (which would affect the presentation of earnings per share) and they clarify existing disclosure requirements for equity-classified instruments. We are currently evaluating the impact that application of ASU 2017-11 will have on our consolidated financial statements, results of operations and cash flows.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which changes GAAP primarily by requiring lessees to recognize, at lease commencement, a lease liability representing the present value of the lessee’s obligation to make lease payments, and a right-of-use asset representing the lessee’s right to use (or control the use of) a specified asset during the lease term, for leases classified as operating leases. For us the amendments in ASU 2016-02 will become effective on January 1, 2019, and early adoption is permitted. We are currently evaluating the impact that application of ASU 2016-02 will have on our consolidated financial statements, results of operations and cash flows.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which outlines a single, comprehensive model for an entity to use to ensure that it recognizes revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For us, the amendments in ASU 2014-09 are effective for fiscal years beginning after December 15, 2017, including interim periods therein. Though we do not believe that this guidance will have a material effect upon the financial condition, results of operations, cash flows or reporting thereof for most of our existing subsidiaries, we are evaluating the impact the guidance will have on the business we acquired inwhen we, together with our wholly-owned subsidiary KanKan Limited, completed the ~~CBG Acquisition.~~acquisition (the “CBG Acquisition”) of assets of China Branding Group Limited (“CBG”) on September 20, 2016, pursuant to the terms of the Second Amended and Restated Asset and Securities Purchase Agreement, dated as of the same date.

We have reviewed all recently issued accounting pronouncements. The pronouncements that we have already adopted ~~including ASU 2016-09,~~ ~~Compensation—Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting,~~ did not have a material effect on our financial condition, results of operations, cash flows or reporting thereof, and except as otherwise noted above, we do not believe that any of the pronouncements that we have not yet adopted will have a material effect upon our financial condition, results of operations, cash flows or reporting thereof.

NOTE 3. BUSINESS ACQUISITIONS

China Branding Group Limited

On September 20, 2016, we, together with our wholly-owned subsidiary KanKan Limited, completed the acquisition (the “CBG Acquisition”) of assets of China Branding Group Limited (“CBG”), pursuant to the terms of the Second Amended and Restated Asset and Securities Purchase Agreement, dated as of the same date (the “CBG Purchase Agreement”), with CBG and the other parties specified therein. We completed the CBG Acquisition ~~primarily to capitalize~~ on the branded-content expertise in the China market of the entities we acquired from CBG, including Fanstang. Fanstang, which is based in Shanghai, China, distributes Western digital entertainment content in China. We also acquired an operation in Los Angeles, California that produces content distributed by Fanstang.

September 20, 2016. The aggregate consideration of $15.4 million included $7.4 million of cash and the future issuance of seven-year warrants (the “CBG Acquisition Warrants”) to purchase 5,750,000 shares of our common stock at $10.00 per share, subject to certain anti-dilution adjustments. ~~At closing,~~For more information regarding the ~~parties deposited $375,000 of~~CBG Acquisition, see Note 3 to the ~~cash portion~~Consolidated Financial Statements in our 2016 Form 10-K.

We based our allocation of the purchase ~~price into escrow for 15 months~~consideration we paid to ~~secure certain obligations of CBG under~~ the ~~Purchase Agreement. We also agreed to provide resale registration rights for~~net tangible and intangible assets we acquired based on their estimated fair values on the ~~shares of our common stock issuable upon exercise~~closing date of the CBG ~~Acquisition Warrants.~~

~~Concurrently with~~Acquisition. Such fair values represented our best estimates based on information available to us at the ~~closing of~~time we calculated the ~~CBG Acquisition,~~estimates. Final purchase accounting is not yet complete, and additional adjustments are likely during the measurement period. For example, we entered into the Amendment, pursuant to which the Lenders agreed (i) to extend additional credit under the Financing Agreement in the principal amount of $8.0 million and (ii) to modify certain of the financial covenants in the Financing Agreement, including financial covenants with respect to quarterly EBITDA levels, inhave identified a manner beneficial to us. The amount outstanding under the Financing Agreement will accrue interest at three month LIBOR plus 10.0% per annum, payable monthly, and has a maturity date of September 24, 2018. The Amendment and related documents also provide for certain fees payable to the Lenders and for the issuance of the CBG Financing Warrants. As a condition to closing the Amendment,tax-related liability that we issued to affiliates of MGG warrants to purchase up to 2,670,736 shares of our common stock at an exercise price of $5.50 per share, subject to certain anti-dilution adjustments (the “CGB Financing Warrants”). On September 20, 2016, we also entered into a Registration Rights Agreement to provide the holders of the CBG Financing Warrants with registration rights for the shares of our common stock issuable under such warrants.

~~The following table presents the aggregate consideration we paid in relation to the CBG Acquisition (in thousands):~~

Calculation of Purchase Price
Cash $ 7,400
Warrants to purchase Remark common stock 7,993
Total purchase consideration $ 15,393

For the nine months ended September 30, 2016, transaction costs related to the CBG Acquisition totaled $0.2 million and are recorded in general and administrative expense in the condensed consolidated statements of operations.



Table of Contents	6	Financial Statement Index

~~Our Consolidated Financial Statements include the operating results of assets acquired in~~believe existed prior to the CBG Acquisition, ~~from~~but for which we are still evaluating available information. As a result, we expect to record an adjustment in the ~~closing date~~third fiscal quarter of 2017, possibly approximating $0.4 million. We did not record any material adjustments to acquisition-date values during the ~~CBG Acquisition.~~ six months ended June 30, 2017.

The following table presents the current status of our preliminary allocation of the purchase consideration we paid to the net tangible and intangible assets we acquired based on their estimated fair values on the closing date of the CBG Acquisition (in thousands):


	Purchase Price Allocation		Purchase Price Allocation
Cash and cash equivalents	$	70	$	60
Accounts receivable	365		368
Other current assets	17		17
Total current assets	$	452	$	445
Intangibles	9,206		9,206
Total identifiable assets acquired	$	9,658	$	9,651
Accounts payable	378		528
Deferred revenue	145		145
Other current liabilities	12		11
Net identifiable assets acquired	$	9,123	$	8,967
Goodwill	6,270		6,426
Total purchase consideration	$	15,393	$	15,393

Our subsidiaries acquired in the CBG Acquisition only contributed a nominal amount to consolidated net loss during the three and nine months ended September 30, 2016. We are excluding pro forma revenue and earnings as determining the amounts is impracticable because CBG, the entity from which we acquired certain assets and entities, was a private company and their records are not readily available in conformity with GAAP.

The fair value of intangible assets acquired of $9.2 million consists of media content and broadcast rights with an estimated fair value of $2.1 million, customer relationships with an estimated fair value of $3.2 million, acquired technology with an estimated fair value of $0.2 million and tradenames with an estimated fair value of $3.7 million. Utilizing the straight-line method, we will amortize the media content and broadcast rights over a weighted-average useful life of approximately five years, the customer relationship intangible asset over a weighted-average useful life of approximately seven years, and the acquired technology intangible asset over a useful life of one year. Overall, the weighted-average useful life of the intangible assets we acquired is approximately seven years. We expect the tradenames to have an indefinite useful life.

The recorded goodwill primarily results from the synergies we expect to realize from the combination of the entities and the assembled workforce we acquired in connection with the CBG Acquisition.

~~Vegas.com LLC~~

On September 24, 2015, we completed the acquisition of all of the outstanding equity interests in Vegas.com, LLC (“Vegas.com”) pursuant to the terms of the Unit Purchase Agreement, dated as of August 18, 2015 (as amended, the “Purchase Agreement”), by and among Remark, Vegas.com and the equity owners of Vegas.com listed on the signature page thereto (the “Vegas.com Acquisition”).

We paid aggregate consideration of $36.6 million that included cash, shares of our common stock, warrants allowing for the purchase of 8,601,410 shares of our common stock at $9.00 per share (the “VDC Acquisition Warrants”, and together with the CBG Acquisition Warrants, the “Acquisition Warrants”), and cash payments contingent upon the performance of Vegas.com in the years ending December 31, 2016, 2017 and 2018 (the “Earnout Payments”). We recorded $15.0 million, the amount by which the aggregate consideration exceeded the $21.6 million of the net identifiable assets that we acquired, as goodwill. The



~~Table of Contents~~	7	~~Financial Statement Index~~

recorded goodwill primarily results from the synergies we expect to realize from the combination of the two companies and the assembled workforce we acquired in connection with the Vegas.com Acquisition.

Concurrently with the closing of the Vegas.com Acquisition, we entered into the Financing Agreement with the Lenders and MGG. As a condition to closing the Financing Agreement, we issued a warrant to an affiliate of MGG that, as of September 30, 2016, allows for the purchase of 2,657,223 shares of our common stock at $8.74 per share (the “VDC Financing Warrant”, and together with the CBG Financing Warrants, the “Financing Warrants”).

Also concurrently with the closing of the Vegas.com Acquisition, to satisfy the closing conditions under the VDC Purchase Agreement, Vegas.com entered into a loan agreement with Bank of America, N.A., which currently expires on May 31, 2017, providing for a letter of credit facility with up to $9.3 million of availability (the “Letter of Credit Facility Agreement”).

