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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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



For the quarterly period ended March 31, 2003



or



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



For the transition period from
 to



Commission File Number 0-18299



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i3 MOBILE,
INC.

(Exact name of registrant as specified in its charter)



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|Delaware                                                       |  | 51-0335259                       
|-------------------------------------------------------------- |  | ---------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)
|                                                              
|181 Harbor Drive Stamford, Connecticut                         |  | 06902                            
|(Address of principal executive offices)                       |  | (Zip Code)                       



Registrants telephone number, including area code:    (203) 428-3000



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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  x    No ̈.



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x.



Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.



|Class                        |  | Outstanding at May 12, 2003
|---------------------------- |  | ---------------------------
|Common Stock, Par Value $.01 |  | 20,115,990                 



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i3 MOBILE, INC.

FORM 10-Q QUARTERLY REPORT



TABLE OF CONTENTS



PART IFinancial Information



|Item 1.Financial Statements (Unaudited)                                                       |  |   
|---------------------------------------------------------------------------------------------- |  | --
|Consolidated Balance Sheet as of March 31, 2003 and December 31, 2002                          |  | 3 
|Consolidated Statement of Operations for the Three Months Ended March 31, 2003 and 2002        |  | 4 
|Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2003 and 2002        |  | 5 
|Notes to Consolidated Financial Statements                                                     |  | 6 
|Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 9 
|Item 3.
Quantitative and Qualitative Disclosures about Market Risk                            |  | 18
|Item 4.
Controls and Procedures                                                               |  | 19
|                                                                                              
|Part IIOther Information                                                                      |  |   
|Item 6.
Exhibits and Reports on Form 8-K                                                      |  | 20
|Signatures and Certifications                                                                  |  | 21



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i3 MOBILE, INC.



CONSOLIDATED BALANCE SHEET

(IN THOUSANDS, EXCEPT SHARE DATA)



|                                                                                                              |  | March 31, 2003 |          |   | December 31, 2002 |  
|------------------------------------------------------------------------------------------------------------- |  | -------------- | -------- | - | ----------------- | -
|                                                                                                              |  | (UNAUDITED)    |          |   | (NOTE)            |  
|ASSETS                                                                                                        |  |                |          |   |                   |  
|Current assets:                                                                                               |  |                |          |   |                   |  
|Cash and cash equivalents                                                                                     |  | $              | 15,077   |   |                   | $
|Accounts receivable, net of allowances                                                                        |  |                | 93       |   |                   |  
|Prepaid expenses and other current assets                                                                     |  |                | 105      |   |                   |  
|                                                                                                              |  |                |          |   |                   |  
|Total current assets                                                                                          |  |                | 15,275   |   |                   |  
|Fixed assets, net                                                                                             |  |                | 1,113    |   |                   |  
|Deposits and other non-current assets                                                                         |  |                | 335      |   |                   |  
|                                                                                                              |  |                |          |   |                   |  
|Total assets                                                                                                  |  | $              | 16,723   |   |                   | $
|                                                                                                              |  |                |          |   |                   |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                          |  |                |          |   |                   |  
|Current liabilities:                                                                                          |  |                |          |   |                   |  
|Accounts payable and accrued liabilities                                                                      |  | $              | 3,874    |   |                   | $
|                                                                                                              |  |                |          |   |                   |  
|Total liabilities                                                                                             |  |                | 3,874    |   |                   |  
|Stockholders equity:                                                                                         |  |                |          |   |                   |  
|Preferred stock; $.01 par value per share, 50,000 shares authorized, none
issued                              |  |                |         |   |                   |  
|Common stock; $.01 par value per share, 75,000,000 shares authorized, 24,820,640 and
24,805,640 shares issued |  |                | 248      |   |                   |  
|Additional paid-in capital                                                                                    |  |                | 166,951  |   |                   |  
|Accumulated deficit                                                                                           |  |                | (146,713 | ) |                   |  
|Treasury stock at cost, 4,334,280 shares                                                                      |  |                | (7,637   | ) |                   |  
|                                                                                                              |  |                |          |   |                   |  
|Stockholders equity                                                                                          |  |                | 12,849   |   |                   |  
|                                                                                                              |  |                |          |   |                   |  
|Total liabilities and stockholders equity                                                                    |  | $              | 16,723   |   |                   | $
|                                                                                                              |  |                |          |   |                   |  



NOTE:    The balance sheet at December 31, 2002 has been derived from the audited consolidated financial statements at that date.



See accompanying notes to consolidated financial statements.



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i3 MOBILE, INC.



CONSOLIDATED STATEMENT OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)



|                                            |  | THREE MONTHS ENDED March 31, |       
|------------------------------------------- |  | ---------------------------- | ------
|                                            |  | 2003                         |       
|                                            |  | (UNAUDITED)                  |       
|Net revenue                                 |  | $                            | 267   
|                                            |  |                              |       
|Expenses:                                   |  |                              |       
|Operating                                   |  |                              | 1,198 
|Sales and marketing                         |  |                              | 568   
|Product development                         |  |                              | 1,150 
|General and administrative                  |  |                              | 3,084 
|Long-lived asset impairment                 |  |                              | 516   
|                                            |  |                              |       
|Total expenses                              |  |                              | 6,516 
|                                            |  |                              |       
|Operating loss                              |  |                              | (6,249
|Interest income, net                        |  |                              | (53   
|                                            |  |                              |       
|Net loss                                    |  | $                            | (6,196
|                                            |  |                              |       
|Net loss per sharebasic and diluted        |  | $                            | (0.31 
|                                            |  |                              |       
|Shares used in computing net loss per share |  |                              | 20,113
|                                            |  |                              |       



See
accompanying notes to consolidated financial statements.



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i3 MOBILE, INC.



CONSOLIDATED STATEMENT OF CASH FLOWS

(IN THOUSANDS)



|                                                                            |  | THREE MONTHS ENDED |       
|--------------------------------------------------------------------------- |  | ------------------ | ------
|                                                                            |  | March 31, 2003     |       
|                                                                            |  | (UNAUDITED)        |       
|Cash flow from operating activities:                                        |  |                    |       
|Net loss                                                                    |  | $                  | (6,196
|Adjustments to reconcile net loss to net cash used in operating
activities: |  |                    |       
|Depreciation                                                                |  |                    | 318   
|Long-lived asset impairment                                                 |  |                    | 516   
|Non-cash stock compensation charges                                         |  |                    |      
|Changes in operating assets and liabilities:                                |  |                    |       
|Decrease in accounts receivable                                             |  |                    | 45    
|Decrease in deferred advertising                                            |  |                    |      
|Decrease in other assets                                                    |  |                    | 276   
|(Decrease) in accounts payable and accrued liabilities                      |  |                    | (454  
|                                                                            |  |                    |       
|Net cash (used) in operating activities                                     |  |                    | (5,495
|                                                                            |  |                    |       
|Investing activities:                                                       |  |                    |       
|Purchase of fixed assets                                                    |  |                    | (6    
|                                                                            |  |                    |       
|Net cash (used) in investing activities                                     |  |                    | (6    
|                                                                            |  |                    |       
|Financing activities:                                                       |  |                    |       
|Payments on capital lease obligations                                       |  |                    |      
|Proceeds from exercise of stock options and warrants                        |  |                    | 6     
|Repurchase of common stock                                                  |  |                    |      
|                                                                            |  |                    |       
|Net cash provided by (used) in financing activities                         |  |                    | 6     
|                                                                            |  |                    |       
|Decrease in cash and cash equivalents                                       |  |                    | (5,495
|Cash and cash equivalents at beginning of period                            |  |                    | 20,572
|                                                                            |  |                    |       
|Cash and cash equivalents at end of period                                  |  | $                  | 15,077
|                                                                            |  |                    |       



See
accompanying notes to consolidated financial statements.



