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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 June 30, 2019

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13054979&doc=10
Commission File Number 001-33720
Remark Holdings, Inc.

 
Delaware
 
33-1135689
 
 
State of Incorporation
 
IRS Employer Identification Number
 

3960 Howard Hughes Parkway, Suite 900
Las Vegas, NV 89169

Address, including zip code, of principal executive offices

702-701-9514

Registrant’s telephone number, including area code


Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Common Stock, $0.001 par value per share
 
MARK
 
The NASDAQ Stock Market LLC

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 every Interactive Data File required to be submitted 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 such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “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 August 8, 2019, a total of 46,130,159 shares of our common stock were outstanding.



TABLE OF CONTENTS


PART I
 
 
Item 1.
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
PART II
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 




SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

The matters discussed in this Quarterly Report on Form 10-Q include “forward-looking statements” about the plans, strategies, objectives, goals or expectations of Remark Holdings, Inc. and subsidiaries (“Remark”, “we”, “us”, “our”). 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. Such forward-looking statements are identifiable by words or phrases indicating that Remark or management “expects,” “anticipates,” “plans,” “believes,” or “estimates,” or that a particular occurrence or event “will,” “may,” “could,” “should,” or “will likely” result, occur or be pursued or “continue” in the future, that the “outlook” or “trend” is toward a particular result or occurrence, that a development is an “opportunity,” “priority,” “strategy,” “focus,” that we are “positioned” for a particular result, or similarly-stated expectations. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report or such other report, release, presentation, or statement.

In addition to other risks and uncertainties described in connection with the forward-looking statements contained in this report and other periodic reports filed with the Securities and Exchange Commission (“SEC”), there are many important factors that could cause actual results to differ materially. Such risks and uncertainties include general business conditions, changes in overall economic conditions, our ability to integrate acquired assets, the impact of competition and other factors which are often beyond our control.

This should not be construed as a complete list of all of the economic, competitive, governmental, technological and other factors that could adversely affect our expected consolidated financial position, results of operations or liquidity. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may impair our business, operations, liquidity, financial condition and prospects. We undertake no obligation to update or revise our forward-looking statements to reflect developments that occur or information that we obtain after the date of this report.







PART I FINANCIAL INFORMATION


ITEM 1.
FINANCIAL STATEMENTS

REMARK HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(dollars in thousands, except share and per share amounts)

 
June 30, 2019
 
December 31, 2018
 
(Unaudited)
 
 
Assets
 
 
 
Cash and cash equivalents
$
2,071

 
$
1,410

Trade accounts receivable, net
4,700

 
5,762

Prepaid expense and other current assets
7,213

 
7,907

Notes receivable, current

 
100

Assets of disposal group, current

 
28,966

Total current assets
13,984

 
44,145

Property and equipment, net
1,795

 
2,075

Operating lease assets
5,582

 

Investment in unconsolidated affiliates
1,944

 
2,005

Intangibles, net
838

 
1,010

Other long-term assets
1,308

 
450

Assets of disposal group, long-term

 
44,123

Total assets
$
25,451

 
$
93,808

Liabilities and Stockholders’ Equity
 
 
 
Accounts payable
$
7,696

 
$
5,675

Accrued expense and other current liabilities
13,625

 
16,812

Contract liability
222

 
132

Note payable
3,000

 
3,000

Loans payable, current, net of unamortized discount and debt issuance cost
11,248

 
35,314

Liabilities of disposal group, current

 
41,648

Total current liabilities
35,791

 
102,581

Operating lease liabilities, long-term
5,838

 

Warrant liability
721

 
1,383

Other liabilities

 
2,934

Liabilities of disposal group, long-term

 
34

Total liabilities
42,350

 
106,932

 
 
 
 
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 authorized; 46,130,159 and 39,053,312 shares issued and outstanding; each at June 30, 2019 and December 31, 2018, respectively
46

 
39

Additional paid-in-capital
315,829

 
308,018

Accumulated other comprehensive income
65

 
32

Accumulated deficit
(332,839
)
 
(321,213
)
Total stockholders’ deficit
(16,899
)
 
(13,124
)
Total liabilities and stockholders’ deficit
$
25,451

 
$
93,808

See Notes to Unaudited Condensed Consolidated Financial Statements


REMARK HOLDINGS, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss
(dollars in thousands, except per share amounts)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Revenue
$
2,865

 
$
3,887

 
$
4,074

 
$
5,713

Cost and expense
 
 
 
 
 
 
 
Cost of revenue (excluding depreciation and amortization)
1,541

 
3,280

 
3,134

 
4,547

Sales and marketing
687

 
1,074

 
1,546

 
2,057

Technology and development
854

 
1,288

 
2,158

 
2,091

General and administrative
2,454

 
4,385

 
5,431

 
21,650

Depreciation and amortization
260

 
546

 
585

 
1,137

Other operating expense

 
24

 
6

 
46

Total cost and expense
5,796

 
10,597

 
12,860

 
31,528

Operating loss
(2,931
)
 
(6,710
)
 
(8,786
)
 
(25,815
)
Other income (expense)
 
 
 
 
 
 
 
Interest expense
(553
)
 
(330
)
 
(940
)
 
(672
)
Other income, net
92

 
43

 
47

 
44

Change in fair value of warrant liability
2,078

 
10,055

 
662

 
18,665

Other gain, net
27

 
554

 
1

 
523

Total other income (expense), net
1,644

 
10,322

 
(230
)
 
18,560

Income (loss) from continuing operations before income taxes
(1,287
)
 
3,612

 
(9,016
)
 
(7,255
)
Benefit from income taxes

 
1,026

 

 
995

Income (loss) from continuing operations
$
(1,287
)
 
$
4,638

 
$
(9,016
)
 