NOTE 4. FAIR VALUE MEASUREMENTS

Liabilities Related to Warrants to Purchase Common Stock

At the end of each reporting period, we use the Monte Carlo Simulation model to estimate and report the fair value of liabilities related to certain outstanding warrants to purchase our common stock that are subject to potential anti-dilution adjustments or that contain put options or call options. Our outstanding warrants include warrants we issued in connection with our acquisition of all of the outstanding equity interests in Vegas.com, LLC (“Vegas.com”) in September 2015 (the “VDC Acquisition”) and the financing related thereto (referred to herein as the VDC Acquisition Warrants and the VDC Financing Warrants, respectively), the CBG Acquisition Warrants and warrants we issued in connection with the Financing Amendment (the “CBG Financing Warrants”).



Table of Contents	7	Financial Statement Index

The following table presents the quantitative inputs, which we classify in Level 3 of the fair value hierarchy, used in estimating the fair value of the warrants:


	September 30, 2016				December 31, 2015		June 30, 2017				December 31, 2016
Warrants issued in February 2012
Annual dividend rate	—	%			—	%
Expected volatility	45.00	%			55.00	%	45.00	%			45.00	%
Risk-free interest rate	0.56	%			0.92	%	0.93	%			0.69	%
Expected remaining term (years)	0.91				1.66		0.16				0.66

	September 30, 2016				December 31, 2015		June 30, 2017				December 31, 2016
	VDC		CBG		VDC		VDC		CBG		VDC		CBG
Financing Warrants
Annual dividend rate	—	%	—	%	—	%
Expected volatility	50.00	%	50.00	%	55.00	%	50.00	%	50.00	%	50.00	%	50.00	%
Risk-free interest rate	1.01	%	1.07	%	1.70	%	1.59	%	1.59	%	1.64	%	1.64	%
Expected remaining term (years)	3.98		4.01		4.73		3.23		3.23		3.73		3.73
Acquisition Warrants
Annual dividend rate	—	%	—	%	—	%
Expected volatility	50.00	%	50.00	%	55.00	%	50.00	%	50.00	%	50.00	%	50.00	%
Risk-free interest rate	1.01	%	1.50	%	1.76	%	1.59	%	2.04	%	1.64	%	2.21	%
Expected remaining term (years)	3.98		7.00		4.74		3.23		6.22		3.73		6.72

In addition to the quantitative assumptions above, we also consider whether we would issue additional equity and, if so, the price per share of such equity. At ~~September~~June 30, ~~2016,~~2017, we estimated that ~~two~~three future equity financing events would potentially occur within the subsequent twelve months.

Our estimate of expected volatility and our stock price tend to have the most significant impact on the estimated fair value of the VDC and CBG Financing Warrants and the VDC and CBG Acquisition Warrants. If we added or subtracted five percentage points with regard to our



~~Table of Contents~~	8	~~Financial Statement Index~~

estimate of expected volatility, or if our stock price increased or decreased by five percent, our estimates of fair value would change approximately as follows (in thousands):


Change in volatility	Increase		Decrease		Increase		Decrease
CBG Financing Warrants	$	450	$	400	$	245	$	245
VDC Financing Warrant	450		500
VDC Financing Warrants					225		195
CBG Acquisition Warrants	1,000		900		575		630
VDC Acquisition Warrants	450		1,000		430		345

Change in stock price
CBG Financing Warrants	$	350	$	300	$	135	$	165
VDC Financing Warrant	250		250
VDC Financing Warrants					85		85
CBG Acquisition Warrants	800		700		345		170
VDC Acquisition Warrants	500		450		170		85



Table of Contents	8	Financial Statement Index

The following table presents the reconciliation of the beginning and ending balances of the liabilities associated with the VDC and CBG Acquisition Warrants, the VDC and CBG Financing Warrants and the warrants issued in February 2012 that remain outstanding (in thousands):


	Nine Months Ended September 30,			Year Ended December 31,		Six Months Ended June 30,			Year Ended December 31,
	2016			2015		2017			2016
Balance at beginning of period	$	19,195		$	512	$	25,030		$	19,195
New warrant issuances	11,625			13,252		—			11,625
Increase (decrease) in fair value	(2,691		)	5,431		(8,329		)	(5,790		)
Balance at end of period	$	28,129		$	19,195	$	16,701		$	25,030

At ~~September~~June 30, ~~2016,~~2017, the price of our common stock was less than the exercise price of the VDC Acquisition Warrants, effectively precluding exercise of the warrants. However, each holder has the right to sell its VDC Acquisition Warrant back to us on its expiration date in exchange for shares of our common stock having a value equivalent to the value of the VDC Acquisition Warrant at closing of the ~~Vegas.com~~VDC Acquisition (reduced pro rata based on the percentage of the VDC Acquisition Warrant exercised), provided that this put option terminates if the closing price of our common stock equals or exceeds $10.16 for any 20 trading days during a period of 30 consecutive trading days at any time on or prior to the expiration date. If the holders had exercised the put option as if ~~September~~June 30, ~~2016~~2017 was the expiration date of the VDC Acquisition Warrants, we would have issued to the holders ~~2,283,106~~3,891,051 shares with a fair value of ~~$4.50~~$2.77 per share. The number of shares issuable upon exercise of the put option is calculated based on the volume weighted average price of our common stock during the 30 trading days ending on the warrants’ expiration date (“30-day VWAP”); the more that the 30-day VWAP decreases, the number of shares we would issue to the holders increases significantly.

Contingent Consideration Issued in Business Acquisition

We used the discounted cash flow valuation technique to estimate the fair value of the liability related to ~~the Earnout Payments~~certain cash payments stipulated byin the VDC ~~Purchase Agreement.~~Acquisition that are contingent upon the performance of Vegas.com in the year ended December 31, 2016, and in the years ending December 31, 2017 and 2018 (the “Earnout Payments”). The significant unobservable inputs that we used, which we classify in Level 3 of the fair value hierarchy, were projected earnings before interest, taxes, depreciation and amortization (“EBITDA”), the probability of achieving certain amounts of EBITDA, and the rate used to discount the liability.



~~Table of Contents~~	9	~~Financial Statement Index~~

The following table presents the change during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 in the balance of the liability associated with the Earnout Payments (in thousands):


Balance at beginning of period	$	2,700	$	2,860
Change in fair value of contingent consideration	100		20
Balance at end of period	$	2,800	$	2,880

On the Condensed Consolidated Balance Sheet, we included the current portion of the liability for contingent consideration as a component of Accrued expense and other liabilities, and the long-term portion as a component of Other liabilities (see Note 12). We have not yet paid the portion of the Earnout Payments which was due on April 30, 2017.

NOTE 5. RESTRICTED CASH

Regarding our restricted cash, ~~approximately $2.3~~$2.25 million relates to the Financing Agreement and secures our obligations under that agreement. The restriction on the cash related to the Financing Agreement will not be released until we have repaid all of our obligations under the Financing ~~Agreement.~~Agreement, unless we obtain the written authorization of the Lenders. The remaining amount



Table of Contents	9	Financial Statement Index

of our restricted cash relates to the Letter of Credit Facility Agreement we have in place to satisfy the requirements of several of the vendors for whom we sell products (hotel rooms, air travel, show tickets, et cetera) through our online outlets. By contract, certain vendors require ~~the~~ letters of credit as a means of securing our payment to them of amounts related to the sales we make on their behalf. We renew the letter of credit facility annually, and the restrictions on the cash related to the letters of credit will ~~not be released until~~remain to the extent we ~~negotiate~~continue to enter into contracts ~~which do not require~~requiring the security of letters of credit.

The following table provides a reconciliation of the amounts separately reported as Cash and cash equivalents and Restricted cash on our consolidated balance sheets with the single line item reported on our consolidated statements of cash flows as Cash, cash equivalents and restricted cash (in thousands):



	June 30, 2017		December 31, 2016
Cash and cash equivalents	$	7,209	$	6,893
Restricted cash reported in current assets	9,406		9,405
Restricted cash reported in long-term assets	2,250		2,250
Total cash, cash equivalents and restricted cash	$	18,865	$	18,548

NOTE 6. INVESTMENT IN UNCONSOLIDATED AFFILIATE

In 2009, we co-founded a U.S.-based venture, Sharecare, to build a web-based platform that simplifies the search for health and wellness information. The other co-founders of Sharecare were Dr. Mehmet Oz, HARPO Productions, Discovery Communications, Jeff Arnold and Sony Pictures Television. As of ~~September~~June 30, ~~2016~~2017, we owned approximately five percent of Sharecare’s issued stock and maintained representation on its Board of Directors.