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i3 MOBILE, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1COMPANY OVERVIEW:



i3 Mobile, Inc., i3 or the Company, was incorporated in Delaware on June 28, 1991. From its inception in June 1991 until 2001, the Companys business was comprised of distributing customized text-based
information to mobile devices under the Powered by i3 Mobile product brand. During 2001, the Company evolved into a company that it believed was among the first to create a premium mobile subscription information and communication
service for telephones. This service, Pronto, was marketed directly to consumers delivering information and service on demand 24 hours a day, combining the service of a mobile concierge with the simplicity of flat-menu voice recognition technology.



Although the Company undertook substantial
efforts to research, develop and market the Pronto product, the Company did not achieve the subscriber levels which had been estimated and were needed to sustain the core business model. Due to the challenges the Company faced in marketing the
Pronto product, and its concerns about its cash resources going forward, in October 2002, the Company engaged the services of an investment banker to pursue strategic alternatives, including a potential merger or acquisition of the Company
(collectively, a Transaction). As a result of that engagement, the Company has entered into discussions with a potential Transaction partner, and to facilitate this or another Transaction, in March 2003 the Company announced the
termination of the Pronto service and other cost saving measures in order to manage its cash resources. Although the Company has entered into discussions with a potential strategic partner for a merger transaction and continues to explore
alternative potential transactions to maximize shareholder value, the Company has not entered into any definitive binding agreement and there can be no assurance the Company will be able to do so, or to do so on favorable terms. In the event the
Company is unable to effect a Transaction in the near term, the Company will be required to implement additional cost reductions or sell the assets of the Company.



The Company has now focused its efforts on locating and consummating a Transaction, if the proper opportunity
is presented. At this time, management believes that a Transaction may be the best means available to leverage the Companys remaining cash resources and to maximize shareholder value.



It is possible the Companys Board of Directors could
determine not to further pursue a Transaction at all, or to consummate a Transaction that may or may not involve the ongoing development, marketing and commercialization of the Pronto platform, which could involve businesses unrelated to its
previous business.



Liquidity:



The Company has incurred substantial losses and negative cash
flows from operations in every fiscal period since inception. For the three months ended March 31, 2003, the Company incurred a loss from operations of approximately $6.2 million and negative cash flows from operations of approximately $5.5 million.
As of March 31, 2003, the Company had an accumulated deficit of approximately $147 million.



Management expects operating losses and negative cash flows to continue for the foreseeable future as the Company incurs ongoing costs and expenses related to facilitating a Transaction. The
anticipated cash expenditures for the remainder of 2003 include approximately $1.2 million of non-cancelable commitments, which include, among other things, rent, content and marketing commitments, which management will continue to resolve. During
March 2003, the Company took action on a plan approved by the Board of Directors in an effort to continue to reduce recurring operating losses, preserve cash resources and working capital and facilitate a potential Transaction. The Company
discontinued revenue producing operations and terminated the Pronto service and initiated cost saving measures including a reduction of 65 employees, approximately 78% of its workforce, the suspension of most of its research and development efforts
at its Texas facility, and furthered its ongoing efforts to resolve contractual obligations. The reduction of workforce resulted in a $1.7 million charge in its results of operations during the first quarter of 2003. If the Company fails to enter
into a Transaction,



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the ongoing reduction of the Companys available cash resources over time would have a material adverse effect on the Companys
ability to operate and therefore could result in the Company selling its assets and ceasing operations. However, management believes the Company has adequate cash resources to continue to realize its assets and discharge its liabilities as a company
into the second quarter of 2004, in the absence of a change in control related to a Transaction.



NOTE 2BASIS OF PRESENTATION:



The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial
information. Certain information and note disclosures normally included in financial statements have been omitted pursuant to Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included in the accompanying unaudited financial statements. Operating results for the three month period ended March 31, 2003 are not necessarily indicative of the results that may be expected
for the fiscal year ending December 31, 2003.



For further information, refer to the consolidated financial statements and footnotes thereto included in our annual report on Form 10-K for the year ended December 31, 2002.



Certain reclassifications have been made for consistent
presentation.



In June 2002, Statement of
Financial Accounting Standards (SFAS) No. 146, Accounting for Exit or Disposal Activities (SFAS No. 146) was issued. SFAS No. 146 addresses the accounting for costs to terminate a contract that is not a capital
lease, costs to consolidate facilities and relocate employees, and involuntary termination benefits under one-time benefit arrangements that are not an ongoing benefit program or an individual deferred compensation contract. A liability for contract
termination costs should be recognized and measured at fair value either when the contract is terminated or when the entity ceases to use the right conveyed by the contract. A liability for one-time termination benefits should be recognized and
measured at fair value at the communication date if the employee would not be retained beyond a minimum retention period (i.e., either a legal notification period or 60 days, if no legal requirement exists). For employees which will be retained
beyond the minimum retention period, a liability should be accrued ratably over the future service period. The provisions of the statement will be effective for disposal activities initiated after December 31, 2002. During the first quarter of
2003, the Company adopted SFAS No. 146 and recorded a charge of $1.7 million. Refer to Note 1.



NOTE 3SIGNIFICANT CUSTOMERS:



During the three months ended March 31, 2003, revenues from the Companys Pronto product offering and from one wireless network operator customer for its legacy wireless alert product accounted
for 39% and 24% of total net revenues, respectively. During the three months ended March 31, 2002, the Company had two wireless network operator customers for its legacy wireless alert product, which combined, accounted for approximately 80% of its
total net revenues. In conjunction with the Companys March 2003 decision to terminate the Pronto service and continue to implement cost saving measures while seeking a Transaction, all revenue producing activities from both the Pronto product
offering and from its legacy wireless alert product offerings have now ceased.



NOTE 4STOCK BASED COMPENSATION



The Company applies Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25), and related interpretations in accounting for its stock option plan and stock awards with the
disclosure provisions of SFAS No. 123, Accounting for Stock-Based Compensation. Under APB 25, compensation expense is computed to the extent that the fair value of the underlying stock on the date of grant exceeds the exercise price of
the employee stock option or stock award. Compensation so computed is deferred and then recognized over the vesting period of the stock option or award.