$
(6,260
)
Loss from discontinued operations, net of tax (Note 16)
(1,487
)
 
(1,259
)
 
(2,610
)
 
(4,414
)
Net income (loss)
$
(2,774
)
 
$
3,379

 
$
(11,626
)
 
$
(10,674
)
Other comprehensive income (loss)
 
 
 
 
 
 
 
Foreign currency translation adjustments
127

 
(183
)
 
33

 
15

Comprehensive income (loss)
$
(2,647
)
 
$
3,196

 
$
(11,593
)
 
$
(10,659
)
 
 
 
 
 
 
 
 
Weighted-average shares outstanding, basic and diluted
43,335

 
32,933

 
39,994

 
32,666

 
 
 
 
 
 
 
 
Net income (loss) per share, basic and diluted
 
 
 
 
 
 
 
Continuing operations
$
(0.03
)
 
$
0.14

 
$
(0.23
)
 
$
(0.19
)
Discontinued operations
(0.03
)
 
(0.04
)
 
(0.07
)
 
(0.14
)
Consolidated
$
(0.06
)
 
$
0.10

 
$
(0.30
)
 
$
(0.33
)
 
 
 
 
 
 
 
 
See Notes to Unaudited Condensed Consolidated Financial Statements


REMARK HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Deficit
(in thousands, except number of shares)

 
Three Months Ended June 30, 2019
 
Common Stock Shares
 
Common Stock Par Value
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive Income (Loss)
 
Accumulated Deficit
 
Total
Balance at March 31, 2019
40,722,229

 
$
41

 
$
310,618

 
$
(62
)
 
$
(330,065
)
 
$
(19,468
)
Net loss

 

 

 

 
(2,774
)
 
(2,774
)
Share-based compensation

 

 
216

 

 

 
216

Common stock sales
5,407,930

 
5

 
4,995

 

 

 
5,000

Other

 

 

 
127

 

 
127

Balance at June 30, 2019
46,130,159

 
$
46

 
$
315,829

 
$
65

 
$
(332,839
)
 
$
(16,899
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2018
 
Common Stock Shares
 
Common Stock Par Value
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive Income (Loss)
 
Accumulated Deficit
 
Total
Balance at March 31, 2018
32,842,399

 
$
33

 
$
292,152

 
$
313

 
$
(313,708
)
 
$
(21,210
)
Net loss

 

 

 

 
3,379

 
3,379

Share-based compensation

 

 
375

 

 

 
375

Equity instrument exercises
302,800

 

 
667

 

 

 
667

Other

 

 
(30
)
 
(183
)
 

 
(213
)
Balance at June 30, 2018
33,145,199

 
$
33

 
$
293,164

 
$
130

 
$
(310,329
)
 
$
(17,002
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2019
 
Common Stock Shares
 
Common Stock Par Value
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive Income (Loss)
 
Accumulated Deficit
 
Total
Balance at December 31, 2018
39,053,312

 
$
39

 
$
308,018

 
$
32

 
$
(321,213
)
 
$
(13,124
)
Net loss

 

 

 

 
(11,626
)
 
(11,626
)
Share-based compensation

 

 
314

 

 

 
314

Common stock sales
7,074,597

 
7

 
7,493

 

 

 
7,500

Equity instrument exercises
2,250

 

 
4

 

 

 
4

Other

 

 

 
33

 

 
33

Balance at June 30, 2019
46,130,159

 
$
46

 
$
315,829

 
$
65

 
$
(332,839
)
 
$
(16,899
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2018
 
Common Stock Shares
 
Common Stock Par Value
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive Income (Loss)
 
Accumulated Deficit
 
Total
Balance at December 31, 2017
28,406,026

 
$
28

 
$
220,117

 
$
115

 
$
(299,848
)
 
$
(79,588
)
Net loss

 

 

 

 
(10,674
)
 
(10,674
)
Effect of adopting new revenue recognition policy

 

 

 

 
193

 
193

Share-based compensation

 

 
12,236

 

 

 
12,236

Equity instrument exercises
4,739,173

 
5

 
60,853

 

 

 
60,858

Reclassification of liability-classified stock-based compensation

 

 
(12
)
 

 

 
(12
)
Other

 

 
(30
)
 
15

 

 
(15
)
Balance at June 30, 2018
33,145,199

 
$
33

 
$
293,164

 
$
130

 
$
(310,329
)
 
$
(17,002
)





REMARK HOLDINGS, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(dollars in thousands)

 
Six Months Ended June 30,
 
2019
 
2018
Net cash used in continuing operating activities
$
(7,496
)

$
(10,152
)
Net cash used in discontinued operating activities
(7,159
)
 
(4,095
)
Net cash used in operating activities
(14,655
)
 
(14,247
)
Cash flows from investing activities:
 
 
 
Proceeds from sale of business
30,000

 

Proceeds from disposition of assets

 
625

Purchases of property, equipment and software
(2
)
 
(370
)
Payment of payroll costs capitalized to software in progress
(127
)
 
(281
)
Acquisition of unconsolidated affiliate

 
(151
)
Net cash provided by (used in) continuing investing activities
29,871


(177
)
Net cash used in discontinued investing activities
(18,396
)
 
(1,643
)
Net cash provided by (used in) investing activities
11,475

 
(1,820
)
Cash flows from financing activities:

 

Proceeds from issuance of common stock, net
7,504

 
951

Payment of loan fees and debt issuance cost
(2,275
)
 
(522
)
Repayments of debt
(25,526
)
 

Net cash provided by (used in) financing activities
(20,297
)

429

Net change in cash, cash equivalents and restricted cash
(23,477
)

(15,638
)
Cash, cash equivalents and restricted cash:


 
 