NOTE 7. PREPAID EXPENSE AND OTHER CURRENT ASSETS

The following table presents the components of prepaid expense and other current assets (in thousands):


	September 30, 2016		December 31, 2015		June 30, 2017		December 31, 2016
Prepaid expense	$	2,250	$	1,675	$	2,745	$	2,160
Deposits	145		189		164		137
Inventory	539		526
Inventory, net					351		314
Other current assets	284		247		412		712
Total	$	3,218	$	2,637	$	3,672	$	3,323



Table of Contents	10	Financial Statement Index

NOTE 8. PROPERTY AND EQUIPMENT

Property and equipment consist of the following (in thousands, except estimated lives):


	Estimated Life (Years)	September 30, 2016			December 31, 2015			Estimated Life (Years)	June 30, 2017			December 31, 2016
Vehicles	2	$	150		$	150		2	$	150		$	150
Computers and equipment	2 - 12	1,228			1,051			2 - 12	1,469			1,192
Furniture and fixtures	2 - 9	251			241			2 - 9	248			244
Software	3 - 5	18,578			16,876			3 - 5	19,658			19,538
Software development in progress		1,339			865				2,207			839
Leasehold improvements	1	150			47			1	166			166
Total property, equipment and software		$	21,696		$	19,230			$	23,898		$	22,129
Less accumulated depreciation		(5,391		)	(1,892		)		(9,252		)	(6,598		)
Total property, equipment and software, net		$	16,305		$	17,338			$	14,646		$	15,531

For the ~~nine~~six months ended ~~September~~June 30, 2017 and 2016, depreciation (and amortization of software) expense was ~~$3.5 million. Depreciation (and amortization of software) expense for the comparable period in 2015 was nominal.~~$2.7 million and $2.3 million, respectively.

NOTE 9. GOODWILL AND OTHER INTANGIBLE ASSETS

The following table summarizes intangible assets by category (in thousands):


	September 30, 2016							December 31, 2015							June 30, 2017							December 31, 2016
	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Finite-lived intangible assets
Domain names	$	4,200	$	(1,456	)	$	2,744	$	4,200	$	(1,160	)	$	3,040	$	3,041	$	(1,684	)	$	1,357	$	3,041	$	(1,554	)	$	1,487
Customer relationships	27,064		(5,296		)	21,768		23,866		(1,973		)	21,893		27,064		(8,914		)	18,150		27,064		(6,513		)	20,551
Media content and broadcast rights	3,491		(315		)	3,176		1,350		(113		)	1,237		3,491		(992		)	2,499		3,491		(541		)	2,950
Acquired technology	578		(210		)	368		436		(145		)	291		578		(382		)	196		578		(268		)	310
Other intangible assets	68		(55		)	13		68		(38		)	30		68		(68		)	—		68		(61		)	7
	$	35,401	$	(7,332	)	$	28,069	$	29,920	$	(3,429	)	$	26,491	$	34,242	$	(12,040	)	$	22,202	$	34,242	$	(8,937	)	$	25,305
Indefinite-lived intangible assets
Trademarks and trade names	$	12,001				$	12,001	$	8,276				$	8,276	$	12,001				$	12,001	$	12,001				$	12,001
License to operate in China	100					100		100					100		100					100		100					100
Total intangible assets	$	47,502				$	40,170	$	38,296				$	34,867	$	46,343				$	34,303	$	46,343				$	37,406



Table of Contents	11	Financial Statement Index

Total amortization expense was ~~$3.9~~$3.1 million and ~~$0.7~~$2.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively.

The following table summarizes the changes in goodwill during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and the year ended December 31, ~~2015~~2016 (in thousands):


	Nine Months Ended September 30, 2016						Year Ended December 31, 2015						Six Months Ended June 30, 2017						Year Ended December 31, 2016
	Travel and Entertainment Segment		Corporate Entity and Other Business Units		Total		Travel and Entertainment Segment		Corporate Entity and Other Business Units		Total		Travel and Entertainment Segment		Corporate Entity and Other Business Units		Total		Travel and Entertainment Segment		Corporate Entity and Other Business Units		Total
Balance at beginning of period	$	18,514	$	1,823	$	20,337	$	3,470	$	1,823	$	5,293	$	18,514	$	8,249	$	26,763	$	18,514	$	1,823	$	20,337
Business acquisitions	—		6,270		6,270		15,044		—		15,044		—		7		7		—		6,426		6,426
Other													—		5		5		—		—		—
Balance at end of period	$	18,514	$	8,093	$	26,607	$	18,514	$	1,823	$	20,337	$	18,514	$	8,261	$	26,775	$	18,514	$	8,249	$	26,763

NOTE 10. ~~CAPITAL LEASE~~DEBT

~~Our Vegas.com subsidiary has leased certain computer hardware and related software that processes and stores its production data. Under~~Note Payable

On April 12, 2017, we issued a short-term note payable in the principal amount of $3.0 million to a private lender in exchange for cash in the same amount. The agreement, which does not have a stated interest rate, required us to repay the note plus a fee of $115,000 on the maturity date of June 30, 2017. The note is accruing interest at $500 per day on the unpaid principal until we ~~will make one more payment of approximately $0.2 million~~repay the note in ~~June 2017. After the final payment in June 2017, ownership of the hardware and software transfers to us.~~full.

~~NOTE 11. LONG-TERM DEBT~~Long-Term Debt

The following table presents long-term debt as of ~~September~~June 30, ~~2016~~2017 (in thousands):


	September 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
Loan due September 2018	$	35,500		27,500			$	35,500		35,500
Unamortized discount	—			(5,546		)
Unamortized debt issuance cost	(161		)	(338		)	(129		)	(175		)
Carrying value of Loan	35,339			21,616			35,371			35,325
Exit fee payable in relation to Loan	2,500			2,000			2,500			2,500
Convertible promissory note payable to an accredited investor	100			100			—			100
Total long-term debt	$	37,939		$	23,716		$	37,871		$	37,925
Less: current portion	(100		)	(100		)	(37,871		)	(100		)
Long-term debt, less current portion and net of discount and debt issuance cost	37,839			23,616
Long-term debt, less current portion and net of debt issuance cost							—			37,825

On September 24, 2015, we entered into the Financing Agreement, pursuant to which the Lenders provided us with the $27.5 million Loan. As ~~described~~mentioned in Note 31, we entered into the Financing Amendment on September 20, 2016 which, among



Table of Contents	12	Financial Statement Index

other changes, increased the Loan by $8.0 million to a total aggregate principal amount of $35.5 million. The Loan bears interest at three-month LIBOR (with a floor of 1%) plus 10% per annum, payable monthly, and has a maturity date of September 24, 2018. As of ~~September~~June 30, ~~2016,~~2017, the applicable interest rate on the Loan was approximately 11% per annum.



~~Table of Contents~~	12	~~Financial Statement Index~~

In connection with the Financing Agreement, we also entered into a security agreement dated as of September 24, 2015 (the “Security Agreement”) with the other Borrowers and the Guarantors for the benefit of MGG, as collateral agent for the Secured Parties referred to therein, to secure the obligations of the Borrowers and the Guarantors under the Financing Agreement. The Security Agreement provides for a first-priority lien on, and security interest in, all assets of Remark and our subsidiaries, subject to certain exceptions.

The Financing Agreement and the Security Agreement contain representations, warranties, affirmative and negative covenants (including financial covenants with respect to quarterly EBITDA levels and the value of our assets), events of default, indemnifications and other provisions customary for financings of this type. The occurrence of any event of default under the Financing Agreement may result in the Loan amount outstanding and unpaid interest thereon, becoming immediately due and payable. As of ~~and for the three months ended September~~June 30, ~~2016,~~2017, we were not in compliance with ~~all applicable financial covenants~~the covenant under the Financing ~~Agreement.~~

~~As described~~Agreement requiring minimum consolidated EBITDA of Remark and its subsidiaries for the trailing twelve-month period ended June 30, 2017 of $(2.7) million, as our actual consolidated EBITDA for such period was $(3.5) million. Also, as of July 13, 2017, we were not in ~~Note 3, we entered into~~compliance with the ~~Amendment related to~~covenant under the Financing Agreement ~~on September 20, 2016. We accounted~~requiring a minimum restricted cash balance of $2.25 million, as the actual cash balance was $1.56 million. The foregoing instances of non-compliance constitute events of default under the Financing Agreement for ~~the Amendment~~which we have not received a waiver as ~~a debt extinguishment, resulting in a loss consisting~~ of the ~~$4.6 million unamortized balance~~date of ~~debt discount and debt issuance cost immediately before the Amendment, the $3.6 million fair value of the warrants we provided to~~this report. As a result, the Lenders may declare our obligations under the ~~$0.5 million additional exit fee~~Financing Agreement, including all unpaid principal and interest, due and payable immediately and exercise such other rights available to them under the ~~$0.4 million of cash we paid to~~Financing Agreement. We have classified the ~~Lenders.~~debt as current in the accompanying balance sheet.

NOTE ~~12.~~11. OTHER LIABILITIES

The following table presents the components of other liabilities (in thousands):


	September 30, 2016		December 31, 2015		June 30, 2017		December 31, 2016
Contingent consideration liability, net of current portion	$	1,820	$	2,700	$	920	$	1,840
Capital lease obligation, net of current portion	—		179
Other	25		25
Deferred rent					1,588		1,002
Deferred tax liability, net					1,123		749
Total	$	1,845	$	2,904	$	3,631	$	3,591

NOTE ~~13.~~12. COMMITMENTS AND CONTINGENCIES

~~Commitments~~

On February 29, 2016, we entered into a new lease for office space to serve as our corporate headquarters for a period of eight years. Based upon our planned use of lease incentives, we expect to pay approximately $10.6 million of base rent over the lease term. Upon executing the lease, we paid the landlord a $1.25 million security deposit which we have reported in Other long-term assets. Barring any default under the lease terms and upon our request, on the 12-month anniversary of the lease and at the end of each subsequent 6-month period until the 30-month anniversary, the landlord will return to us a portion of the security deposit, with all of such repayments aggregating to approximately $1.0 million. The landlord will return the remaining balance of the security deposit to us within 30 days of the later of the end of the lease or our surrender of the premises, to the extent portions of the security deposit are not applied to unpaid amounts otherwise due under the lease.