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The Company
applies SFAS No. 123, Emerging Issues Task Force Abstract No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services (EITF 96-18) and related
interpretations in accounting for issuances of stock awards to non-employees. Under SFAS No. 123 these equity transactions are accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued,
whichever is more reliably measurable. The value of the equity instruments is calculated under a fair value based method using a Black-Scholes pricing model. EITF 96-18 defines the measurement date for determining fair value as the earlier of the
date at which a commitment for performance by the counterparty to earn the equity instruments is reached or the date at which the counterpartys performance is complete.



If compensation expenses had been recognized based on the fair value of the options at their grant date, in
accordance with SFAS No. 123, the Companys net loss and net loss per share would have been reduced to the pro-forma amounts indicated below for the periods ended March 31:



|                                                                                                |  | 2003   |   |  | 2002    |  
|----------------------------------------------------------------------------------------------- |  | ------ | - |  | ------- | -
|Loss applicable to common stock:                                                                |  |        |   |  |         |  
|As reported                                                                                     |  | (6,196 | ) |  | (9,932  | )
|Deduct: Total stock-based employee compensation expense under fair value methods for all
awards |  | (113   | ) |  | (157    | )
|                                                                                                |  |        |   |  |         |  
|Pro forma                                                                                       |  | (6,309 | ) |  | (10,089 | )
|Basic and diluted net loss per share:                                                           |  |        |   |  |         |  
|As reported                                                                                     |  | (.31   | ) |  | (.44    | )
|Pro forma                                                                                       |  | (.31   | ) |  | (.45    | )



NOTE
5LONG-LIVED ASSET IMPAIRMENT:



During
March 2003, the Company took action on a plan approved by its Board of Directors and consequently terminated the Pronto service and initiated further cost saving measures. As a result of this plan, management reviewed the fair value of the
Companys long-lived assets, including related prepaid maintenance contracts, in accordance with SFAS No. 144 and recorded a $0.5 million non-cash charge to the Companys results of operations. During its impairment review, the Company
assessed its future cash flows and determined that it was necessary to record an impairment charge to reduce the carrying value of its long-lived assets to their estimated fair value.



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



The following discussion of our financial condition and results of operations should be read together with
our consolidated financial statements and the related notes included in this document and with Managements Discussion and Analysis of Financial Condition and Results of Operations and the audited financial statements and notes
thereto for the years ended December 31, 2002, 2001 and 2000 included in our annual report on Form 10-K for the year ended December 31, 2002, and presumes that readers have access to, and will have read, Managements Discussion and
Analysis of Financial Conditions and Results of Operations contained in such Form 10-K.



OVERVIEW



From our inception in June 1991 until 2001, our business was comprised of distributing customized text-based information to mobile devices under the Powered by i3 Mobile product brand. During 2001, we evolved from a
company that distributed customized text-based information to mobile devices under the Powered by i3 Mobile product brand into a company that we believed was among the first to create a premium mobile subscription information and
communication service for telephones. This service, Pronto, was marketed directly to consumers delivering information and service on demand 24 hours a day, combining the service of a mobile concierge with the simplicity of flat-menu voice
recognition technology.



We have determined that
our direct to consumer marketing approach for Pronto has not proven effective in quickly growing our subscriber base. While we have pursued the establishment of sales channels for Pronto through marketing and distribution relationships with third
parties, we have determined that the establishment of such sales channels would require the ability to fund negative cash flow and losses until such time as significant revenue streams were realized, which could take additional time beyond the
Companys current cash resources. Consequently, we have determined that the establishment of sales channels through marketing and distribution relationships are not, at this time, a viable alternative.



Although we undertook substantial efforts to research, develop
and market the Pronto product, we did not achieve the subscriber levels which had been estimated and were needed to sustain the core business model. Due to challenges we faced in marketing the Pronto product, and our concerns about our cash
resources going forward, in October 2002, we engaged the services of an investment banker to pursue strategic alternatives, including a potential merger or acquisition of the Company (collectively, a Transaction). As a result of that
engagement, we have entered into discussions with a potential Transaction partner for a merger transaction, although we have not entered into any definitive binding agreement and there can be no assurance we will be able to do so, or to do so on
favorable terms. In the event we are unable to effect a Transaction in the near term, we will be required to implement additional cost reductions or sell the assets of the Company and cease operations. However, management believes the Company has
adequate cash resources to continue to realize its assets and discharge its liabilities as a company into the second quarter of 2004. See Risk Factors.



We have focused our efforts on locating and consummating a Transaction, if the proper opportunity is
presented. At this time, we believe that a Transaction may be the best means available to leverage our remaining cash resources and to maximize shareholder value.



During March 2003, in an effort to continue to reduce recurring operating losses, preserve cash resources and
working capital and facilitate a potential Transaction, the Company took action on a plan approved by the Board of Directors and discontinued revenue producing operations and terminated the Pronto service and initiated cost saving measures including
a reduction of 65 employees, approximately 78% of its workforce, the suspension of most of its research and development efforts at its Texas facility, and furthered our ongoing efforts to resolve contractual obligations. The reduction of workforce
resulted in a $1.7 million charge to our results of operations in the first quarter of 2003. As a result of the plan approved by the Board of Directors, management reviewed the fair value of the Companys long-lived assets, including prepaid
maintenance contracts and recorded a $0.5 million non-cash charge to our results of operations in the first quarter of 2003. Additionally, subscription revenues from wireless network operators will cease subsequent to March 31, 2003 as we continue
to implement cost saving measures and seek to consummate a Transaction.



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RESULTS OF OPERATIONS



THREE MONTHS ENDED MARCH 31, 2003 AND MARCH 31, 2002



Net
Revenue.    Net revenue decreased 70.1% to $0.3 million for the three months ended March 31, 2003 from $0.9 million for the three months ended March 31, 2002. This decrease was attributable to a decrease in subscription
revenues from wireless network operators during the 2003 period as compared to the 2002 period as we had begun to de-emphasize our legacy wireless alert product during 2002. In conjunction with the Companys March 2003 decision to terminate the
Pronto service and continue to implement cost saving measures while seeking a Transaction, all revenue producing activities from both the Pronto product offering and from its legacy wireless alert product offerings have now ceased. See
Liquidity and Capital Resources.



Operating Expenses.    Operating expenses decreased by 29.4% to $1.2 million for the three months ended March 31, 2003 from $1.7 million for the three months ended March 31, 2002. The decrease was primarily
attributable to reduced call center activities related to the Pronto product offering in the 2003 period. The 2003 period, however, includes approximately $0.1 million in severance and related costs associated with the March 2003 reduction in our
workforce. As of March 31, 2003 all operating activities have ceased as a result of our recent decision to terminate the Pronto service and focus on the consummation of a Transaction.