Beginning of period, including cash in disposal group
25,548

 
34,302

End of period
$
2,071

 
$
18,664

 
 
 
 
Supplemental cash flow information:
 
 
 
Cash paid for interest
$
2,211

 
$
2,105

 
 
 
 
Supplemental schedule of non-cash investing and financing activities:
 
 
 
Issuance of common stock upon warrant exercise
$

 
$
59,907

Capitalization of interest to debt principal
$
171

 
$

Common stock subscription payable
$

 
$
849

Increase in loan payable
$
1,103

 
$

See Notes to Unaudited Condensed Consolidated Financial Statements


REMARK HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements



NOTE 1. ORGANIZATION AND BUSINESS

Organization and Business

Remark Holdings, Inc. and subsidiaries (“Remark”, “we”, “us”, or “our”), which include its consolidated variable-interest entities (“VIEs”), are primarily technology-focused. Our KanKan data intelligence platform serves as the basis for our development and deployment of artificial-intelligence-based solutions for businesses in many industries and geographies. We also own and operate digital media properties that deliver relevant, dynamic content and e-commerce solutions. Our common stock is listed on the Nasdaq Capital Market under the ticker symbol MARK.

 
Going Concern
 
During the six months ended June 30, 2019, and in each fiscal year since our inception, we have incurred net losses which have resulted in an accumulated deficit of $332.8 million as of June 30, 2019. Additionally, our operations have historically used more cash than they have provided. Net cash used in continuing operating activities was $7.5 million during the six months ended June 30, 2019. As of June 30, 2019, our cash and cash equivalents balance was $2.1 million, and we had a negative working capital balance of $21.8 million.

On March 29, 2019, we entered into a common stock purchase agreement (the “2019 Aspire Purchase Agreement”) with Aspire Capital Fund, LLC (“Aspire Capital”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, we have the right to direct Aspire Capital to purchase up to an aggregate of $30.0 million of shares of our common stock over the 30-month term of the 2019 Aspire Purchase Agreement. The 2019 Aspire Purchase Agreement, which we describe in more detail in Note 14, terminated and replaced the common stock purchase agreement we had entered into with Aspire Capital on July 2, 2018 (the “2018 Aspire Purchase Agreement”).

Concurrently with entering into the 2019 Aspire Purchase Agreement, we also entered into a registration rights agreement with Aspire Capital, in which we agreed to file with the Securities and Exchange Commission (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 2019 Aspire Purchase Agreement. We have filed with the SEC a prospectus supplement to our effective shelf Registration Statement on Form S-3 (File No. 333-225448) registering all of the shares of common stock that may be offered to Aspire Capital from time to time under the 2019 Aspire Purchase Agreement.

As of June 30, 2019, we have issued to Aspire Capital a total of 2,504,370 shares of our common stock under the 2019 Aspire Purchase Agreement. During the six months ended June 30, 2019, we issued a total of 7,074,597 shares of our common stock to a private investor and to Aspire Capital under the 2018 Aspire Purchase Agreement and the 2019 Aspire Purchase Agreement in exchange for approximately $7.5 million plus Aspire Capital’s commitment to participate in the 2019 Aspire Purchase Agreement.

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 (“MGG”), in its capacity as collateral agent and administrative agent for the Lenders, pursuant to which the Lenders extended credit to the Borrowers consisting of a term loan in the aggregate principal amount of $35.5 million (the “Loan”). The terms of the Financing Agreement, the amendments thereto, and related documents effective as of June 30, 2019 are described in Note 11, which also describes our ongoing events of default relating to our failure to make certain required payments under the Financing Agreement as well as certain other ongoing events of default.

On May 15, 2019, we completed the sale of all of the issued and outstanding membership interests of Vegas.com, LLC (“Vegas.com”), pursuant to a Membership Interest Purchase Agreement, dated as of March 15, 2019, with VDC-MGG Holdings LLC, an affiliate of MGG, for an aggregate purchase price of $30 million (the “VDC Transaction”). The cash proceeds of the VDC Transaction were used to pay amounts due under the Financing Agreement, of which approximately $10 million remained outstanding after giving effect to the application of such cash proceeds.




Our history of recurring operating losses, working capital deficiencies and negative cash flows from operating activities, in conjunction with the ongoing events of default under the Financing Agreement, give rise to substantial doubt regarding our ability to continue as a going concern.

We intend to fund our future operations and meet our financial obligations through revenue growth in our Technology and Data Intelligence segment; however, we cannot provide assurance that revenue, income and cash flows generated from our businesses will be sufficient to sustain our operations in the long term (including but not limited to payment of the amounts required under the Financing Agreement). As a result, we are actively evaluating strategic alternatives including debt refinancing and potential sales of investment assets or operating businesses. However, we may need to obtain additional capital through equity financing.

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 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 on financial projections, we believe that we will be able to meet our ongoing requirements for at least the next 12 months following this report (including the amounts required under the Financing Agreement, based on the current status of discussions with the Lenders regarding ongoing events of default) 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

refinance our debt

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


However, projections are inherently uncertain and the success of our plans is largely outside of our control. As a result, there is substantial doubt regarding our ability to continue as a going concern, and we may fully utilize our cash resources prior to August 9, 2020.


Comparability

We have reclassified certain amounts in our June 30, 2018 unaudited condensed consolidated financial statements to conform to the current presentation as of June 30, 2019. Specifically, we have changed how we present operating expense to better reflect the activities that generate such expense. Neither total stockholders’ deficit as of June 30, 2018 nor net loss or cash flows for the three and six months ended June 30, 2018 changed because of the reclassifications.


NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

We prepared the accompanying unaudited Condensed Consolidated Balance Sheet as of June 30, 2019, with the audited Consolidated Balance Sheet amounts as of December 31, 2018 presented for comparative purposes, and the related unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss, the Condensed Consolidated Statements of Cash Flows and the Condensed Consolidated Statements of Stockholders’ Deficit 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 and our unaudited Condensed Consolidated Statement of Stockholders’ Deficit, each as of June 30, 2019, as well as our unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss and 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 the Annual Report on Form 10-K (the “2018 Form 10-K”).


Consolidation

We include all of our subsidiaries, which include the variable-interest entities (“VIEs”) for which we are the primary beneficiary, in our condensed consolidated financial statements, eliminating all significant intercompany balances and transactions during consolidation.

To comply with China’s laws which restrict foreign ownership of entities that operate within industries deemed sensitive by the Chinese government, we employ what we believe is a commonly-used organizational structure consisting of a wholly-foreign owned enterprise (“WFOE”) and the VIEs to operate our KanKan business. We own 100% of the equity of the WFOE, while the VIEs are companies formed in China under local laws which are owned by members of our management team. We funded the registered capital and operating expenses of the VIEs by extending loans to the VIEs’ owners. We are the primary beneficiary of the VIEs because the relationships between the VIEs and our WFOE are governed by contractual agreements, including in each case an Exclusive Call Option Agreement, an Exclusive Business Cooperation Agreement, a Proxy Agreement and an Equity Pledge Agreement, which give us control over the operations of the VIEs.
 

Use of Estimates
 
We prepare our consolidated financial statements in conformity with GAAP. While preparing our unaudited condensed consolidated financial statements, we make estimates and assumptions that affect amounts reported and disclosed in the unaudited condensed 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, income taxes, and inventory reserve, among other items.


Changes to Significant Accounting Policies - Leases

We adopted Accounting Standards Codification Topic 842, Leases (“ASC 842”), as of January 1, 2019. When adopting ASC 842 we elected several practical expedients permitted under the transition guidance within ASC 842, which, among other things, allowed us to carry forward the historical lease classification and to avoid recording leases that had expired prior to the date of adoption. We also elected to combine the lease and non-lease components of our leases for office space (which represent the largest portion of our operating lease assets and liabilities) and not to record leases with initial terms of 12 months or less (short-term leases) on the balance sheet. We amortize the cost of short-term leases on a straight-line basis over the lease term.

As of January 1, 2019, our adoption of ASC 842 added $4.9 million of operating lease assets, $1.1 million of current operating lease liabilities (reported in Accrued expense and other current liabilities) and $5.7 million of long-term operating lease liabilities to our balance sheet, and it removed $3.3 million of previously-recorded deferred rent and early lease termination liabilities; it had no effect on consolidated net loss or consolidated cash flows.


Recently Issued Accounting Pronouncements

We have reviewed all recently issued accounting pronouncements. The pronouncements that we have already adopted, except as noted above for leases, 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. REVENUE

We are not required to include disclosures related to remaining performance obligations because substantially all of our contracts with customers have an original expected duration of one year or less.


Disaggregation of Revenue

The following table presents a disaggregation of our revenue by major category for the six months ended June 30, 2019 and 2018 (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Data platform services:
 
 
 
 
 
 
 
FinTech services

 
2,219

 

 
3,376

AI-based products and services
2,466

 
1,150

 
2,890

 
1,176

Advertising and other
399

 
518

 
1,184

 
1,161

Revenue
$
2,865

 
$
3,887

 
$
4,074

 
$
5,713




Significant Judgments

When accounting for revenue in accordance with ASC 606, we make certain judgments, such as whether we act as a principal or as an agent in transactions or whether our contracts with customers fall within the scope of ASC 606, that affect the determination of the amount and timing of our revenue from contracts with customers. Based on the current facts and circumstances related to our contracts with customers, none of the judgments we make involve an elevated degree of qualitative significance or complexity such that further disclosure is warranted in terms of their potential impact on the amount and timing of our revenue.


Contract Assets and Contract Liabilities

We do not currently generate material contract assets. During the six months ended June 30, 2019, our contract liability related to continuing operations changed only as a result of routine business activity.

During the six months ended June 30, 2019, we did not recognize material amounts of revenue which was included in the beginning balance of Contract liability at January 1, 2019, while we recognized $0.3 million of revenue during the six months ended June 30, 2018 which was included in the beginning balance of Contract liability at January 1, 2018.

During the six months ended June 30, 2019 and 2018, we did not recognize revenue from performance obligations within the scope of ASC 606 that were satisfied in previous periods.





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 common stock. As of June 30, 2019, our outstanding liability-classified warrants include the warrants we issued or that we are obligated to issue as part of the consideration for our acquisition (the “CBG Acquisition”) of assets of China Branding Group Limited (“CBG”) in September 2016 (the “CBG Acquisition Warrants”) and warrants we issued as a result of an amendment to the Financing Agreement related to the acquisition (the “CBG Financing Warrants”).

