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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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(Mark One)



|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 1-13806



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iDINE REWARDS NETWORK INC.

(Exact name of registrant as specified in its charter)



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|DELAWARE                                                       |  | 84-6028875                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State of other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                              
|11900 Biscayne Boulevard, North Miami,                         |  | Florida 33181                       
|(Address of principal executive offices)                       |  | (zip code)                          



305-892-3343

(Registrants telephone number, including area code)



---



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



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



As of May 7, 2003, there were 22,411,408 shares of the
Registrants $.02 par value common stock outstanding.



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I N D E X



iDINE REWARDS
NETWORK INC. AND SUBSIDIARIES



|          |  |                                                                                              |  | PAGE NO.
|--------- |  | -------------------------------------------------------------------------------------------- |  | --------
|         
|PART I.   |  | FINANCIAL INFORMATION                                                                        |  |         
|         
|Item 1.   |  | Financial Statements:                                                                        |  |         
|         
|          |  | Consolidated Balance SheetsMarch 31, 2003 (unaudited) and December 31, 2002                 |  | 3       
|         
|          |  | Consolidated Statements of OperationsThree months ended March 31, 2003 and 2002 (unaudited) |  | 4       
|         
|          |  | Consolidated Statements of Cash FlowsThree months ended March 31, 2003 and 2002 (unaudited) |  | 5       
|         
|          |  | Notes to Unaudited Consolidated Financial Statements                                         |  | 6-12    
|         
|Item 2.   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations        |  | 13-20   
|         
|Item 3.   |  | Quantitative and Qualitative Disclosure About Market Risk                                    |  | 20      
|         
|Item 4.   |  | Disclosure Controls and Procedures                                                           |  | 21      
|         
|PART II.  |  | OTHER INFORMATION                                                                            |  | 21-22   
|SIGNATURE |  | 22                                                                                          



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iDINE REWARDS NETWORK INC. AND SUBSIDIARIES



Consolidated Balance Sheets

(in thousands, except per share data)