Sales and Marketing Expenses.    Sales and marketing expenses decreased by 85% to
$0.6 million for the three months ended March 31, 2003 from $3.8 million for the three months ended March 31, 2002. The decrease from the March 31, 2002 period is primarily attributable to direct marketing initiatives incurred during the 2002 period
for the Pronto product which were not incurred in the 2003 period. The 2003 period, however, includes approximately $0.3 million in severance and related costs associated with the March 2003 reduction in our workforce. As of March 31, 2003 all sales
and marketing activities have ceased as a result of our recent decision to terminate the Pronto service and focus on the consummation of a Transaction. As of March 31, 2003, however, we are contractually obligated to purchase for cash an aggregate
of approximately $0.3 million in advertising from our previous Pronto related advertising arrangements.



Product Development Expenses.    Product development expenses decreased by 21.7% to $1.2 million for the three
months ended March 31, 2003 from $1.5 million for the three months ended March 31, 2002. The decrease was primarily as a result of reduced labor and related costs in the 2003 period for the ongoing refinement and enhancement of Pronto versus the
2002 period. The 2003 period, however, includes approximately $0.3 million in severance and related costs associated with the March 2003 reduction in our workforce. As of March 31, 2003 all product development activities have ceased as a result of
our recent decision to terminate the Pronto service and focus on the consummation of a Transaction.



General and Administrative Expenses.    General and administrative expenses decreased by 24.9% to $3.1 million
for the three months ended March 31, 2003 from $4.1 million for the three months ended March 31, 2002. This decrease from the March 31, 2002 period was primarily attributable to a decrease in depreciation of $1.2 million due to the impairment of our
long-lived assets in the third quarter of 2002 partially offset by approximately $1.0 million in severance costs incurred during the 2003 period associated with the March 2003 reduction in our workforce. We anticipate that general and administrative
expenses will continue to decrease on a quarterly basis for the remainder of 2003, as compared to the quarter ended March 31, 2003, as a result of our recent decision to terminate the Pronto service and focus on the consummation of a Transaction.



Interest Income,
Net.    Net interest income was $0.1 million for the three months ended March 31, 2003 as compared to $0.2 million for the three months ended March 31, 2002. The decrease was attributable to a lower amount of funds invested
in the 2003 period as compared to 2002 as well as lower average returns on investments due to a general decrease in interest rates.



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LIQUIDITY AND CAPITAL
RESOURCES



Since our inception we have
financed our operations primarily through sales of our common and preferred securities and the issuance of long-term debt, which has resulted in aggregate cash proceeds of $130.1 million through March 31, 2003. We have incurred substantial losses
and negative cash flows from operations in every fiscal period since inception. Our working capital decreased to $11.4 million at March 31, 2003 from $16.9 million at December 31, 2002. As of March 31, 2003, we have an accumulated deficit of
approximately $147 million.



Net cash used in
operating activities was $5.5 million for the three months ended March 31, 2003 and $7.3 million for the three months ended March 31, 2002. The principal use of cash in each of these periods was to fund our losses from operations.



We believe that our current cash and cash equivalents would be
sufficient to meet our anticipated cash needs for working capital which includes approximately $1.2 million of non-cancelable commitments for the remainder of 2003 including among other things, rent, content and marketing commitments, which
management will continue to resolve. We have determined, however, that we will not continue to operate Pronto at this time and will instead focus on effecting a Transaction. If we effect a Transaction, relaunching the Pronto platform would require
use of our existing cash resources and would require additional financing. In addition, we may incur significant uses of cash in connection with possible strategic acquisitions and exploration of other potential business Transactions with strategic
partners or our cash could fund operations unrelated to the Pronto platform. We anticipate that we will continue to incur negative operating margins and net losses. If the Company fails to enter into a Transaction, the resultant reduction of the
Companys available cash resources would have a material adverse effect on our ability to operate and therefore could result in the Company selling its assets and ceasing operations. However, management believes the Company has adequate cash
resources to continue to realize its assets and discharge its liabilities as a company into the second quarter of 2004, in the absence of a change in control related to a Transaction.



During March 2003, in an effort to continue to reduce recurring operating losses, preserve cash resources and
working capital and facilitate a potential Transaction, the Company took action on a plan approved by the Board of Directors and discontinued revenue producing operations and terminated the Pronto service and initiated cost saving measures including
a reduction of 65 employees, approximately 78% of its workforce, the suspension of most of its research and development efforts at its Texas facility, and furthered our ongoing efforts to resolve contractual obligations. The reduction of workforce
resulted in a $1.7 million charge to our results of operations in the first quarter of 2003 in accordance with Statement of Financial Accounting Standards (SFAS) No. 146. As a result of the plan approved by the Board of Directors,
management reviewed the fair value of the Companys long-lived assets, including prepaid maintenance contracts and recorded a $0.5 million non-cash charge to our results of operations in the first quarter of 2003. Additionally, subscription
revenues from wireless network operators will cease subsequent to March 31, 2003 as we continue to implement cost saving measures and seek to consummate a Transaction.



Net cash used in investing activities was $0.3 million for the three months ended March 31, 2002. The amounts
invested in the 2002 period were principally related to Pronto. No such amounts were undertaken in the 2003 period.



Net cash used in financing activities was $0.2 million for the three months ended March 31, 2002. The amounts used in the 2002 period were
for the repayment of certain capital lease obligations. No such amounts were undertaken in the 2003 period.



CRITICAL ACCOUNTING POLICIES



Please refer to the discussion of our critical accounting policies contained in the Managements Discussion and Analysis section of our 2002 Annual Report on Form 10-K (which discussion is
incorporated herein by reference).



RECENTLY ISSUED ACCOUNTING
PRONOUNCEMENTS



In June 2002, SFAS No. 146,
Accounting for Exit or Disposal Activities (SFAS No. 146) was issued. SFAS No. 146 addresses the accounting for costs to terminate a contract that is not a capital lease, costs to consolidate facilities and relocate
employees, and involuntary termination benefits under one-time benefit arrangements that are not an ongoing benefit



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program or an individual deferred compensation contract. A liability for contract termination costs should be recognized and measured at fair
value either when the contract is terminated or when the entity ceases to use the right conveyed by the contract. A liability for one-time termination benefits should be recognized and measured at fair value at the communication date if the employee
would not be retained beyond a minimum retention period (i.e., either a legal notification period or 60 days, if no legal requirement exists). For employees which will be retained beyond the minimum retention period, a liability should be accrued
ratably over the future service period. The provisions of the statement will be effective for disposal activities initiated after December 31, 2002. During the first quarter of 2003, the Company adopted SFAS No. 146 and recorded a charge of $1.7
million.



CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS



This quarterly report on Form 10-Q contains
certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this report, the words believe, anticipate,
think, intend, plan, expect, project, will be and similar expressions identify such forward-looking statements, but their absence does not mean that the statement is not
forward-looking. The forward looking statements included herein are based on current expectations and assumptions that involve a number of risks and uncertainties, including the statements in Liquidity and Capital Resources regarding the adequacy of
funds to meet funding requirements. Our actual results may differ significantly from the results discussed in the forward-looking statements. A number of uncertainties exist that could affect our future short term operating results, including,
without limitation, our ability to locate a suitable strategic investment partner, acquisition candidate or other investment opportunity and our ability to manage our cash resources until we are able to do so. In the event that the Company
consummates a Transaction that involves relaunching the Pronto service and/or exploiting its core technologies, risks related to our Pronto service platform include the ability to secure marketing channel distribution, the growth rate of the market
for wireless products, the progress and cost of re-establishing our service infrastructure, the cost, risk and timing of retaining, rehiring or identifying key personnel with the knowledge and experience to relaunch the platform and developing our
products and services, the timing and market acceptance of those products and services and our history of losses, competitive economic conditions, and general economic factors. In light of the significant risks and uncertainties inherent in the
forward-looking statements included herein, the inclusion of such statements should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. We undertake no obligation to
update publicly any forward-looking statements or reflect new information, events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.



Other Risks and Uncertainties



Before deciding to invest in i3 Mobile or to maintain or increase your investment, you should carefully
consider the risks described below, in addition to the other information contained in this report and in our other filings with the SEC. Additional risks and uncertainties not presently known to us may also affect our business operations. If any of
these risks actually occur, our business, financial condition or results of operations could be seriously harmed. In that event, the market price of our common stock could decline and you may lose all or part of your investment.



There can be no assurance that we will be able to
consummate a Transaction.    We have incurred recurring operating losses, and operations have not generated positive cash flows. We have determined that a Transaction may be the best means available to leverage our
remaining cash resources and to maximize shareholder value. Although we have entered into discussions with a potential strategic partner for a merger transaction, we have not entered into any definitive binding agreement, and there can be no
assurance we will be able to consummate a Transaction, or to do so on favorable terms. In the event we are unable to effect a Transaction, we will be required to implement additional cost reductions or sell the assets of the Company and cease
operations.



The potential benefits of a
Transaction may not be realized.    Although we believe that a Transaction may enhance shareholder value and provide funding for strategic initiatives, any potential Transaction involves significant risks, many of which
will be beyond our control. We



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may not realize the benefits of any potential Transaction because of numerous integration challenges, including the possibility that a
Transaction may result in adverse changes to our business focus. Additionally, the market price of our common stock may decline as a result of any potential Transaction if the integration with any potential Transaction partner is unsuccessful, if we
do not achieve the perceived benefits of any potential Transaction as rapidly or to the extent anticipated by financial analysts or investors, or if the effect of any potential Transaction is not consistent with our expectations.



Insiders own a large percentage of our stock, which
could delay or prevent a change in control and may negatively affect your investment.    As of March 31, 2003, our officers, directors and affiliated persons beneficially owned approximately 35% of our voting securities.
J. William Grimes, our President, interim Chief Executive Officer and Chairman of the Board of Directors, beneficially owned approximately 24% of our voting securities as of that date. These stockholders will be able to exercise significant
influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, which could have the effect of delaying or preventing a third party from acquiring control over us and
could affect the market price of our common stock. In addition, our executive officers have stock option grants which provide for accelerated vesting upon a change in control if their employment is actually or constructively terminated as a result.



The following risks and uncertainties
affecting our Pronto business assume we consummate a Transaction that involves relaunching the Pronto service and/or exploiting its core technologies, and thereafter the Company (or its successors) will continue to seek to commercialize the Pronto
platform and provide funding for certain of the initiatives, or similar initiatives, described below.



It is also possible that in connection with effecting a Transaction, the Company (or its successors) could determine to continue or
enter into new lines of business which might or might not involve continuation of the Pronto service or the utilization of its underlying technologies, in which case the following discussion would have limited or no application to the Companys
future operations.



We have a new
product and are considering alternative business models, which makes predictions of our future results of operations difficult.    During 2001 we initiated the Pronto business model, which involved offering
subscription-based voice-activated premium wireless content and services, and in the fall of 2001 we launched local consumer testing of our Pronto service offering. During the second quarter of 2002, we conducted a national
direct-to-consumer marketing and sales campaign for Pronto. Despite those efforts, as a result of fewer subscribers than projected electing to subscribe to the Pronto service, the Company has determined that its direct to consumer marketing approach
for Pronto has not proven effective in quickly growing its subscriber base. While the Company has pursued the establishment of sales channels for Pronto through marketing and distribution relationships with third parties, the Company has determined
that the establishment and support of such sales channels would require the ability to fund negative cash flow and losses until such time as significant revenue streams were realized, which could take additional time beyond the Companys
current cash resources. Consequently, the Company has determined that the establishment of sales channels through marketing and distribution relationships are not, at this time, a viable alternative. In the event that the Company consummates a
Transaction that involves relaunching the Pronto service and/or exploiting its core technologies, the Company believes that it will need to focus its efforts on establishing sales channels for Pronto through marketing and distribution relationships
with third parties. These could include wireless network operators, telecommunications carriers, Internet portals, business enterprises, and selected vertical retail outlets. Even if such a relationship is established, there can be no assurance any
such relationships will be able to successfully commercialize the Companys services, and the Company would continue to incur substantial operating losses, and would require significant additional financing, until such time as a substantial
subscriber base, recurring revenues and positive cash flow were achieved. There can be no assurance that we will be able to enter into such a relationship. Due to the uncertainty of consummating a Transaction (or the nature thereof if consummated),
the uncertainty in securing marketing channel distribution partnerships with third parties in the event that we consummate a Transaction that involves relaunching the Pronto service and/or exploiting its core technologies and evolving consumer
preferences in our industry, it is difficult to predict our future results of operations. Investors must consider our business, industry and prospects in light of the risks and difficulties typically encountered by companies in rapidly evolving and
intensely competitive markets requiring significant capital expenditures such as those in which we are engaged. In the event we are unable to effect a Transaction, we will be required to implement additional



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cost reductions, obtain additional financing, or sell the assets of the Company and cease operations.



We have a history of losses and may not be able to
generate sufficient net revenue from our Pronto business in the future to achieve or sustain profitability.    We have incurred losses since inception and expect that our net losses and negative cash flow will continue
for the foreseeable future as we seek to consummate a Transaction. To date, our revenues have largely come from our legacy Powered by i3 Mobile SMS alerts distribution arrangements, and this revenue stream has ceased effective March 31,
2003 as we seek to consummate a Transaction. If we effect a Transaction, relaunching the Pronto platform would require use of our existing cash resources and would require additional financing. In addition, we may incur significant uses of cash in
connection with possible strategic acquisitions and exploration of other potential business Transactions with strategic partners or our cash resources could fund operations unrelated to the Pronto platform. We anticipate that we will continue to
incur negative operating margins and net losses. Whether or not we consummate a Transaction, we cannot assure you that we will ever generate sufficient net revenue to achieve or sustain profitability. If the Company fails to enter into a
Transaction, the resultant reduction of the Companys available cash resources would have a material adverse effect on the Companys ability to operate and therefore could result in the Company selling its assets and ceasing operations.
However, management believes the Company has adequate cash resources to continue to realize its assets and discharge its liabilities as a company into the second quarter of 2004.