~~Contingencies~~

We are neither a defendant in any material pending legal proceeding nor are we aware of any material threatened claims against us; therefore, we have not accrued any contingent ~~liabilities.~~liabilities, exclusive of the liability for the Earnout Payments related to the VDC Acquisition.



~~Table of Contents~~	13	~~Financial Statement Index~~

NOTE ~~14.~~13. STOCKHOLDERS' EQUITY AND NET LOSS PER SHARE

~~Authorized Shares~~

On June 7, 2016, at our 2016 annual meeting of stockholders, our stockholders approved an amendment to our Amended and Restated Certificate of Incorporation to increase the number of authorized shares of our common stock to 100,000,000, and we filed a Certificate of Amendment to our Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware on June 7, 2016 to reflect this amendment, which became effective immediately upon filing.

Equity Issuances

During the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, we issued a total of ~~963,922~~382,308 shares of our common stock to investors in certain private placements in exchange for approximately ~~$4.3~~$1.3 million in cash.



Table of Contents	13	Financial Statement Index

Stock-Based Compensation

We are authorized to issue equity-based awards under our 2010 Equity Incentive Plan and our 2014 Incentive Plan, each of which our stockholders have approved. We grant such awards to attract, retain and motivate eligible officers, directors, employees and consultants. Under each of the plans, we have granted shares of restricted stock and options to purchase common stock to our officers and employees with exercise prices equal to or greater than the fair value of the underlying shares on the grant date.

Stock options awarded generally expire 10 years from the grant date. All forms of equity awards vest upon the passage of time, the attainment of performance criteria, or both.

The following table summarizes the stock option activity under our equity incentive plans as of ~~September~~June 30, ~~2016~~2017, and changes during the ~~nine~~six months then ended:

Shares Weighted-Average Exercise Price
Weighted-Average Remaining Contractual Term
(in years)
Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2016 4,327,653
$ 6.23

Granted 2,061,050
3.75

Exercised (102,200 ) 2.77

Forfeited, cancelled or expired (504,737 ) 11.62

Outstanding at September 30, 2016 5,781,766
$ 5.16
8.1 $ 968
Options exercisable at September 30, 2016 4,793,307
$ 5.22
7.9 $ 910

In addition, on January 11, 2016, our stockholders approved the grant of an option to purchase 350,000 shares of our common stock at an exercise price of $4.10 per share to Kai-Shing Tao, our Chief Executive Officer and Chairman of the Board. We recorded the entire $1.0 million of compensation expense associated with this award because Mr. Tao had fully vested in the award at the time we received stockholder approval.

~~The following table summarizes the restricted stock activity under our equity incentive plans as of September 30, 2016, and changes during the nine months then ended:~~



~~Table of Contents~~	14	~~Financial Statement Index~~

Shares
Weighted-Average
Grant-Date Fair Value
Non-vested at January 1, 2016 —
$ —
Granted 31,983
150
Vested (15,992 ) 75
Non-vested at September 30, 2016 15,991
$ 75



	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2017	7,344,140		$	5.01
Granted	2,904,000		2.06
Forfeited, cancelled or expired	(152,101	)	4.42
Outstanding at June 30, 2017	10,096,039		$	4.16	8.4	$	2,149
Options exercisable at June 30, 2017	7,541,780		$	4.77	8.0	$	540

We incurred share-based compensation expense of ~~$0.6~~$0.3 million and ~~$5.3~~$1.0 million, respectively, during the three months ended ~~September~~June 30, 2017 and 2016, and ~~2015, and~~ of ~~$3.0~~$0.6 million and ~~$6.8~~$2.4 million, respectively, during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015.~~2016.

Net Income (Loss) per Share

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, there were no reconciling items related to either the numerator or denominator of the loss per share calculation.

Securities which would have been anti-dilutive to a calculation of diluted earnings per share include:

the outstanding stock options described above;

the outstanding CBG Acquisition Warrant, which may be exercised to purchase 40,000 shares of our common stock at a per-share exercise price of $10.00 (we are also committed to the future issuance of additional CBG Acquisition Warrants at the same per-share exercise price as the CBG Acquisition Warrant that has already been issued), and the outstanding CBG Financing Warrants, which may be exercised to purchase ~~2,670,736~~2,741,229 shares of our common stock at an exercise price of ~~$5.50~~$5.36 per share;

the outstanding VDC Acquisition Warrants, which may be exercised to purchase 8,601,410 shares of our common stock at an exercise price of $9.00 per share, and the outstanding VDC Financing ~~Warrant,~~Warrants, which may be exercised to purchase ~~2,657,223~~2,786,535 shares of our common stock at an exercise price of ~~$8.74~~$8.33 per share;



Table of Contents	14	Financial Statement Index

the warrants issued in conjunction with our acquisition of Hotelmobi, Inc., which may be exercised to purchase 1,000,000 shares of our common stock, half at an exercise price of $8.00 per share and half at an exercise price of $12.00 per share; and

the warrants issued in conjunction with a private placement in 2012, which may be exercised to purchase 215,278 shares of our common stock at an exercise price of $~~4.95~~4.85 per share.

NOTE ~~15.~~14. SEGMENT INFORMATION

The following tables present certain information regarding our travel and entertainment segment for the three and nine months ended September 30, 2016. Because the comparative amounts for the three and nine months ended September 30, 2015 were not material for the segment, we have not presented such information.

In the presentation of our segment information, we include Adjusted EBITDA, which is a “non-GAAP financial measure” as defined in Item 10(e) of Regulation S-K promulgated by the Securities and Exchange Commission ~~(the “SEC”~~(“SEC”). We use Adjusted EBITDA as a supplement to operating income (loss), the most comparable GAAP financial measure, to evaluate the operational performance of our reportable segment. Adjusted EBITDA represents operating income (loss) plus depreciation and amortization expense, share-based compensation expense, impairments and net other income, less other loss. You should not consider our presentation of Adjusted EBITDA in isolation, or consider it superior to, or as a substitute for, financial information prepared and presented in accordance with GAAP. You should also note that our calculation of Adjusted EBITDA may be different from the calculation of Adjusted EBITDA or similarly-titled non-GAAP financial measures used by other companies; therefore, our Adjusted EBITDA may not be comparable to such other measures.



Table of Contents	15	Financial Statement Index

The following table presents certain financial information ~~for~~regarding our travel and entertainment segment for the three and six months ended June 30, 2017 and 2016 (in thousands):

Segment Corporate Entity and Other Consolidated
Three Months Ended September 30, 2016
GAAP financial measures:
Net revenue $ 14,891
$ 251
$ 15,142
Operating loss $ (245 ) $ (3,953 ) $ (4,198 )
Non-GAAP financial measure:
Adjusted EBITDA $ 1,787
$ (2,880 ) $ (1,093 )

Nine Months Ended September 30, 2016
GAAP financial measures:
Net revenue $ 42,668
$ 1,703
$ 44,371
Operating loss $ (1,223 ) $ (11,654 ) $ (12,877 )
Non-GAAP financial measure:
Adjusted EBITDA $ 4,851
$ (7,390 ) $ (2,539 )

~~The following table reconciles Adjusted EBITDA for the segment and for the corporate entity and other business units to Operating loss (in thousands):~~

Segment Corporate Entity and Other Consolidated
Three Months Ended September 30, 2016
Adjusted EBITDA $ 1,787
$ (2,880 ) (1,093 )
Less:
Depreciation and amortization (2,033 ) (492 ) (2,525 )
Share-based compensation expense —
(614 ) (614 )
Other income, net 1
—
1
Plus:
Other loss —
33
33
Operating loss $ (245 ) $ (3,953 ) $ (4,198 )

Nine Months Ended September 30, 2016
Adjusted EBITDA $ 4,851
$ (7,390 ) (2,539 )
Less:
Depreciation and amortization (6,045 ) (1,356 ) (7,401 )
Share-based compensation expense —
(3,012 ) (3,012 )
Other income, net (29 ) —
(29 )
Plus:
Other loss —
104
104
Operating loss $ (1,223 ) $ (11,654 ) $ (12,877 )



	Segment			Corporate Entity and Other			Consolidated
Three Months Ended June 30, 2017
GAAP financial measures:
Net revenue	$	15,288		$	1,968		$	17,256
Operating loss	$	(322	)	$	(4,355	)	$	(4,677	)
Non-GAAP financial measure:
Adjusted EBITDA	$	1,763		$	(3,245	)	$	(1,482	)

Six Months Ended June 30, 2017
GAAP financial measures:
Net revenue	$	29,481		$	3,074		$	32,555
Operating loss	$	(1,777	)	$	(8,280	)	$	(10,057	)
Non-GAAP financial measure:
Adjusted EBITDA	$	2,367		$	(6,105	)	$	(3,738	)