|                                                                                                                                                                                                        |  | March 31, 2003 |         |   | December 31, 2002* |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ------------------ | -
|                                                                                                                                                                                                        |  | (unaudited)    |         |   |                    |  
|Assets                                                                                                                                                                                                  |  |                |         |   |                    |  
|Current assets:                                                                                                                                                                                         |  |                |         |   |                    |  
|Cash and cash equivalents                                                                                                                                                                               |  | $              | 10,366  |   |                    | $
|Short term investments                                                                                                                                                                                  |  |                | 1,702   |   |                    |  
|Accounts receivable, net                                                                                                                                                                                |  |                | 7,179   |   |                    |  
|Rights to receive, net                                                                                                                                                                                  |  |                | 108,400 |   |                    |  
|Deferred income taxes                                                                                                                                                                                   |  |                | 5,537   |   |                    |  
|Prepaid expenses and other current assets                                                                                                                                                               |  |                | 1,890   |   |                    |  
|                                                                                                                                                                                                        |  |                |         |   |                    |  
|Total current assets                                                                                                                                                                                    |  |                | 135,074 |   |                    |  
|Property and equipment, net                                                                                                                                                                             |  |                | 7,889   |   |                    |  
|Other assets                                                                                                                                                                                            |  |                | 332     |   |                    |  
|Excess of cost over net assets acquired                                                                                                                                                                 |  |                | 9,671   |   |                    |  
|                                                                                                                                                                                                        |  |                |         |   |                    |  
|Total assets                                                                                                                                                                                            |  | $              | 152,966 |   |                    | $
|                                                                                                                                                                                                        |  |                |         |   |                    |  
|Liabilities and Shareholders Equity                                                                                                                                                                    |  |                |         |   |                    |  
|Current liabilities:                                                                                                                                                                                    |  |                |         |   |                    |  
|Secured non-recourse revolving debt                                                                                                                                                                     |  |                | 60,000  |   |                    |  
|Accounts payableRights to receive                                                                                                                                                                      |  |                | 13,496  |   |                    |  
|Accounts payabletrade                                                                                                                                                                                  |  |                | 14,589  |   |                    |  
|Accrued expenses and other                                                                                                                                                                              |  |                | 3,763   |   |                    |  
|Deferred membership fee income                                                                                                                                                                          |  |                | 2,143   |   |                    |  
|Deferred income taxes                                                                                                                                                                                   |  |                | 1,160   |   |                    |  
|                                                                                                                                                                                                        |  |                |         |   |                    |  
|Total current liabilities                                                                                                                                                                               |  |                | 95,151  |   |                    |  
|Other long-term liabilities                                                                                                                                                                             |  |                | 346     |   |                    |  
|                                                                                                                                                                                                        |  |                |         |   |                    |  
|Total liabilities                                                                                                                                                                                       |  |                | 95,497  |   |                    |  
|                                                                                                                                                                                                        |  |                |         |   |                    |  
|Shareholders equity :                                                                                                                                                                                  |  |                |         |   |                    |  
|Preferred stock, par value $0.10 per share (1,000 shares authorized; none issued and
outstanding)                                                                                                       |  |                |        |   |                    |  
|Preferred stockSeries A, senior convertible redeemable, par value $0.10 per share;
authorized 10,000 shares; issued 0 and 1,330 shares, respectively, and outstanding 0 and 1,218 shares, respectively |  |                |        |   |                    |  
|Common stock, par value $0.02 per share; authorized 70,000 shares; issued 22,327 and
20,530 shares, respectively, and outstanding 22,045 and 20,381 shares, respectively                                |  |                | 447     |   |                    |  
|Additional paid-in capital                                                                                                                                                                              |  |                | 50,351  |   |                    |  
|Cumulative other comprehensive income                                                                                                                                                                   |  |                | 2       |   |                    |  
|Retained earnings                                                                                                                                                                                       |  |                | 8,879   |   |                    |  
|Treasury stock, at cost (282 and 260 shares, respectively)                                                                                                                                              |  |                | (2,210  | ) |                    |  
|                                                                                                                                                                                                        |  |                |         |   |                    |  
|Total shareholders equity                                                                                                                                                                              |  |                | 57,469  |   |                    |  
|                                                                                                                                                                                                        |  |                |         |   |                    |  
|Total liabilities and shareholders equity                                                                                                                                                              |  | $              | 152,966 |   |                    | $
|                                                                                                                                                                                                        |  |                |         |   |                    |  

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|* |  | The balance sheet at December 31, 2002 is derived from the registrants audited consolidated financial statements.
|- |  | ------------------------------------------------------------------------------------------------------------------



See accompanying notes to unaudited consolidated financial
statements.



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iDINE REWARDS
NETWORK INC. AND SUBSIDIARIES



Consolidated Statements of Operations

Three months ended March 31, 2003 and 2002

(unaudited)

(in
thousands, except earnings per share)