The market for wireless content services is new, and our business will suffer if the market does not
develop as we expect or if the usage of wireless content products does not continue to grow.    The wireless content services market is new and may not grow or be sustainable. In the event that we consummate a Transaction
that involves relaunching the Pronto service and/or exploiting its core technologies, it is possible that our services may never achieve market acceptance or be well received by consumers. We had a limited number of customers and we have not
provided our services on the scale that was anticipated. We incur operating expenses based largely on anticipated revenue trends that are difficult to predict given the recent emergence of the premium wireless content and concierge services market.
If general wireless product usage does not continue to increase, or the market for premium wireless content service does not develop, or develops more slowly than we expect, demand for our Pronto services may be limited and our business, financial
condition and operating results could be harmed.



We will invest a significant amount of our resources to develop and support our products and services and may not realize any return on this investment.    In the event that we consummate a
Transaction that involves relaunching the Pronto service and/or exploiting its core technologies, we plan to continue to invest a significant amount of our resources to develop and support our Pronto products and services. Accordingly, our success
will depend on our ability to generate sufficient revenue from sales of these products and services to offset the expenses associated with developing and supporting them.



There are many risks that we would face in doing so.    In particular, we would need to
reduce the costs and improve our voice recognition system to reduce the number of calls that fail over to the live operator for basic requests of news, sports and weather. Additionally, the rapidly changing technological environment in which we
operate can require the frequent introduction of new products, resulting in short product lifecycles. Accordingly, if our products and services do not quickly achieve market acceptance, they may become obsolete before we have generated enough
revenue from their sales to realize a sufficient return on our investment.



We expect to incur significant expenses and losses throughout 2003.    If we incur substantial development and operating expenses that we are not able to recover, and we are not
able to compensate for such expenses, our business, financial condition and results of operations would be materially adversely affected. Although our current cash and cash equivalents would be sufficient to meet our anticipated cash needs for
working capital and capital expenditures into the second quarter of 2004, we have determined that we will not continue to market Pronto at this time and will instead focus on effecting a Transaction. If we effect a Transaction, relaunching the
Pronto platform would require use of our existing cash resources and would require additional financing.



If we fail to enhance Pronto to meet changing customer requirements and technological advances, our operations would be materially
adversely affected.    The timely development of new or enhanced products and services is a complex and uncertain process and in the event that we



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consummate a Transaction that involves relaunching the Pronto service and/or exploiting its core technologies, we might not have sufficient
resources to successfully and accurately anticipate technological and market trends, or to successfully manage long development cycles. We might also experience design, marketing and other difficulties that could delay or prevent our development,
introduction or marketing of our Pronto services, as well as new products and enhancements. We might also be required to collaborate with third parties to develop our products and might not be able to do so on a timely and cost-effective basis, if
at all. If we are not able to develop new products or enhancements to existing products on a timely and cost-effective basis, or if our new products or enhancements fail to achieve market acceptance, our business, financial condition and results of
operations would be materially adversely affected.



The Pronto business model relies on third-party software and technology, the loss of which would force us to use inferior substitute technology or to again cease offering our products.    The Pronto
business model relies on third party intellectual property licenses. In the event that we consummate a Transaction that involves relaunching the Pronto service and/or exploiting its core technologies we would again need to use some third-party
software that may not be available on commercially reasonable terms, or at all. We would lose our ability to use this software if the agreements are terminated or if the rights of our suppliers to license it were challenged by individuals or
companies which asserted ownership of these rights. The loss of, or inability to maintain or obtain, any required intellectual property would require us to use substitute technology, which would be more expensive or of lower quality or performance,
or would force us to develop the technology ourselves or again cease offering our products. Any significant interruption in the supply of any licensed software would cause a decline in product sales, unless and until we were able to replace the
functionality provided by such licensed software. We would also depend on these third parties to deliver and support reliable products, enhance their current products, develop new products on a timely and cost-effective basis, and respond to
emerging industry standards and other technological changes. The failure of these third parties to meet these criteria would materially harm our business.



We depend on third parties for content, and the loss of access to this content could harm our
business.    We do not create our own content. Rather, we acquire rights to information from numerous third-party content providers. In the event that we consummate a Transaction that involves relaunching the
Pronto service and/or exploiting its core technologies, our future success would be dependent upon our ability to re-establish relationships with these content providers and enter into new relationships with other content providers. If we fail to
enter into and maintain satisfactory arrangements with content providers, our business would suffer.



We may be subject to liability for our use or distribution of information that we receive from third
parties.    In the event that we consummate a Transaction that involves relaunching the Pronto service and/or exploiting its core technologies, we would obtain content and commerce information from third parties.
When we integrate and distribute this information through Pronto, we might be liable for the data that is contained in that content. This could subject us to legal liability for such things as defamation, negligence, intellectual property
infringement and product or service liability. Many content agreements do not provide indemnity protection. Even if a given contract does contain indemnity provisions, these provisions may not cover a particular claim. Our insurance coverages might
not be adequate to cover fully the amounts or types of claims that might be made against us. Any liability that we would incur as a result of content we would receive from third parties would adversely affect our financial results. We also would
gather personal information from users in order to provide personalized services. Gathering and processing this personal information might subject us to legal liability for negligence, defamation, invasion of privacy, product or service liability.
We might also be subject to laws and regulations, both in the United States and abroad, regarding user privacy.



We rely heavily on our proprietary technology, but we may be unable to adequately protect or enforce our intellectual property
rights.    In the event that we consummate a Transaction that involves relaunching the Pronto service and/or exploiting its core technologies, our success would depend significantly upon our proprietary technology. To
protect our proprietary rights, we would rely on a combination of copyright and trademark laws, trade secrets, confidentiality agreements with employees and third parties and protective contractual provisions. Despite any efforts we would make to
protect our proprietary rights, unauthorized parties might copy aspects of our products or services or obtain and use information that we would regard as proprietary. In addition, others could possibly independently develop substantially equivalent
intellectual property. If we do not effectively protect our intellectual property our business could suffer. If we cannot adequately protect



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our intellectual property, our competitive position may suffer. Companies in the software industry have frequently resorted to litigation
regarding intellectual property rights. We might have to litigate to enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of other parties proprietary rights. Similarly, we would not be
able to ensure that our employees will comply with the confidentiality agreements that they will have entered into with us, or they will not misappropriate our technology for the benefit of a third party. If a third party or any employee breaches
the confidentiality provisions we would have in our contracts or misappropriates or infringes on our intellectual property, we might not have adequate remedies. In addition, third parties might independently discover or invent competing technologies
or reverse engineer any trade secrets, software or other technology we might have.