Three Months Ended June 30, 2016
GAAP financial measures:
Net revenue	$	14,234		$	741		$	14,975
Operating loss	$	405		$	(3,908	)	$	(3,503	)
Non-GAAP financial measure:
Adjusted EBITDA	$	2,418		$	(2,521	)	$	(103	)

Six Months Ended June 30, 2016
GAAP financial measures:
Net revenue	$	27,777		$	1,452		$	29,229
Operating loss	$	(978	)	$	(7,701	)	$	(8,679	)
Non-GAAP financial measure:
Adjusted EBITDA	$	3,063		$	(4,509	)	$	(1,446	)



Table of Contents	16	Financial Statement Index

The following table reconciles Adjusted EBITDA for the segment and for the corporate entity and other business units to Operating loss (in thousands):



	Segment			Corporate Entity and Other			Consolidated
Three Months Ended June 30, 2017
Adjusted EBITDA	$	1,763		$	(3,245	)	(1,482		)
Less:
Depreciation, amortization and impairments	(2,085		)	(809		)	(2,894		)
Share-based compensation expense	—			(321		)	(321		)
Other income, net	—			(1		)	(1		)
Plus:
Other loss	—			21			21
Operating loss	$	(322	)	$	(4,355	)	$	(4,677	)

Six Months Ended June 30, 2017
Adjusted EBITDA	$	2,367		$	(6,105	)	(3,738		)
Less:
Depreciation, amortization and impairments	(4,125		)	(1,630		)	(5,755		)
Share-based compensation expense	—			(596		)	(596		)
Other income, net	(19		)	(1		)	(20		)
Plus:
Other loss	—			52			52
Operating loss	$	(1,777	)	$	(8,280	)	$	(10,057	)

Three Months Ended June 30, 2016
Adjusted EBITDA	$	2,418		$	(2,521	)	(103		)
Less:
Depreciation, amortization and impairments	(2,013		)	(466		)	(2,479		)
Share-based compensation expense	—			(988		)	(988		)
Other income, net	—			(1		)	(1		)
Plus:
Other loss	—			68			68
Operating loss	$	405		$	(3,908	)	$	(3,503	)

Six Months Ended June 30, 2016
Adjusted EBITDA	$	3,063		$	(4,509	)	(1,446		)
Less:
Depreciation, amortization and impairments	(4,012		)	(864		)	(4,876		)
Share-based compensation expense	—			(2,398		)	(2,398		)
Other income, net	(29		)	(1		)	(30		)
Plus:
Other loss	—			71			71
Operating loss	$	(978	)	$	(7,701	)	$	(8,679	)



Table of Contents	17	Financial Statement Index

The following table presents total assets for our travel and entertainment segment ~~as of September 30, 2016~~ (in thousands):


	Total Assets		June 30, 2017		December 31, 2016
Travel and entertainment segment	$	76,744	$	73,214	$	76,074
Corporate entity and other business units	30,410		28,107		29,625
Consolidated	$	107,154	$	101,321	$	105,699

~~During the three and nine months ended September 30, 2016, capital~~Capital expenditures for the travel and entertainment segment totaled $0.5 million and ~~$1.2~~$0.4 million during the three months ended June 30, 2017 and 2016, respectively, and $0.9 million and $0.7 million during the six months ended June 30, 2017 and 2016, respectively.

~~NOTE 16. SUBSEQUENT EVENTS~~

~~Private Placements of Common Stock~~

On October 4, 2016 and October 14, 2016, we issued a total of 666,667 shares of our common stock in private placements in exchange for $3.0 million. Except for an amount equal to the par value of the shares issued, we recorded the proceeds in additional paid-in capital.

~~Public Equity Line with Aspire Capital~~

On November 9, 2016, we entered into a common stock purchase agreement with Aspire Capital Fund, LLC, an Illinois limited liability company (“Aspire Capital”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $20.0 million of shares of our common stock over the 30-month term of the purchase agreement. In consideration for entering into the purchase agreement with Aspire Capital, concurrently with the execution of such purchase agreement, we issued to Aspire Capital 151,515 shares of our common stock. Immediately following the execution of the purchase agreement, we made an initial sale to Aspire Capital under the purchase agreement of 222,222 shares of common stock at a price of $4.50 per share, for proceeds of $1.0 million.

Concurrently with entering into the purchase agreement, we also entered into a registration rights agreement with Aspire Capital, in which we agreed to file with the SEC one or more registration statements, as necessary, and to the extent permissible and subject to certain exceptions, to register under the Securities Act of 1933, as amended, the sale of the shares of our common stock that may be issued to Aspire Capital under the purchase agreement. We have filed with the SEC a prospectus supplement (File No. 333-202024) registering all of the shares of common stock that may be offered to Aspire Capital from time to time.

~~For more details regarding the purchase agreement and the registration rights agreement with Aspire Capital, please see our Current Report on Form 8-K that we filed with the SEC on November 9, 2016.~~


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

You should read our discussion and analysis of our financial condition and results of operations for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 in conjunction with our unaudited condensed consolidated financial statements and notes thereto set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q. Such discussion and analysis includes forward-looking statements that involve risks and uncertainties and that are not historical facts, including statements about our beliefs and expectations. You should also read “Special Note Regarding Forward-Looking Statements” in the section following the table of contents of this report.



~~Table of Contents~~	17	~~Financial Statement Index~~

OVERVIEW

We own, operate and acquire innovative digital media properties across multiple verticals, such as travel ~~personal finance, social media,~~and entertainment, technology and data intelligence, young adult lifestyle and ~~entertainment,~~personal finance, that deliver culturally relevant, dynamic content that attracts and engages users on a global scale. We leverage our unique digital media assets to target the Millennial demographic, which provides us with access to fast-growing, lucrative markets.

During the ~~three and nine~~six months ended ~~September~~June 30, ~~2016,~~2017, we earned most of our revenue from sales of travel and entertainment products, with various advertising mechanisms and merchandise sales also contributing to our revenue. We also recognized revenue from KanKan’s new financial product and artificial intelligence product.

With regard to ~~our Vegas.com~~the operations ~~which comprise nearly all~~ of our travel and entertainment segment, ~~results of operations,~~ our sales via mobile devices ~~were~~continued to represent a significant percentage of total sales. We intend to continue investing in improvements to ~~our mobile platform, including a project to ensure customers receive current data on their travel and entertainment options as rapidly as possible as they use~~ our mobile platform. We view improving and expanding our presence on mobile devices as the best way in which we can differentiate our Vegas.com offerings from our competitors’ offerings, as our ~~competitors’~~competitors in the Las Vegas market tend to be “brick-and-mortar” operations, and drive increases in revenue.

Our recent improvements to the desktop experience of our customers has, for example, led to significant improvement in conversion rates related to entertainment bookings. Therefore, while we will continue to focus on our mobile platform, we will also continue to make improvements to the desktop ~~experience, including~~experience. We also gave notice to our partner in the operation of the LasVegas.com website that we would end our co-management of the website and assume full control over operation of the website. Although it did not impact our operating results during the second quarter, we launched an ~~update to system architecture~~improved version of the LasVegas.com website in July 2017, with many of the same improvements that we have implemented on the Vegas.com website and mobile application, which we believe will ~~allow us to more rapidly institute such improvements.~~improve the revenue stream from the LasVegas.com website.

On September 20, 2016, we completed the CBG Acquisition, primarily to capitalize on the branded-content expertise in the China market of the entities we acquired from CBG, including Fanstang. Fanstang, which is based in Shanghai, China, distributes Western digital entertainment content in China. We also acquired an operation in Los Angeles, California that produces content distributed by Fanstang.FansTang (Shanghai) Entertainment Information Consulting Co., Ltd. (“FansTang”). We plan to continue ~~the focus on branded content in~~integrating FansTang into our China operations and to launch a branded-content strategy across all of our brands in the U.S.

~~Matters Affecting Comparability of Results~~

~~The CBG Acquisition impacted our financial condition at September 30, 2016, but our subsidiaries acquired in the CBG Acquisition only nominally impacted the results of operations for the three~~ and ~~nine months ended September 30, 2016.~~

We completed the Vegas.com Acquisition on September 24, 2015. Our financial condition at September 30, 2016 and our results of operations for the three and nine months then ended include Vegas.com, while the same periods in 2015 only include Vegas.com’s results of operations for the six days subsequent to the Vegas.com Acquisition.

~~CRITICAL ACCOUNTING POLICIES~~

~~During the three and nine months ended September 30, 2016, we made no material changes to our critical accounting policies as we disclosed them in Part II, Item 7 of our 2015 Form 10-K.~~

~~RESULTS OF OPERATIONS~~

As a result of the Vegas.com Acquisition completed in the third quarter of 2015, we have one reportable segment: travel and entertainment. Because the travel and entertainment segment did not exist prior to the third quarter of 2015, we do not have comparative results from the prior fiscal year. We therefore do not provide herein a presentation of changes in segment results with associated explanations of the changes; rather, we provide a presentation of changes in overall results with associated explanations of the changes, noting that the Vegas.com Acquisition is the largest contributing factor.