|                                                                            |  | 2003 |        |   | 2002 |  
|--------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | -
|Operating revenue:                                                          |  |      |        |   |      |  
|Gross dining sales                                                          |  | $    | 82,595 |   |      | $
|Cost of sales                                                               |  |      | 44,237 |   |      |  
|Member rewards and savings                                                  |  |      | 16,867 |   |      |  
|                                                                            |  |      |        |   |      |  
|Net revenue from dining sales                                               |  |      | 21,491 |   |      |  
|Membership and renewal fee income                                           |  |      | 1,346  |   |      |  
|Other operating revenue                                                     |  |      | 41     |   |      |  
|                                                                            |  |      |        |   |      |  
|Total operating revenues                                                    |  |      | 22,878 |   |      |  
|                                                                            |  |      |        |   |      |  
|Operating expenses:                                                         |  |      |        |   |      |  
|General and administrative                                                  |  |      | 4,871  |   |      |  
|Salaries and benefits                                                       |  |      | 4,833  |   |      |  
|Sales commission and expense                                                |  |      | 3,903  |   |      |  
|Printing and postage                                                        |  |      | 1,777  |   |      |  
|Member and merchant marketing expenses                                      |  |      | 1,625  |   |      |  
|                                                                            |  |      |        |   |      |  
|Total operating expenses                                                    |  |      | 17,009 |   |      |  
|                                                                            |  |      |        |   |      |  
|Operating income                                                            |  |      | 5,869  |   |      |  
|Other income (expense):                                                     |  |      |        |   |      |  
|Interest and other investment gain (loss)                                   |  |      | 33     |   |      |  
|Interest expense and financing cost                                         |  |      | (439   | ) |      |  
|                                                                            |  |      |        |   |      |  
|Income before income taxes                                                  |  |      | 5,463  |   |      |  
|Income tax expense (benefit)                                                |  |      | 2,074  |   |      |  
|                                                                            |  |      |        |   |      |  
|Net income                                                                  |  | $    | 3,389  |   |      | $
|                                                                            |  |      |        |   |      |  
|Net income per share of common stock:                                       |  |      |        |   |      |  
|Basic                                                                       |  | $    | 0.16   |   |      | $
|                                                                            |  |      |        |   |      |  
|Diluted                                                                     |  | $    | 0.14   |   |      | $
|                                                                            |  |      |        |   |      |  
|Weighted average number of common and common equivalent shares
outstanding: |  |      |        |   |      |  
|Basic                                                                       |  |      | 21,597 |   |      |  
|                                                                            |  |      |        |   |      |  
|Diluted                                                                     |  |      | 23,884 |   |      |  
|                                                                            |  |      |        |   |      |  



See
accompanying notes to unaudited consolidated financial statements.



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iDINE REWARDS
NETWORK INC. AND SUBSIDIARIES

Three months ended March 31, 2003 and 2002



Consolidated Statements of Cash Flows

(unaudited)

(in thousands)



|                                                                                  |  | 2003 |        |   | 2002 |  
|--------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | -
|Cash flows from operating activities:                                             |  |      |        |   |      |  
|Net income                                                                        |  | $    | 3,389  |   |      | $
|Adjustments to reconcile net income to net cash provided by operating
activities: |  |      |        |   |      |  
|Depreciation and amortization                                                     |  |      | 1,099  |   |      |  
|Amortization of deferred financing cost                                           |  |      | 63     |   |      |  
|Deferred income taxes                                                             |  |      | 2,074  |   |      |  
|Provision for losses on Rights to receive                                         |  |      | 4,215  |   |      |  
|Changes in assets and liabilities:                                                |  |      |        |   |      |  
|Accounts receivable                                                               |  |      | (1,001 | ) |      |  
|Rights to receive                                                                 |  |      | (4,166 | ) |      |  
|Prepaid expenses and other current assets                                         |  |      | (738   | ) |      |  
|Other assets                                                                      |  |      | (12    | ) |      |  
|Accounts payable                                                                  |  |      | 1,193  |   |      |  
|Income taxes                                                                      |  |      | (1,214 | ) |      |  
|Accrued expenses and other                                                        |  |      | (2,286 | ) |      |  
|Deferred membership fee income                                                    |  |      | (73    | ) |      |  
|                                                                                  |  |      |        |   |      |  
|Net cash provided by operating activities                                         |  |      | 2,543  |   |      |  
|                                                                                  |  |      |        |   |      |  
|Cash flow from investing activities:                                              |  |      |        |   |      |  
|Additions to property and equipment                                               |  |      | (1,175 | ) |      |  
|Increase in short term investments                                                |  |      | (519   | ) |      |  
|Increase in restricted deposits and investments                                   |  |      | 140    |   |      |  
|                                                                                  |  |      |        |   |      |  
|Net cash used in investing activities                                             |  |      | (1,554 | ) |      |  
|                                                                                  |  |      |        |   |      |  
|Cash flows from financing activities:                                             |  |      |        |   |      |  
|Dividends paid                                                                    |  |      | (15    | ) |      |  
|Conversion of warrants and options for common stock, net                          |  |      | 1,259  |   |      |  
|Conversion of preferred stock                                                     |  |      | (133   | ) |      |  
|                                                                                  |  |      |        |   |      |  
|Net cash provided by (used in) financing activities                               |  |      | 1,111  |   |      |  
|                                                                                  |  |      |        |   |      |  
|Net increase (decrease) in cash                                                   |  |      | 2,100  |   |      |  
|Cash and cash equivalents:                                                        |  |      |        |   |      |  
|Beginning of the period                                                           |  |      | 8,266  |   |      |  
|                                                                                  |  |      |        |   |      |  
|End of the period                                                                 |  | $    | 10,366 |   |      | $
|                                                                                  |  |      |        |   |      |  
|Supplemental disclosures of cash flow information:                                |  |      |        |   |      |  
|Cash paid during the period for:                                                  |  |      |        |   |      |  
|Interest                                                                          |  |      | 317    |   |      |  
|                                                                                  |  |      |        |   |      |  
|Income taxes                                                                      |  |      | 1,001  |   |      |  
|                                                                                  |  |      |        |   |      |  
|Dividends                                                                         |  |      | 55     |   |      |  
|                                                                                  |  |      |        |   |      |  