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:
 
June 30,
 
December 31,
 
2019
 
2018
CBG Financing Warrants
 
 
 
Expected volatility
85.00
%
 
70.00
%
Risk-free interest rate
1.88
%
 
2.52
%
Expected remaining term (years)
1.23

 
1.73

CBG Acquisition Warrants
 
 
 
Expected volatility
75.00
%
 
70.00
%
Risk-free interest rate
1.74
%
 
2.46
%
Expected remaining term (years)
4.22

 
4.72




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 June 30, 2019, we estimated that four 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 CBG Financing Warrants and the CBG Acquisition Warrants. If we added or subtracted five percentage points with regard to our 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
CBG Financing Warrants
$
75

 
$
35

CBG Acquisition Warrants
175

 
175

 
 
 
 
Change in stock price
 
 
 
CBG Financing Warrants
$
35

 
$

CBG Acquisition Warrants
60

 
60







The following table presents the change in the liability balance associated with our liability-classified warrants (in thousands):
 
Six Months Ended June 30,
 
Year Ended December 31,
 
2019
 
2018
Balance at beginning of period
$
1,383

 
$
89,169

Warrant exercises

 
(59,907
)
Increase (decrease) in fair value
(662
)
 
(27,879
)
Balance at end of period
$
721

 
$
1,383




At January 1, 2018, our outstanding liability-classified warrants included warrants we issued in connection with our acquisition of all of the outstanding equity interests in Vegas.com in September 2015 (the “VDC Acquisition”) and the financing related thereto (the “VDC Acquisition Warrants” and the “VDC Financing Warrants”, respectively). On January 8, 2018, holders of VDC Acquisition Warrants with respect to 2,416,996 shares of our common stock exercised such warrants. Because the VDC Acquisition Warrants provided that such warrants were exercisable on a cashless basis only, we issued a total of 750,102 shares of common stock in settlement of such warrants without receiving any proceeds from the exercise thereof.

On January 10, 2018, we exercised our right to exercise all remaining VDC Acquisition Warrants and VDC Financing Warrants (which right became effective when the closing price of our common stock reached $14.00), exercising VDC Acquisition Warrants with respect to 6,184,414 shares of our common stock and VDC Financing Warrants with respect to 3,117,148 shares of our common stock. Because the VDC Acquisition Warrants and VDC Financing Warrants provided that such warrants were exercisable on a cashless basis only, we issued a total of 2,236,915 and 1,385,396 shares of common stock to the holders of the VDC Acquisition Warrants and the VDC Financing Warrants, respectively, in settlement of such warrants without receiving any proceeds from the exercise thereof.


Contingent Consideration Issued in Business Acquisition

We used the discounted cash flow valuation technique to estimate the fair value of the liability related to certain cash payments stipulated in the VDC Acquisition that were contingent upon the performance of Vegas.com in the years ended December 31, 2016, 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.

The following table presents the change during the six months ended June 30, 2019 in the balance of the liability associated with the Earnout Payments (in thousands):
Balance at beginning of period
$
990

Payments

Change in fair value of contingent consideration (included in Other loss)
10

Interest accrued on unpaid balance
56

Balance at end of period
$
1,056




On the Condensed Consolidated Balance Sheets, we included the liability for contingent consideration as a component of Accrued expense and other liabilities.





NOTE 5. INVESTMENT IN UNCONSOLIDATED AFFILIATES

In 2009, we co-founded a U.S.-based venture, Sharecare, Inc. (“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 June 30, 2019, we owned approximately five percent of Sharecare’s issued stock and maintained representation on its Board of Directors.

During June 2018, one of our consolidated VIEs acquired a 20% interest in Beijing All-in-one Cloud Net Technology, Co. Ltd. (“AIO”), a Chinese technology company which provides consulting and data services to the Chinese film industry, in exchange for $1.0 million, a portion of which was paid by June 30, 2019, and a license to use our proprietary KanKan data intelligence platform in China. Based on our evaluation of the facts and circumstances related to the transaction, we determined that we will account for such transaction using the equity method of accounting. We recognize our equity in the net earnings or losses relating to AIO on a one-quarter reporting lag in our Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss. For the three months ended June 30, 2019, the amount of our equity in AIO’s net earnings for their quarter ended March 31, 2019 was not material.


NOTE 6. PREPAID EXPENSE AND OTHER CURRENT ASSETS

The following table presents the components of prepaid expense and other current assets (in thousands):
 
June 30,
2019
 
December 31, 2018
Other receivables
$
4,236

 
$
4,607

Prepaid expense
1,098

 
1,076

Deposits
1,342

 
1,395

Inventory, net
345

 
587

Other current assets
192

 
242

Total
$
7,213

 
$
7,907

 
 
 
 



NOTE 7. PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands, except estimated lives):
 
Estimated Life
(Years)
 
June 30,
2019
 
December 31, 2018
Computers and equipment
3
 
1,004

 
1,004

Furniture and fixtures
3
 
20

 
20

Software
3
 
4,921

 
4,918

Software development in progress
 
 
1,050

 
924

Leasehold improvements
10
 
312

 
310

Total property, equipment and software
 
 
$
7,307

 
$
7,176

Less accumulated depreciation
 
 
(5,512
)
 
(5,101
)
Total property, equipment and software, net
 
 
$
1,795

 
$
2,075




For the six months ended June 30, 2019 and 2018, depreciation (and amortization of software) expense was $0.4 million and $0.8 million, respectively.





NOTE 8. LEASES

We lease office space and equipment under contracts we classify as operating leases. None of our leases are financing leases. Several of our leases include one or more options to renew; however, as of June 30, 2019, we are not reasonably certain that we will exercise the renewal options and we have not included such renewal options in the lease liabilities or disclosures herein.

As of June 30, 2019, the current portion of our operating lease liability was $1.5 million and was reported in Accrued expense and other current liabilities on our Unaudited Condensed Consolidated Balance Sheet.

The following table presents the detail of our lease expense, net of sublease income, which is reported in General and administrative expense (in thousands):
 
Three Months Ended June 30, 2019
 
Six Months Ended June 30, 2019
Operating lease expense
$
385

 
$
703

Short-term lease expense
98

 
164

Less: Sublease income
(78
)
 
(78
)
Lease expense
$
405

 
$
789




We reported within continuing operating cash flows $0.9 million of cash paid for amounts included in the measurement of operating lease liabilities.

As of June 30, 2019, our operating leases had a weighted-average remaining lease term of approximately 51 months, and we used a weighted-average discount rate of 13% to measure our operating lease liabilities.