~~In the tables below, we present dollar amounts in thousands.~~

China.



Table of Contents	18	Financial Statement Index

~~Revenue~~

Matters Affecting Comparability of Results

Change
2016 2015 Dollars Percentage
Three months ended September 30th $ 15,142
$ 816
$ 14,326
1,756 %
Nine months ended September 30th 44,371
2,440
41,931
1,718 %
We completed the CBG Acquisition on September 20, 2016. Our financial condition at June 30, 2017, and our results of operations for the three and six months ended June 30, 2017 include the results from our subsidiaries acquired in the CBG Acquisition, while the same periods in 2016 do not include results from our subsidiaries acquired in the CBG Acquisition.

CRITICAL ACCOUNTING POLICIES

During the three and ~~nine~~six months ended ~~September~~June 30, 2017, we made no material changes to our critical accounting policies as we disclosed them in Part II, Item 7 of our 2016 Form 10-K.

RESULTS OF OPERATIONS

The following discussion of our results of operations contains tables that present only those income statement line items that reflect material changes from period to period which require explanation, and does not contain a complete reproduction of our statements of operations.

Reportable Segment Results



	Three Months Ended June 30,				Change
	2017		2016		Dollars		Percentage
Revenue, net	$	15,288	$	14,234	$	1,054	7	%
Sales and marketing	5,627		4,749		878		18	%
Technology and development	626		4		622		15,550	%



	Six Months Ended June 30,				Change
	2017		2016		Dollars		Percentage
Revenue, net	$	29,481	$	27,777	$	1,704	6	%
Cost of revenue	5,248		4,809		439		9	%
Sales and marketing	11,380		10,098		1,282		13	%
Technology and development	1,251		13		1,238		9,523	%

Our reportable segment results during the three and six months ended June 30, 2017 in comparison to the same periods of 2016, including the increase in net revenue, ~~was~~were primarily affected by the ~~operating results~~various improvements we have made to our Vegas.com website and mobile application. The improvements led to an increase in our conversion of traffic on our Vegas.com ~~after the~~website and mobile application which boosted show ticket sales. The increased show ticket sales through our Vegas.com ~~Acquisition, which added~~website and mobile application, as well as improved commission rates we earn on sales of third-party show tickets, increased net revenue of $14.9 million and $42.7 million, respectively. The three and nine months ended September 30, 2015 also included approximately $0.4 million of net revenue from our operation of Vegas.com after the acquisition date.

~~Cost and Expense~~

Three Months Ended September 30, Change
2016 2015 Dollars Percentage
Cost of revenue (excluding depreciation and amortization) $ 2,864
$ 136
$ 2,728
2,006 %
Sales and marketing 4,887
469
4,418
942 %
Technology and development 1,066
61
1,005
1,648 %
General and administrative 7,921
8,859
(938 ) (11 )%
Depreciation and amortization 2,525
459
2,066
450 %
Other operating expense 77
142
(65 ) (46 )%
Total cost and expense $ 19,340
$ 10,126
$ 9,214
91 %

Nine Months Ended September 30, Change
2016 2015 Dollars Percentage
Cost of revenue (excluding depreciation and amortization) $ 7,837
$ 256
$ 7,581
2,961 %
Sales and marketing 15,349
845
14,504
1,716 %
Technology and development 1,904
233
1,671
717 %
General and administrative 24,251
15,364
8,887
58 %
Depreciation and amortization 7,401
909
6,492
714 %
Other operating expense 506
189
317
168 %
Total cost and expense $ 57,248
$ 17,796
$ 39,452
222 %

~~Our operation of Vegas.com after the Vegas.com Acquisition increased our operating expense categories~~ during the three and ~~nine~~six months ended ~~September~~June 30, ~~2016 as follows:~~2017 by approximately $2.0 million and $3.8 million, respectively, and contributed to corresponding increases in cost of revenue, and in sales and marketing expense.

~~Cost~~The increased net revenue from show ticket sales during the three and six months ended June 30, 2017 was partially offset by net revenue decreases of ~~revenue -~~ approximately ~~$2.8~~$0.5 million and ~~$7.6~~$1.6 million, respectively,

~~Sales~~ that resulted from macroeconomic conditions as well as continuing declines in traffic to the LasVegas.com website. As a result of the continuing declines in site traffic, we gave notice to our partner in the operation of the LasVegas.com website that we would end our co-management of the website and ~~marketing - approximately $4.9 million and $14.9 million, respectively~~

~~Technology and development - approximately $0.6 million and $0.6 million, respectively~~assume full control over operation of the website. We launched an improved version of the LasVegas.com website in July 2017.



Table of Contents	19	Financial Statement Index

~~General~~Further offsetting the increased net revenue from show ticket sales during the three and ~~administrative -~~six months ended June 30, 2017 were decreases of approximately ~~$4.9~~$0.3 million and ~~$14.2~~$0.4 million, respectively,

~~Depreciation and amortization - approximately $2.0 million and $5.8 million, respectively~~

~~Other operating expense - approximately $0.1 million and $0.5 million, respectively~~ in box office ticket sales that resulted because we operated with one less box office during such periods than we did during the comparable periods of 2016. We added another box office location in July 2017, which should increase box office ticket revenue.

For the three and nine months ended September 30, 2016, increases in data storage and website/application maintenance costs of $0.3 million and $1.0 million, primarily associated with KanKan, were the primary cause of theThe increases in Technology and development expense noted in the tables above, exclusive of the contribution resulting from our operation of Vegas.com. We began to ramp-up operations related to KanKan approximately at the beginning of the second quarter of 2015.

~~In addition to the contribution noted above to general and administrative expense resulting from our operation of Vegas.com, which also added approximately $0.3 million in the prior year~~ during the three and ~~nine~~six months ended ~~September~~June 30, ~~2015,~~2017 of approximately $0.6 million and $1.3 million, respectively, relate to licensing fees we incurred in relation to the ~~following also affected general and administrative expense:~~LasVegas.com website beginning in July 2016 when the term of the related agreement became month-to-month. Prior to July 2016, our payments under the agreement were reducing a previously-established liability related to the portion of the agreement term during which we were committed to make payments.

For the three and nine months ended September 30, 2016, share-based compensation decreased approximately $4.7 million and $3.8 million, respectively, primarily because we awarded grants to our employees in July 2015 of options to purchase an aggregate of approximately 1.8 million shares of our common stock, half of which vested on the grant date and the other half of which vested by December 31, 2015. We did not make a similar set of grants during the three months ended September 30, 2016. Also contributing to the decrease in stock compensation was our decision to grant fewer awards in 2016 compared to 2015 and prior, and to grant awards to employees during 2016 that vest over two years rather than over one year.

Consolidated Results

On January 11, 2016, our stockholders approved the grant of an option to purchase 350,000 shares of our common stock at an exercise price of $4.10 per share to Kai-Shing Tao, our CEO and Chairman of the Board. We recorded the entire $1.0 million of share-based compensation expense associated with the award, which partially offset the decrease in share-based compensation during the nine months ended September 30, 2016 noted in the previous bullet, because Mr. Tao had fully vested in the award at the time we received stockholder approval.



	Three Months Ended June 30,					Change
	2017		2016			Dollars		Percentage
Revenue, net	$	17,256	$	14,975		$	2,281	15	%
Cost of revenue	3,965		2,624			1,341		51	%
Sales and marketing	5,774		4,934			840		17	%
Technology and development	884		434			450		104	%
General and administrative	8,359		7,910			449		6	%
Depreciation and amortization	2,894		2,479			415		17	%
Change in FV of warrant liability	1,760		(647		)	2,407		(372	)%

For the three and nine months ended September 30, 2016, legal expense decreased by $0.4 million and $0.5 million, respectively, primarily because of legal costs associated with the Vegas.com Acquisition in 2015, whereas legal costs associated with the CBG Acquisition in 2016 were less significant.



	Six Months Ended June 30,				Change
	2017		2016		Dollars		Percentage
Revenue, net	$	32,555	$	29,229	$	3,326	11	%
Cost of revenue	6,629		4,973		1,656		33	%
Sales and marketing	11,649		10,462		1,187		11	%
Technology and development	1,792		838		954		114	%
General and administrative	16,685		16,330		355		2	%
Depreciation and amortization	5,755		4,876		879		18	%
Change in FV of warrant liability	8,329		3,338		4,991		150	%

~~Certain general and administrative costs that would have previously been recorded~~

Consolidated results of operations were primarily impacted by the results of operations of our ~~other subsidiary that makes up the~~ travel and entertainment segment, ~~were combined with similar costs and recorded at Vegas.com and are reflected~~as described above. Additionally, the operations of the subsidiaries we acquired in the ~~amounts above depicting~~CBG Acquisition had the ~~results of Vegas.com.~~following effects during the three and six months ended June 30, 2017:

~~Approximate increases of~~increased net revenue by $0.7 million and $1.0 million, respectively

increased General and administrative expense by $0.6 million and $1.2 million, respectively

increased Depreciation and amortization expense by $0.3 million and $0.6 million, respectively ~~in facilities costs during the three and nine months ended September 30, 2016 related to the lease of our new corporate headquarters~~

We began amortizing the cost of certain internally-developed software which was substantially completed in the prior year subsequent to the second quarter of 2015, resulting in an increase during the nine months ended September 30, 2016 of approximately $0.7 million in depreciation and amortization expense, exclusive of the operations of Vegas.com.