Our products might infringe the intellectual property rights of others, and resulting claims against us could be costly and require us to enter into disadvantageous license or royalty
arrangements.    The software industry is characterized by the existence of a large number of patents and frequent litigation based on allegations of patent infringement and the violation of intellectual property rights.
Although we would attempt to avoid infringing known proprietary rights of third parties, we might be subject to legal proceedings and claims for alleged infringement by us or as licensees of third-party proprietary rights, such as patents, trade
secrets, trademarks or copyrights, from time to time in the ordinary course of business. Any claims of infringement of other parties proprietary right would be time-consuming, result in costly litigation, divert managements attention,
cause product or service release delays, require us to redesign our products or services or require us to enter into royalty or licensing agreements. If a successful claim of infringement were made against us and we could not develop non-infringing
technology or license the infringed or similar technology on a timely and cost-effective basis, our business could suffer. Furthermore, former employers of our employees might assert that these employees have improperly disclosed confidential or
proprietary information to us. Any of these results would harm our business. We also might be increasingly subject to infringement claims as the number of, and number of features of, our products grow.



Our failure to respond to rapid change in the market for
voice interface services could cause us to lose revenue and harm our business.    The voice interface services industry is relatively new and rapidly evolving. In the event that we consummate a Transaction that involves
relaunching the Pronto service and/or exploiting its core technologies, our success would depend substantially upon our ability to enhance our existing Pronto product release and to develop and introduce, on a timely and cost-effective basis, new
versions with features that meet changing end-user requirements and incorporate technological advancements. If we are unable to develop new enhanced functionalities or technologies to adapt to these changes, or if we cannot offset a decline in
revenue from existing products with revenues from new products, our business would suffer. Commercial acceptance of our products and technologies would depend on, among other things, the ability of our products and technologies to meet and adapt to
the needs of our target markets, and the performance and price of our products and our competitors products.



If our products contain defects, we could be exposed to significant product liability claims and damage to our
reputation.    Because our products were partially designed to provide critical communications services, we might be subject to significant liability claims. Our agreements with customers typically contained provisions
intended to limit our exposure to certain liability claims, but such agreements might not preclude all potential claims resulting from a defect in one or more of our products. Although we would maintain what we believed to be adequate product
liability insurance covering certain damages arising from implementation and use of our products, our insurance might not be sufficient to cover us against all possible liability. Liability claims might also require us to spend significant time and
money in litigation or to pay significant damages. As a result, any such claims, whether or not successful, could seriously damage our reputation and have a material adverse effect on our business, financial condition and results of operations.



If we fail to comply with regulations and
evolving industry standards, sales of our existing and future products could be adversely affected.    In the event that we consummate a Transaction that involves relaunching the Pronto service and/or exploiting its core
technologies, we anticipate that we would not be subject to direct regulation by the Federal Communications Commission or any other governmental agency, other than laws and regulations applicable to businesses in general. However, in the future, we
might be subject to regulation by the FCC or another regulatory agency. In addition, the wireless carriers who would supply us airtime are subject to regulation by the FCC and regulations that affect them might increase



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our costs or reduce our ability to continue selling and supporting our services. While we believe that the current Pronto products comply
with all current governmental laws, regulations and standards, we cannot assure you that we will be able to continue to design our products to comply with all necessary requirements in the future. In addition, we might be required to customize our
products to comply with various industry or proprietary standards promoted by our competitors. Our key competitors may establish proprietary standards, which they do not make available to us. As a result, we may not be able to achieve
interoperability with their products.



We
might otherwise deem it necessary or advisable to modify our products to address actual or anticipated changes in the regulatory environment.    Failure of our products to comply, or delays in compliance, with the various
existing, anticipated, and evolving industry regulations and standards could adversely affect sales of our existing and future products. Moreover, the enactment of new laws or regulations, changes in the interpretation of existing laws or
regulations or a reversal of the trend toward deregulation in the telecommunications industry, could have a material adverse effect on our customers, and thereby materially adversely affect our business, financial condition and operating results.



Our business will suffer if we are unable
to hire, retain and motivate highly qualified employees.    Our future success would depend on our ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, sales and
marketing and business development personnel. Our services and the industries to which we would provide our services are relatively new. As a result, qualified technical personnel with experience relevant to our business are scarce and competition
to recruit them is intense. If we fail to successfully attract and retain a sufficient number of highly qualified technical, managerial, sales and marketing, business development and administrative personnel, our business could suffer.



The Company expects the following risks and uncertainties to exist
regardless of whether or not a Transaction is consummated.



We do not plan to pay any dividends.    Investors who need income from their holdings should not purchase our shares. We intend to retain any future earnings to fund the operation and expansion of
our business. We do not anticipate paying cash dividends on our shares in the future. As a result, our common stock is not a good investment for people who need income from their holdings.



Our stock price may be volatile due to factors outside of our
control.    Since our initial public offering on April 6, 2000, our stock price has been extremely volatile. During that time, the stock market in general, and The Nasdaq National and SmallCap Markets and the
securities of technology companies in particular, has experienced extreme price and trading volume fluctuations. These fluctuations have often been unrelated or disproportionate to the operating performance of individual companies. The following
factors, among others, could cause our stock price to fluctuate: the amount of our limited cash resources, an announcement of our intention to consummate a Transaction with a suitable strategic investment partner or acquisition candidate, actual or
anticipated variations in operating results; announcements of operating results and business conditions by our customers and suppliers; announcements by our competitors relating to new customers, technological innovation or new services; economic
developments in our industry as a whole; and general market conditions. These broad market fluctuations may materially adversely affect our stock price, regardless of our operating results. Our stock price may fluctuate due to variations in our
operating results.



Certain provisions of
our charter documents provide for limited personal liability of members of our board of directors.    Our certificate of incorporation and by-laws contain certain provisions which reduce the potential liability of members
of our board of directors for certain monetary damages and provide for indemnity of other persons. We are unaware of any pending or threatened litigation against us or our directors that would result in any liability for which any of our directors
would seek indemnification or other protection.



We have implemented anti-takeover provisions that could make it more difficult to acquire us.    Our certificate of incorporation, our bylaws and Delaware law contain provisions that could
make it more difficult for a third party to acquire us without the consent of our board of directors, even if doing so would be beneficial to our stockholders. For example, a takeover bid otherwise favored by a majority of our stockholders might be
rejected by our board of directors. During 2001, we changed our charter to include provisions classifying our board of directors into three groups so that the directors in each group will serve staggered three-year terms, which would make it
difficult for a potential acquirer to gain control of our board



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of directors. We are also afforded the protections of Section 203 of the Delaware General Corporation Law, which provides certain
restrictions against business combinations with interested stockholders.