Maturity of Lease Liabilities

The following table presents information regarding the maturities of our undiscounted remaining operating lease payments, with a reconciliation to the amount of the liabilities representing such payments as presented in our June 30, 2019 Unaudited Condensed Consolidated Balance Sheet (in thousands).
Operating lease liabilities maturing during the next:
 
One year
$
2,326

Two years
2,217

Three years
2,091

Four years
1,768

Five years
1,204

Thereafter

Total undiscounted cash flows
$
9,606

Present value of cash flows
$
7,301

 
 
Lease liabilities on balance sheet:
 
Short-term
1,463

Long-term
5,838

Total lease liabilities
$
7,301







Significant Judgments

When accounting for our leases, we make certain judgments, such as whether a contract contains a lease or what discount rate to use, that affect the determination of the amount of our lease assets and liabilities. Based on the current facts and circumstances related to our contracts, none of the judgments we make involve an elevated degree of qualitative significance or complexity such that further disclosure is warranted.


NOTE 9. INTANGIBLE ASSETS

The following table summarizes intangible assets by category (in thousands):
 
June 30, 2019
 
December 31, 2018
 
Gross Amount
 
Accumulated
Amortization
 
Net Amount
 
Gross Amount
 
Accumulated
Amortization
 
Net Amount
Finite-lived intangible assets
 
 
 
 
 
 
 
 
 
 
 
Domain names
$
1,256

 
$
(838
)
 
$
418

 
$
1,256

 
$
(801
)
 
$
455

Media content and broadcast rights
1,350

 
(1,058
)
 
292

 
1,350

 
(923
)
 
427

Other intangible assets
68

 
(68
)
 

 
68

 
(68
)
 

 
$
2,674

 
$
(1,964
)
 
$
710

 
$
2,674

 
$
(1,792
)
 
$
882

Indefinite-lived intangible assets
 
 
 
 
 
 
 
 
 
 
 
License to operate in China
128

 

 
128

 
128

 

 
128

Total intangible assets
$
2,802

 

 
$
838

 
$
2,802

 

 
$
1,010




Total amortization expense was $0.2 million and $0.4 million for the six months ended June 30, 2019 and 2018, respectively.


NOTE 10. INCOME TAX

Our effective tax rate (“ETR”) from continuing operations was 0.0% for the six months ended June 30, 2019. The quarterly ETR has not significantly differed from our historical annual ETR because we continue to maintain a full valuation allowance against our existing deferred tax assets.


NOTE 11. DEBT

Short-Term Debt

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 thousand 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.





Other Debt

The following table presents debt (in thousands) as of:
 
June 30,
2019
 
December 31, 2018
Loan payable to MGG
$
11,248

 
$
35,500

Unamortized original issue discount

 
(1,418
)
Unamortized debt issuance cost

 
(18
)
Carrying value of Loan
11,248

 
34,064

Exit fee payable in relation to Loan

 
1,250

Total long-term debt
$

 
$
35,314

Less: current portion

 
(35,314
)
Long-term debt, less current portion and net of debt issuance cost
$

 
$




On September 24, 2015, we entered into the Financing Agreement, pursuant to which the Lenders provided us with the $27.5 million Loan. We entered into Amendment No. 1 to Financing Agreement on September 20, 2016 which, among other changes, increased the Loan by $8.0 million to a total aggregate principal amount of $35.5 million. As of June 30, 2019, after amendments and other events described below, the Loan bore interest at three-month LIBOR (with a floor of 2%) plus 11% per annum, payable monthly, and had a maturity date of May 15, 2020. As of June 30, 2019, the applicable interest rate on the Loan was approximately 14% per annum.

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.

On April 30, 2018, we entered into Amendment No. 4 and Waiver to Financing Agreement (the “Fourth Financing Amendment”), which provided for, among other things, (i) a reduction in the interest rate on the remaining amount outstanding under the Financing Agreement to three-month LIBOR plus 8.5% per annum, (ii) an extension of the maturity date under the Financing Agreement to September 30, 2020, (iii) a modification of certain of our covenants under the Financing Agreement, including covenants regarding capital expenditures, minimum value of certain of our assets, consolidated EBITDA of Vegas.com and its subsidiaries, and revenue generated by KanKan, (iv) an increase in the amount we are permitted to invest in our non-U.S. subsidiaries operating our KanKan business (v) a waiver by the Lenders of certain events of default under the Financing Agreement and (vi) prepayment by the Borrowers of $8.0 million principal amount outstanding and $3.5 million of exit fees under the Financing Agreement within 60 days following the date of the Fourth Financing Amendment. In consideration for the Lenders’ entry into the Fourth Financing Amendment, we also paid a closing fee of approximately $413 thousand.

Effective as of June 29, 2018, we entered into Amendment No. 5 and Waiver to Financing Agreement (the “Fifth Financing Amendment”) pursuant to which the Lenders agreed, among other things, to extend the due date of the prepayments required by the Fourth Financing Amendment for up to three months, provided that we made extension payments on the first business day of each such month. The extension payments were $250,000 for each of the first two months and $500,000 for the third month, with the final extension period ending on September 28, 2018. We made the extension payments required by the Fifth Financing Amendment to extend the due date of the prepayments required by the Fourth Financing Amendment to September 28, 2018; however, we failed to prepay the $8.0 million principal amount and $3.5 million of exit fees due on such date. Such failure to make the required payments constituted an event of default under the Financing Agreement and as a result, from September 28, 2018, the Loan bore interest at three-month LIBOR plus 11.0%, the default interest rate.