Table of Contents	20

~~Other Income (Expense)~~

Three Months Ended September 30, Change
2016 2015 Dollars Percentage
Debt conversion expense —
(1,469 ) 1,469
(100 )%
Interest expense (1,224 ) (303 ) (921 ) 304 %
Other income (loss), net (1 ) (80 ) 79
(99 )%
Loss on extinguishment of debt (9,157 ) —
(9,157 ) —
Change in fair value of warrant liability (647 ) 20
(667 ) (3,335 )%
Other gain (loss) (33 ) 6
(39 ) (650 )%
Total other expense $ (11,062 ) $ (1,826 ) $ (9,236 ) 506 %
KanKan’s new financial product and artificial intelligence product also began earning revenue during the three and six months ended June 30, 2017, causing increases in net revenue of $0.9 million and $1.0 million, respectively. Cost of revenue related to the launch of the new products caused increases of $1.0 million over each of the correspondng periods, but we expect that cost of revenue will be significantly lower in the future because of the one-time nature of certain data-related costs we incurred in connection with the launch of the products on an accelerated timeframe.

Nine Months Ended September 30, Change
2016 2015 Dollars Percentage
Debt conversion expense —
(1,469 ) 1,469
(100 )%
Interest expense (3,649 ) (708 ) (2,941 ) 415 %
Other income (loss), net 29
(79 ) 108
(137 )%
Loss on extinguishment of debt (9,157 ) —
(9,157 ) —
Change in fair value of warrant liability 2,691
241
2,450
1,017 %
Other gain (loss) (104 ) 6
(110 ) (1,833 )%
Total other expense $ (10,190 ) $ (2,009 ) $ (8,181 ) 407 %

~~On September 23, 2015,~~Our share-based compensation expense, which we ~~incurred approximately $1.5~~include in General and administrative expense, decreased during the three and six months ended June 30, 2017 by $0.7 million ~~of debt conversion expense related~~and $1.8 million, respectively. In January 2016, we granted an option to ~~inducing certain of the holders of our debt to convert their convertible debt securities into~~purchase shares of our common stock to ~~satisfy~~an executive. Such grant resulted in $1.0 million of share-based compensation expense during the three months ended March 31, 2016, while we did not grant a ~~condition precedent to~~similar award during the ~~financing~~six months ended June 30, 2017. The remainder of the ~~Vegas.com Acquisition.~~decrease in share-based compensation expense primarily results from the decrease in our stock price from the same period of the prior year, which results in lower grant-date fair value estimates. The following also affected General and administrative expense:

~~The Loan we obtained under the Financing Agreement to finance the Vegas.com Acquisition was the primary cause of the~~an increase in ~~interest expense reflected~~payroll and related costs of $0.3 million and $0.8 million, respectively, during the three and six months ended June 30, 2017, primarily related to our acceleration of product development in ~~the tables above.~~our KanKan operations

~~As described~~an increase in ~~Note 3, we entered into the Amendment related to the Financing Agreement on September 20, 2016. We accounted for the Amendment as a debt extinguishment, resulting in a loss consisting~~rent expense of ~~the $4.6~~$0.3 million unamortized balance of debt discount and debt issuance cost immediately before the Amendment, the $3.6 million fair value of the warrants we provided to the Lenders, the $0.5 million additional exit fee and the $0.4 million of cash we paid to the Lenders.

Our issuance of the ~~VDC~~CBG Financing ~~Warrant~~Warrants and the ~~VDC~~CBG Acquisition Warrants ~~resulted in~~was the primary cause of the differences in the amount of change we recorded in relation to estimating the fair value of the warrant liabilities at the reporting date.

LIQUIDITY AND CAPITAL RESOURCES

Overview

During the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, and in each fiscal year since our inception, we have incurred net losses and generated negative cash flow from operations, resulting in an accumulated deficit of ~~$184.5~~$197.4 million and a cash and cash equivalents balance of ~~$5.3~~$7.2 million, both amounts as of ~~September~~June 30, ~~2016.~~2017. Our net revenue during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 was ~~$44.4~~$32.6 million.



~~Table of Contents~~	21

On September 24, 2015, concurrently with the closing of the ~~Vegas.com~~VDC Acquisition, we entered into the Financing Agreement, pursuant to which the Lenders extended credit to the Borrowers consisting of the Loan in the aggregate principal amount of $27.5 million. On September 20, 2016, concurrently with the closing of the CBG Acquisition, we entered into the Financing Amendment which, among other changes, increased the Loan by $8.0 million to a total aggregate principal amount of $35.5 million. The Loan amount outstanding accrues interest at three-month LIBOR plus 10.0% per annum, payable monthly, and the Loan has a maturity date of September 24, 2018. The Financing Agreement and related documents also provide for certain fees payable to the Lenders, including a $2.5 million exit fee, and for the issuance of the VDC Financing ~~Warrant,~~Warrants, which ~~provides~~provide the ~~holder~~holders with the right to sell the warrant back to Remark on its expiration date in exchange for $3.0 million in cash (reduced pro rata based on the percentage of the warrant exercised). As of ~~September~~June 30, ~~2016,~~2017, $35.5 million of aggregate principal remained outstanding under the Loan.

The Financing Agreement ~~as modified by the Amendment,~~ contains certain affirmative and negative covenants, including but not limited to financial covenants with respect to quarterly EBITDA levels and the value of our assets. If we fail to comply with any financial covenant under the Financing Agreement going forward, under certain circumstances after a cure period, the ~~Lender~~Lenders may demand the repayment of the Loan amount outstanding and unpaid interest thereon, which could have a material adverse effect on our financial condition. As of ~~and for the three months ended September~~June 30, ~~2016,~~2017, we were not in compliance with ~~all applicable financial covenants~~the covenant under the Financing Agreement requiring minimum consolidated EBITDA of Remark and its subsidiaries for the trailing twelve-month period ended June 30, 2017 of $(2.7) million, as our actual consolidated EBITDA for such period was $(3.5) million. Also, as of July 13, 2017, we were not in compliance with the covenant under the Financing Agreement requiring a minimum restricted cash balance of $2.25 million, as the actual cash balance was $1.56 million. The foregoing instances of non-compliance constitute events of default under the Financing Agreement for which we have not received a waiver as of the date of this report. As a result, the Lenders may declare our obligations under the Financing Agreement, including all unpaid principal and interest, due and payable



Table of Contents	21

immediately and exercise such other rights available to them under the Financing Agreement. Our available cash and other liquid assets are not sufficient to pay such obligations in full. We are pursuing discussions with the Lenders with respect to obtaining a waiver under or modifications to the Loan Agreement, but we cannot provide assurance that we will obtain such waiver or modifications.

On September 24, 2015, concurrently with the closing of the ~~Vegas.com~~VDC Acquisition, Vegas.com entered into ~~the~~a Letter of Credit Facility Agreement with Bank of America, N.A., which currently expires on May 31, ~~2017,~~2018 and which we expect to renew for another year, providing for a letter of credit facility with up to $9.3 million of availability. Amounts available under the ~~Letter~~letter of ~~Credit Facility Agreement~~credit facility are subject to customary fees and are secured by a first-priority lien on, and security interest in, a cash collateral account with the bank containing cash equal to 101.25% of the aggregate outstanding undrawn face amount of all letters of credit under the ~~Letter~~letter of ~~Credit Facility Agreement~~credit facility outstanding.

~~Though~~On April 12, 2017, we ~~believe~~issued a short-term note payable in the principal amount of $3.0 million to a private lender in exchange for cash in the same amount. The agreement, which does not have a stated interest rate, required us to repay the note plus a fee of $115,000 on the maturity date of June 30, 2017. The note is accruing interest at $500 per day on the unpaid principal until we repay the note in full.

In the second quarter of each year following a performance period, we are obligated to make certain cash payments stipulated in the VDC Acquisition that are contingent upon the performance of Vegas.com in the year ended December 31, 2016, and in the years ending December 31, 2017 and 2018. We expect that the ~~CBG Acquisition and~~performance of Vegas.com during the ~~Vegas.com Acquisition~~year ended December 31, 2017 will ~~provide us~~exceed the threshold triggering the maximum payment of $1.0 million. We have not yet paid the portion of the cash payments related to the year ended December 31, 2016, which was due on April 30, 2017.

On November 9, 2016, we entered into a common stock purchase agreement (the “Aspire Purchase Agreement”) with ~~additional revenue sources, we~~Aspire Capital Fund, LLC, an Illinois limited liability company (“Aspire Capital”), which provides that Aspire Capital is committed to purchase up to an aggregate of $20.0 million of shares of our common stock over the 30-month term of the Aspire Purchase Agreement. As of August 9, 2017, Aspire has purchased $2.5 million of shares of our common stock under the Aspire Purchase Agreement.