See
accompanying notes to unaudited consolidated financial statements.



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iDINE REWARDS
NETWORK INC. AND SUBSIDIARIES



Notes to Unaudited Consolidated Financial Statements

(amounts in thousands, except per share
data)



|(1) |  | Basis of Presentation
|--- |  | ---------------------



These unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments which are of a normal recurring nature necessary to present fairly the financial position, results of operations and cash flows as of March 31, 2003 and for the three month periods ended March 31, 2003 and
2002 have been made. Certain prior period amounts have been reclassified to conform with the current periods presentation. Operating results for the three months ended March 31, 2003 and 2002 are not necessarily indicative of the operating
results for the full year. For further information, refer to the consolidated financial statements and footnotes thereto included in the iDine Rewards Network Inc. (formerly Transmedia Network Inc.) and its subsidiaries Form 10-K for the year ended
December 31, 2002 filed with the Securities and Exchange Commission (SEC) on March 31, 2003, and all other iDine Rewards Network Inc. filings filed with the SEC through the date of this report. The balance sheet as of December 31, 2002
was derived from the registrants audited consolidated financial statements.



Cost of sales is composed of the cost of Rights to receive sold, related transaction processing fees and provision for Rights to receive losses.



|(2) |  | Employment Agreements
|--- |  | ---------------------



On September 26, 2002, the Board of Directors appointed fellow board member George S. Wiedemann as President and Chief Executive Officer.
Mr. Wiedemann, who has been on the Companys Board since 1998, will also continue to serve as a director. In addition to a base salary, Mr. Wiedemanns employment agreement provides (i) for an annual bonus opportunity up to 100% of his
base salary (ii) a lump sum severance payment of eighteen months base salary plus the greater of his guaranteed bonus for that year or the pro rata portion of the full bonus potential for that year plus continuation of certain benefits if there is a
change in control of the Company (as defined) and his employment terminates (iii) an option to purchase 1,000,000 shares, granted on February 5, 2003, of the Companys common stock with an exercise price of $9.58 and vesting equally over 4
years, with the first 25% vesting on September 30, 2003 (iv) a non-compete covenant in event he voluntarily or involuntarily leaves the Companys employment, and (v) severance arrangements if terminated for any reason other than Cause.



The options issued to Mr. Wiedemann to purchase
the 1,000,000 shares of the Companys common stock was divided as follows: 250,000 shares of common stock within the Companys Long Term Incentive Plan (the Plan) and 750,000 shares of common stock outside the Plan.