On May 15, 2019, we completed the VDC Transaction and used the cash proceeds of $30 million to pay amounts due under the Financing Agreement, of which approximately $10 million remained outstanding after giving effect to the application



of such cash proceeds. On the same date, in connection with the closing of the VDC Transaction, we entered into Amendment No. 6 and Waiver to Financing Agreement (the “Sixth Financing Amendment”), pursuant to which, among other things, (i) the Lenders waived all events of default under the Financing Agreement existing as of the date of the Sixth Financing Amendment, (ii) MGG released any and all liens in the equity interests of Vegas.com and its subsidiaries and their assets and properties, (iii) the Borrowers may add the amount of any accrued and unpaid interest to the outstanding principal amount of the Loan, (iv) the remaining principal amount outstanding under the Financing Agreement will accrue interest at a rate equal to the three-month LIBOR (with a floor of 2%) plus 8.5% per annum, (v) the continuing Loan will have a maturity date of May 15, 2020, (vi) covenants with respect to capital expenditures and revenue generated by our KanKan business were eliminated and covenants regarding the minimum value of certain of our assets, our minimum liquidity and the amount we are permitted to invest in our non-U.S. subsidiaries were modified, and (vii) we are required to commence a sale process with respect to our equity in Sharecare within five business days of the effective date of the Sixth Financing Amendment, and to use the net cash proceeds of such sale to pay in full our outstanding obligations under the Financing Agreement the (“Sharecare Covenant”).

The Financing Agreement contains certain affirmative and negative covenants, including but not limited to a covenant requiring us to maintain a minimum of $1.0 million in unrestricted cash in designated bank accounts. As of June 30, 2019, we were not in compliance with such covenant. We were also not in compliance with certain other covenants under the Financing Agreement, including covenant requiring us to obtain and pay for a tail directors’ and officers’ liability insurance policy (the “Tail Policy”) by June 4, 2019 in connection with the VDC Transaction, and a covenant requiring us to make the final Earnout Payment by June 14, 2019. Additionally, although we have actively taken steps to monetize our ownership interest in Sharecare, we did not comply with certain procedural requirements stipulated by the Sharecare Covenant. Our non-compliance with such covenants constitutes events of default under the Financing Agreement. In addition, the Lenders paid the $1.1 million of premium under the Tail Policy on our behalf and such amount was added to the amount of principal due under the Financing Agreement.


NOTE 12. OTHER LIABILITIES

The following table presents the components of other liabilities (in thousands):
 
December 31, 2018
Deferred rent
$
1,583

Accrued early lease termination liability
1,137

Deferred tax liability, net
214

Total
$
2,934

 
 




NOTE 13. COMMITMENTS AND CONTINGENCIES

At June 30, 2019, we had no material commitments outside the normal course of business.


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, exclusive of the liability for the Earnout Payment related to the VDC Acquisition.





NOTE 14. STOCKHOLDERS' EQUITY, STOCK-BASED COMPENSATION AND NET LOSS PER SHARE

Equity Issuances

On March 29, 2019, we entered into the 2019 Aspire Purchase Agreement with Aspire Capital, which provides that, upon the terms and subject to the conditions and limitations set forth therein, we have the right to direct Aspire Capital to purchase up to an aggregate of $30.0 million of shares of our common stock over the 30-month term of the 2019 Aspire Purchase Agreement. On April 5, 2019, the conditions necessary for purchases under the 2019 Aspire Purchase Agreement to commence were satisfied and the 2018 Aspire Purchase Agreement was terminated under the terms of the 2019 Aspire Purchase Agreement. We issued 629,370 shares of our common stock to Aspire Capital upon commencement of the 2019 Aspire Purchase Agreement.

Under the 2019 Aspire Purchase Agreement, on any trading day over the 30-month term of such agreement, we have the right, in our sole discretion, to present Aspire Capital with a purchase notice (each, a “Purchase Notice”) directing Aspire Capital to purchase up to 50,000 shares of our common stock per trading day, up to an aggregate of $30.0 million under the 2019 Aspire Purchase Agreement, at a per share price (the “Purchase Price”) equal to the lesser of (i) the lowest sale price of our common stock on the purchase date or (ii) the arithmetic average of the three lowest closing sale prices for our common stock during the 10 consecutive trading days ending on the trading day immediately preceding the purchase date.

The aggregate purchase price payable by Aspire Capital on any one purchase date may not exceed $250,000, unless otherwise mutually agreed. The parties may mutually agree to increase the number of shares of our common stock that may be purchased per trading day pursuant to the terms of the 2019 Aspire Purchase Agreement to 3,000,000 shares.

In addition, on any trading day on which we submit a Purchase Notice to Aspire Capital to purchase at least 50,000 shares, we also have the right, in our sole discretion, to present Aspire Capital with a volume-weighted average price purchase notice (each, a “VWAP Purchase Notice”) directing Aspire Capital to purchase an amount of our common stock equal to up to 30% of the aggregate shares of our common stock traded on the next trading day (the “VWAP Purchase Date”), subject to a maximum number of shares we may determine, and a minimum purchase price threshold equal to the greater of (i) 80% of the closing price of our common stock on the trading day immediately preceding the VWAP Purchase Date or (ii) a higher price that may be determined by us. The purchase price per share pursuant to such VWAP Purchase Notice will be equal to the lesser of (i) the closing sale price of our common stock on the VWAP Purchase Date, or (ii) 97% of the volume-weighted average price for our common stock traded on its principal market on the VWAP Purchase Date, subject to certain exceptions.

We may deliver multiple Purchase Notices and VWAP Purchase Notices to Aspire Capital from time to time during the term of the 2019 Aspire Purchase Agreement, so long as the most recent purchase has been completed.