Our common stock may be subject to delisting from the Nasdaq Small Cap market.    Our common stock is currently trading on the Nasdaq SmallCap Market (Nasdaq
SmallCap). By letter dated March 18, 2003 from Nasdaq, we have been made aware that we currently do not meet the minimum $1 per share requirement for continued listing on the Nasdaq SmallCap Market. In accordance with Marketplace Rule
4310(c)(8)(D), we have been provided with 180 days, until September 15, 2003, to regain compliance. If at anytime before September 15, 2003, the bid price of our common stock closes at $1.00 per share or more for a minimum of 10 consecutive trading
days, we will be provided with notification that we are in compliance with the rule for continued listing. If compliance cannot be demonstrated by September 15, 2003, we would need to meet the initial listing criteria for the SmallCap Market under
Marketplace Rule 4310(c)(2)(A), whereby we would be granted an additional 180 day grace period to regain compliance. For continued listing, and in addition to the $1 minimum bid price, we must have (i) $2.5 million in stockholders equity or$35 million market value of listed securities or$500,000 net income from continuing operations; (ii) 500,000 publicly held shares; (iii) $1 million market value of publicly held shares; (iv) at least 300 shareholders; and (v) at least 2
market makers. Furthermore, if we are able to regain compliance with the listing standards for the Nasdaq National Market in accordance with Nasdaq Marketplace Rule 4450(a)(2), we would again be eligible for listing on the Nasdaq National Market;
however there can be no assurance of our ability to meet the standards of the Nasdaq National market and regain listing. If we are unable to demonstrate compliance with the Nasdaq SmallCap criteria for maintaining our listing, our common stock could
be subject to delisting. If our common stock were to be delisted from trading on the Nasdaq SmallCap and were neither re-listed thereon nor listed for trading on another recognized securities exchange, trading, if any, in the common stock may
continue to be conducted on the OTC Bulletin Board or in the non-Nasdaq over-the-counter market. Delisting would result in limited release of the market price of the common stock and limited news coverage of our company and services and could
restrict investors interest in our common stock and materially adversely affect the trading market and prices for our common stock and our ability to issue additional securities or to secure additional financing.



Information that we may provide to investors from time
to time is accurate only as of the date we disseminate it, and we undertake no obligation to update the information.    From time to time, we may publicly disseminate forward-looking information or guidance in compliance
with Regulation FD promulgated by the Securities and Exchange Commission. This information or guidance represents our outlook only as of the date that we disseminated it, and we undertake no obligation to provide updates to this information or
guidance in our filings with the Securities and Exchange Commission or otherwise.



If our cash balances, revenue and operating results fall below investors expectations, our stock price could significantly decline.    Our quarterly operating
results have fluctuated in the past and are likely to fluctuate significantly in the future due to a variety of factors, many of which are outside of our control. If our quarterly or annual operating results do not meet the expectations of investors
and securities analysts, the trading price of our common stock could significantly decline. As a result of any of these factors, our quarterly or annual operating results could fall below the expectations of public market analysts and investors. In
this event, the price of our common stock could significantly decline.



Item 3.Quantitative and Qualitative Disclosures About Market Risk



We have limited exposure to financial market risks, including changes in interest rates. We do not currently transact significant business
in foreign currencies and, accordingly, are not subject to exposure from adverse movements in foreign currency exchange rates. Our exposure to market risks for changes in interest rates relates primarily to corporate debt securities. We place our
investments with high credit quality issuers and, by policy, limit the amount of the credit exposure to any one issuer. Our general policy is to limit the risk of principal loss and ensure the safety of invested funds by limiting market and credit
risk. All highly liquid investments with a maturity of less than three months at the date of purchase are considered to be cash equivalents.



As of March 31, 2003 we had no debt outstanding. We currently have no plans to incur debt during the next twelve months. As such, changes
in interest rates will only impact interest income. The impact of potential changes in hypothetical interest rates on budgeted



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interest income in 2003 has been estimated at approximately $0.1 million or approximately 1% of budgeted net loss for each 1% change in
interest rates.



Item 4.Controls and Procedures



In designing and evaluating the Companys disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 of the Securities
Exchange Act of 1934, as amended (the Exchange Act)), management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired control objectives,
as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.



Within the 90 days prior to the date of this report, the Company carried out an evaluation, under the
supervision and with the participation of the Companys management, including the Companys interim Chief Executive Officer and Chief Financial Officer (its principal executive officer and principal financial officer), of the effectiveness
of the design and operation of the Companys disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the interim Chief Executive Officer and Chief Financial Officer concluded that the Companys
disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic Securities and Exchange Commission filings. There were no significant changes in the Companys internal
controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.



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Part II

Other Information



Item 6.Exhibits and Reports on Form 8-K



| | (a) |  | Exhibits
| | --- |  | --------



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



Exhibit 99.2 Certification Pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



| | (b) |  | Reports on Form 8-K
| | --- |  | -------------------



On February 13, 2003, i3 Mobile, Inc. (the Company) issued a press release announcing its earnings for the three months ended
and year ended December 31, 2002.



On March 25,
2003, i3 Mobile, Inc. (the Company) issued a press release announcing that it had ceased operations of its Pronto service and taken other cost saving measures, and that it had begun discussions for a strategic merger with a potential
transaction partner. The Company also announced that John A. Lack, the Companys President and Chief Executive Officer, had left the Company to pursue other interests and that J. William Grimes, Chairman of the Board, would assume the
additional responsibilities of President and Chief Executive Officer on an interim basis.



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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.



Dated:  May 14, 2003



i3 MOBILE, INC.By:

/s/    Edward J. FletcherEdward J. Fletcher Chief Financial Officer




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CERTIFICATION



I, J. William Grimes, Chief
Executive Officer of i3 Mobile, Inc., certify that:



1.   I have reviewed this quarterly report on Form 10-Q of i3 Mobile, Inc.;



2.   Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;



3.   Based on my knowledge,
the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this quarterly report;



4.   The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:



a)   Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being prepared;



b)   Evaluated the effectiveness of the registrants disclosure controls and procedures as of a date
within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and



c)   Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the Evaluation Date;



5.   The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent function):



a)   All significant deficiencies in the design or operation of internal controls which could adversely
affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and



b)   Any fraud, whether or not
material, that involves management or other employees who have a significant role in the registrants internal controls; and



6.   The registrants other certifying officers and I have indicated in this quarterly report whether
or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.



Date:  May 14,
2003



|                                         
|-----------------------------------------
|/s/    J. William Grimes                 
|J. William Grimes Chief Executive Officer





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##### Table of Contents



CERTIFICATION



I, Edward J. Fletcher,
Chief Financial Officer of i3 Mobile, Inc., certify that:



1.    I have reviewed this quarterly report on Form 10-Q of i3 Mobile, Inc.;



2.   Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;



3.   Based on my knowledge,
the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this quarterly report;



4.   The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:



a)   Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being prepared;



b)   Evaluated the effectiveness of the registrants disclosure controls and procedures as of a date
within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and



c)   Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the Evaluation Date;



5.   The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent function):



a)   All significant deficiencies in the design or operation of internal controls which could adversely
affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and



b)  Any fraud, whether or not
material, that involves management or other employees who have a significant role in the registrants internal controls; and



6.   The registrants other certifying officers and I have indicated in this quarterly report whether
or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.



Date:  May 14, 2003



|                                          
|------------------------------------------
|/s/    Edward J. Fletcher                 
|Edward J. Fletcher Chief Financial Officer





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