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iDINE REWARDS NETWORK INC. AND SUBSIDIARIES



Notes to Unaudited Consolidated Financial Statements

(amounts in thousands, except per share data)



Also, effective January 16, 2003, Richard Carolan, the Executive Vice President of Restaurant Sales resigned. As part of his severance
agreement, Mr. Carolan will receive payments of $282 as well as continued health care coverage for a defined period. Also, as part of his original employment agreement, all unvested options issued to Mr. Carolan vest immediately if termination
occurs for any reason other than cause. Mr. Carolan had 225,000 options with a strike price of $7.49 outstanding at his severance date. On April 9, 2003, Mr. Carolan excercised options to purchase 168,750 shares of the Companys common stock.



|(3) |  | Certain Relationships and Related Transactions
|--- |  | ----------------------------------------------



On March 31, 2003, the Company entered into an office lease agreement with Equity Office Properties Management Corp., the agent for Two
North Riverside Plaza Joint Venture. The lease provided for up to 10,000 square feet of office space at 2 North Riverside Plaza, Chicago, Illinois. The term of the lease is from April 1, 2003 through March 30, 2009 and the future minimum lease
obligation for this property is as follows:



|Year ended December 31,      |  | Amount
|---------------------------- |  | ------
|2003                         |  | $     
|2004                         |  |       
|2005                         |  |       
|2006                         |  |       
|Thereafter                   |  |       
|                             |  |       
|Total minimum lease payments |  | $     
|                             |  |       



This
office space is currently undergoing improvements. Two North Riverside Plaza Joint Venture is a limited partnership comprised of trusts established for the benefit of the family of Samuel Zell, iDines Chairman of the Board of Directors.



In addition to the office lease, the Company
signed a Letter of Agreement with Equity Group Investments, LLC. (EGI) for administrative services for the period April 1, 2003 through December 31, 2003 or until the improvements are completed on the office space referenced in the lease
agreement mentioned above. The administrative services consist of rent for temporary office space, utilities, building and mailroom services and basic office supplies and will be in effect until iDine takes possession of the property mentioned
above. The maximum annual cost for the administrative services is $138, and the monthly cost will be pro rated based on the percentage of actual occupancy. Samuel Zell serves as Chairman of EGI.



|(4) |  | Securitization of Rights to Receive
|--- |  | -----------------------------------



The Companys $80 million revolving securitization of its combined Rights to receive is privately placed through two asset backed
commercial paper conduits. Borrowing capacity under the facility is recalculated weekly based on a formula driven advance rate applied to the current balance of Rights to receive that is eligible to be securitized. The advance rate is determined
based on recent sales trends and months on hand of Rights to receive. Outstanding borrowings under the facility at March 31, 2003 were $60,000. Based on the level of eligible Rights to receive at that date, the Company had $20,000 available for
borrowing, the full amount remaining under the securitization facility.



The conduit requires that a liquidity facility be provided by an A1/P1 rated financial institution in the amount equal to 102% of the securitization amount. This liquidity facility must be renewed annually. JPMorgan Chase
and BMO Nesbitt Burns Corp both act as 50 percent co-purchasers on the $80 million facility. The credit agreement was renewed on May 14, 2003 for a new 364-day renewable term and the Company paid fees of $500 which will be amortized over the
renewable term. JPMorgan Chase and BMO Nesbitt Burns Corp will both continue to act as 50 percent co-purchasers on the facility, and the facility limit was increased to $100 million. In addition, JPMorgan Chase has added to the terms that if there
are any change in accounting standards or issuance of pronouncements released by any accounting body, or any change in interpretation or application of existing or future accounting standards that in the judgement of JPMorgan Chase causes or
requires the consolidation of assets and liabilities of its conduit with the assets and liabilities of JPMorgan Chase, the program fee rate will increase from 0.85% to no more than 1.50% of the facility limit. There were no other material changes to
the terms of the facility.



The facility provides



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iDINE REWARDS NETWORK INC. AND SUBSIDIARIES



Notes to Unaudited Consolidated Financial Statements

(amounts in thousands, except per share data)



various restrictive covenants regarding collateral eligibility, concentration limitations and also requires the Company to maintain net worth
of at least $24,000. At March 31, 2003, the Company was in compliance with these covenants.