We cannot provide assurance that revenue generated from our businesses will be sufficient to sustain our operations in the long ~~term. We~~term; therefore, we have implemented measures to reduce operating costs, and we continuously evaluate other opportunities to reduce costs. Additionally, we are actively assessing the sale of certain non-core assets, considering sales of minority interests in certain of our operating businesses, and evaluating potential acquisitions that would provide additional revenue. However, we may need to obtain additional capital through equity financing, debt financing, or by divesting of certain assets or businesses.

Conditions in the debt and equity markets, as well as the volatility of investor sentiment regarding macroeconomic and microeconomic conditions, will play primary roles in determining whether we can successfully obtain additional capital. Additionally, pursuant to the Financing Agreement, we are subject to certain limitations on our ability and the ability of our subsidiaries to, among other things, incur additional debt and transfer, sell or otherwise dispose of assets, without the consent of the Lenders. We cannot be certain that we will be successful at raising capital, whether in an equity financing, debt financing, or by divesting of certain assets or businesses, on commercially reasonable terms, if at all. In addition, if we obtain capital by issuing equity, such transaction(s) may dilute existing stockholders.additional capital.

A variety of factors, many of which are outside of our control, affect our cash flow; those factors include regulatory issues, competition, financial markets and other general business conditions. Based ~~upon~~on our ~~most recent cash flow~~historical track record and projections, we believe that we ~~have sufficient~~will be able to meet our ongoing requirements through June 30, 2018, (including repayment of our existing debt as it matures) with existing cash, cash equivalents and cash resources, ~~to meet our ongoing requirements through September 30, 2017, including repayment~~and based on the probable success of our existing debt as it matures. However, projecting operating results is inherently uncertain because anticipated expenses may exceed current forecasts; therefore, we cannot assure you that we will generate sufficient income and cash flow to meet allone or more of ~~our liquidity requirements.~~

the following plans:

~~Cash Used in Operating Activities~~monetize existing assets

~~We generated $7.9 million more cash from operating activities during~~work with our creditors to modify existing arrangements or refinance our debt

obtain additional capital through equity issuances, including but not limited to under the nine months ended September 30, 2016 than we did during the nine months ended September 30, 2015. The increase in cash provided by operating activities is primarily a result of our operation of Vegas.com subsequent to the Vegas.com Acquisition.Aspire Purchase Agreement (which issuances may dilute existing stockholders)



Table of Contents	22

However, projections are inherently uncertain and we cannot assure you that we will generate sufficient income and cash flow to meet all of our liquidity requirements.

Cash Flows - Operating Activities

We generated $4.0 million less cash from operating activities during the six months ended June 30, 2017 than we did during the six months ended June 30, 2016. The decrease in cash provided by operating activities is a result of a decrease in net loss of $3.5 million and the timing of payments related to elements of working capital.

Cash ~~Used in~~Flows - Investing Activities

During the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, we paid approximately $7.4 million for the CBG Acquisition and obtained only an insignificant amount of cash, while the amount of cash we obtained in the Vegas.com Acquisition nearly offset the cash consideration we paid. As a result, our business acquisitions, net of cash acquired, were approximately $7.1 million more than in the comparative period. We also expended ~~$1.0~~$0.3 million more to purchase property and equipment than we did during the ~~nine months ended September 30, 2015.~~same period of 2016.

Cash ~~Provided by~~Flows - Financing Activities

During the ~~nine~~six months ended ~~September~~June 30, ~~2016, our financing activities provided $10.0 million less than during the nine months ended September 30, 2015. During 2016,~~2017, we obtained ~~$2.4 million less from common stock issuances than we obtained during the comparable period of 2015, while our net proceeds from~~ debt financing ~~were $20.3~~totaling $3.0 million, ~~less than during the comparable period of 2015. The decreases in cash provided by financing activities was partially offset because~~while we ~~established a restricted cash balance of approximately $11.7 million and repaid approximately $1.4 million of debt during the nine months ended September 30, 2015, but had no~~did not enter into similar ~~activity~~transactions during the same period of 2016. The increase in cash from debt financing was partially offset by a decrease of $1.0 million in the amount of cash from sales of our common stock, resulting in a total increase of $2.0 million provided by financing activities.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements.

Recently Issued Accounting Pronouncements

Please refer to Note 2 in the Notes to Unaudited Condensed Consolidated Financial Statements included in this report for a discussion regarding recently issued accounting pronouncements which may affect us.


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable


ITEM 4.	CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain a set of disclosure controls and procedures designed to provide reasonable assurance that the information we must disclose in reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. We designed our disclosure controls with the objective of ensuring we accumulate and communicate this information to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under Exchange Act, as of the end of the period covered by this report. Based upon that evaluation, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures were effective as of ~~September~~June 30, ~~2016.~~2017.



Table of Contents	23

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during the fiscal quarter ended ~~September~~June 30, ~~2016~~2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

None


ITEM 1A.	RISK FACTORS

~~Not Applicable~~The following risk factor supplements those included in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on April 5, 2017.

We are not in compliance with certain covenants under the Financing Agreement, constituting events of default as a result of which our obligations under the Financing Agreement, including all unpaid principal and interest, may be declared immediately due and payable.

As of June 30, 2017, we were not in compliance with the covenant under the Financing Agreement requiring minimum consolidated EBITDA of Remark and its subsidiaries for the trailing twelve-month period ended June 30, 2017 of $(2.7) million, as our actual consolidated EBITDA for such period was $(3.5) million. Also, as of July 13, 2017, we were not in compliance with the covenant under the Financing Agreement requiring a minimum restricted cash balance of $2.25 million, as the actual cash balance was $1.56 million. The foregoing instances of non-compliance constitute events of default under the Financing Agreement for which we have not received a waiver as of the date of this report. As a result, the Lenders may declare our obligations under the Financing Agreement, including all unpaid principal and interest, due and payable immediately and exercise such other rights available to them under the Financing Agreement. Our available cash and other liquid assets are not sufficient to pay such obligations in full. We are pursuing discussions with the Lenders with respect to obtaining a waiver under or modifications to the Loan Agreement, but we cannot provide assurance that we will obtain such waiver or modifications.


ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~On August 10, 2016, we issued a total of 444,444 shares of our common stock to accredited investors in private placements in exchange for $2.0 million in cash.~~

We made the offers and sales of securities in the private placements in reliance upon an exemption from registration requirements pursuant to Section 4(a)(2) under the Securities Act of 1933, as amended, based upon representations made to us by the investors in purchase agreements we entered into with the investors.Not applicable


ITEM 3.	DEFAULTS UPON SENIOR SECURITIES

None


ITEM 4.	MINE SAFETY DISCLOSURES

Not applicable


ITEM 5.	OTHER INFORMATION

None



Table of Contents	24	Financial Statement Index


ITEM 6.	EXHIBITS

Incorporated Herein
By Reference To
Exhibit Number Description Document Filed On Exhibit Number
2.1
Second Amended and Restated Asset and Securities Purchase Agreement, dated as September 20, 2016, by and among China Branding Group Limited (in official liquidation), certain of its managers and subsidiaries listed on the signature page thereto, the joint official liquidators, KanKan Limited and Remark Media, Inc. ¹
8-K 09/26/2016 2.1
4.1 Form of CBG Acquisition Warrant. 8-K 09/26/2016 4.1
4.2 Form of CBG Financing Warrant. 8-K 09/26/2016 4.2
10.1 Amendment No. 1 to Financing Agreement, dated as of September 20, 2016, by and among Remark Media, Inc. and certain of its subsidiaries named as Borrowers and Guarantors, the Lenders and MGG Investment Group LP, as Collateral Agent and Administrative Agent for the Lenders. 8-K 09/26/2016 10.1
10.2 Registration Rights Agreement dated as of September 20, 2016, by and between Remark Media, Inc. and the Subscribers listed on the signature page thereto. 8-K 09/26/2016 10.2
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document



		Incorporated Herein By Reference To
Exhibit Number	Description	Document	Filed On	Exhibit Number
3.1	Certificate of Amendment to Amended and Restated Certificate of Incorporation	8-K	04/11/2017	3.1
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document


1.	We have omitted certain schedules and exhibits to this agreement in accordance with Item 601(b)(2) of Regulation S-K. We will furnish a copy of any omitted schedule and/or exhibit to the SEC upon request.



Table of Contents	25	Financial Statement Index

SIGNATURES

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



			REMARK ~~MEDIA,~~HOLDINGS, INC.

Date:	~~November 14, 2016~~August 10, 2017	By:	/s/ Douglas Osrow
			Douglas Osrow
			Chief Financial Officer
			(principal financial officer)



Table of Contents	26	Financial Statement Index



PART I
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets	1
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Unaudited Condensed Consolidated Statements of Cash Flows	3
	Notes to Unaudited Condensed Consolidated Financial Statements	4
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1718
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23

PART II
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Mine Safety Disclosures	24
Item 5.	Other Information	24
Item 6.	Exhibits	25
	Signature	26



	Calculation of Purchase Price
Cash	$	7,400
Warrants to purchase Remark common stock	7,993
Total purchase consideration	$	15,393



	Shares		Weighted-Average Grant-Date Fair Value
Non-vested at January 1, 2016	—		$	—
Granted	31,983		150
Vested	(15,992	)	75
Non-vested at September 30, 2016	15,991		$	75