In addition, Aspire Capital will not be required to buy any shares of our common stock pursuant to a Purchase Notice that is received by Aspire Capital on any trading day on which the last closing trade price of our common stock is below $0.25. There are no trading volume requirements or restrictions under the 2019 Aspire Purchase Agreement, and we will control the timing and amount of sales of our common stock to Aspire Capital. Aspire Capital has no right to require any sales by us, but is obligated to make purchases from us as directed by us in accordance with the 2019 Aspire Purchase Agreement. There are no limitations on use of proceeds, financial or business covenants, restrictions on future fundings, rights of first refusal, participation rights, penalties or liquidated damages in the 2019 Aspire Purchase Agreement. The 2019 Aspire Purchase Agreement may be terminated by us at any time, at our discretion, without any cost to us. Aspire Capital has agreed that neither it nor any of its agents, representatives and affiliates will engage in any direct or indirect short-selling or hedging our common stock during any time prior to the termination of the 2019 Aspire Purchase Agreement.

The 2019 Aspire Purchase Agreement provides that the total number of shares that may be issued pursuant to such agreement is limited to 8,140,373 shares (the “Exchange Cap”), or 19.99% of our shares of common stock outstanding as of the date of the 2019 Aspire Purchase Agreement, unless stockholder approval is obtained in accordance with the rules of the Nasdaq Stock Market. If stockholder approval is not obtained, such limitation will not apply after the Exchange Cap is reached if at all times thereafter the average purchase price paid for all shares issued under the 2019 Aspire Purchase Agreement is equal to or greater than $1.85 per share. The 2019 Aspire Purchase Agreement also provides that at no time will Aspire Capital (together with its affiliates) beneficially own more than 19.99% of our outstanding shares of common stock.

As of June 30, 2019, we have issued to Aspire Capital a total of 2,504,370 shares of our common stock under the 2019 Aspire Purchase Agreement. During the six months ended June 30, 2019, we issued a total of 7,074,597 shares of our common



stock to a private investor and to Aspire Capital under the 2018 Aspire Purchase Agreement and the 2019 Aspire Purchase Agreement in exchange for $7.5 million plus Aspire Capital’s commitment to participate in the 2019 Aspire Purchase Agreement.


Stock-Based Compensation 

We are authorized to issue equity-based awards under our 2010 Equity Incentive Plan, our 2014 Incentive Plan, and our 2017 Incentive Plan, each of which our stockholders have approved. We also award cash bonuses (“China Cash Bonuses”) to our employees in China, which grants are not subject to a formal incentive plan and which can only be settled in cash. 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 and China Cash Bonuses generally expire 10 years from the grant date. All forms of equity awards and China Cash Bonuses vest upon the passage of time, the attainment of performance criteria, or both. When participants exercise stock options, we issue any shares of our common stock resulting from such exercise from new authorized and unallocated shares available at the time of exercise.

The following table summarizes activity under our equity incentive plans related to equity-classified stock option grants as of June 30, 2019, and changes during the 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, 2019
10,874,849

 
$
4.36

 
 
 
 
Granted
25,000

 
1.66

 
 
 
 
Exercised
(2,250
)
 
1.99

 
 
 
 
Forfeited, cancelled or expired
(94,742
)
 
3.82

 
 
 
 
Outstanding at June 30, 2019
10,802,857

 
$
4.35

 
6.3
 
$

Options exercisable at June 30, 2019
10,802,857

 
$
4.35

 
6.3
 
$




The following table summarizes activity under our equity incentive plans related to the China Cash Bonuses as of June 30, 2019, and changes during the 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, 2019
1,464,750

 
$
5.60

 
 
 
 
Granted
152,000

 
1.56

 
 
 
 
Forfeited, cancelled or expired
(280,250
)
 
5.79

 
 
 
 
Outstanding at June 30, 2019
1,336,500

 
$
5.09

 
8.1
 
$

Bonuses exercisable at June 30, 2019
709,250

 
$
5.37

 
7.3
 
$




During the six months ended June 30, 2019, we did not award restricted stock under our equity incentive plans.




During the three months ended June 30, 2019 and 2018, we incurred share-based compensation expense (benefit) of $(0.1) million and $0.3 million, respectively, and we incurred share-based compensation expense of $0.2 million and $11.8 million, respectively, during the six months ended June 30, 2019 and 2018.


Net Loss per Share 
 
For the three and six months ended June 30, 2019 and 2018, there were no reconciling items related to either the numerator or denominator of the loss per share calculation, except that for the second quarter of 2018 the denominator changed as a result of applying the treasury stock method to outstanding in-the-money stock options; however, the change in the denominator did not lead to a dilution of basic earnings per share.

Securities which would have been anti-dilutive to a calculation of diluted earnings per share for the three and six months ended June 30, 2019 and 2018 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 3,651,574 shares of our common stock at an exercise price of $4.02 per share.


NOTE 15. SEGMENT INFORMATION

As a result of our disposal of the previously-reported Travel and Entertainment segment, we currently report one segment: our Technology & Data Intelligence segment, which provides services to our customers based upon the data collected and processed by our proprietary data intelligence software.

Our chief operating decision maker uses Adjusted EBITDA as the primary measure of profitability for evaluating 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. We do not allocate certain types of shared expense, such as legal and accounting, to our reportable segment; such costs are included in Corporate Entity and Other.

The following table presents certain financial information regarding our reportable segment and other entities for the three and six months ended June 30, 2019 and 2018 (in thousands):
 
Technology & Data Intelligence
 
Corporate Entity and Other
 
Consolidated
Three Months Ended June 30, 2019
 
 
 
 
 
Revenue
$
2,465

 
$
400

 
$
2,865

Adjusted EBITDA
$
(344
)
 
$
(2,310
)
 
$
(2,654
)
Three Months Ended June 30, 2018
 
 
 
 
 
Revenue
$
3,369

 
$
518

 
$
3,887

Adjusted EBITDA
$
(