The interest rate applicable to the facility is the rate equivalent to the rate (or if more than one rate, the weighted average of the rates) at which commercial paper (CP) having a term
equal to the related CP tranche period that may be sold by any placement agent or commercial paper dealer selected by the conduit on the first day of such CP tranche period, plus the amount of any placement agent or commercial paper dealer fees and
commissions incurred or to be incurred in connection with such sale. For the three-month periods ended March 31, 2003, the effective interest rate for the facility was 2.9% per annum, respectively.



|(5) |  | Conversion of Preferred Stock
|--- |  | -----------------------------



Consistent with the terms of the Series A Convertible Preferred Stock, the Company gave notice to holders on December 24, 2002 of its
intention to exercise its right to convert all of its issued and outstanding shares of Series A Convertible Preferred Stock into shares of the Companys Common Stock. On January 23, 2003, 1,329 shares of the Companys Series A Preferred
Stock, the remaining amount issued and outstanding, were converted into 1,586 shares of the Companys common stock. Each share of the Series A Preferred Stock was converted into 1.19316 shares of common stock. Each holder of record of the
Series A Preferred Stock on January 23, 2003 also received a partial quarterly cash dividend pro-rated for the period from January 1, 2003 through January 23, 2003.



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iDINE REWARDS NETWORK INC. AND SUBSIDIARIES



Notes to Unaudited Consolidated Financial Statements

(amounts in thousands, except per share data)





|(6) |  | Income per Common and Common Equivalent Share
|--- |  | ---------------------------------------------



Basic and diluted net income per share was computed by dividing net income available to common stockholders by the weighted-average number
of shares of common stock and common stock equivalents outstanding for each period presented.



|                                                                           |          | Three months ended |       
|-------------------------------------------------------------------------- | -------- | ------------------ | ------
|                                                                           | 03/31/03 |                    |       
|Net income                                                                 |          | $                  | 3,389 
|Series A Preferred Stock dividends                                         |          |                    | (15   
|                                                                           |          |                    |       
|Net income available to common stockholders                                |          | $                  | 3,374 
|                                                                           |          |                    |       
|Weighted average number of common and common equivalent shares
outstanding |          |                    |       
|Basic                                                                      |          |                    | 21,597
|Series A Preferred Stock                                                   |          |                    | 394   
|Stock options                                                              |          |                    | 869   
|Warrants                                                                   |          |                    | 1,024 
|                                                                           |          |                    |       
|Diluted                                                                    |          |                    | 23,884
|                                                                           |          |                    |       
|Net income per share                                                       |          |                    |       
|Basic EPS                                                                  |          | $                  | 0.16  
|                                                                           |          |                    |       
|Diluted EPS                                                                |          | $                  | 0.14  
|                                                                           |          |                    |       



The 2003
earnings reflect the Companys fully taxable status whereas the three-month period ending March 31, 2002 results did not provide for any taxes due to the availability of previous years net operating loss carryforwards. Earnings per share for
the three-month period ending March 31, 2002, assuming a fully taxable position and statutory tax rates, would have been $0.09 per fully diluted share.



The Company has elected to continue to comply with Accounting Principles Board Opinion (APB) No. 25 to account for stock options and
accordingly, no compensation expense has been recognized in the financial statements. Had the Company determined compensation expense based on the fair value at the grant date for its stock options under Statement of Financial Accounting Standards
(SFAS) No. 123, the Companys net income would have been reduced to the pro forma amounts indicated below:



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iDINE REWARDS NETWORK INC. AND SUBSIDIARIES



Notes to Unaudited Consolidated Financial Statements

(amounts in thousands, except per share data)





|                                                            |  | Three months ended March 31, |       
|----------------------------------------------------------- |  | ---------------------------- | ------
|                                                            |  | 2003                         |       
|Net income                                                  |  |                              |       
|As reported                                                 |  | $                            | 3,389 
|Employee stock option compensation expense                  |  |                              | (1,178
|                                                            |  |                              |       
|Pro forma                                                   |  | $                            | 2,211 
|                                                            |  |                              |       
|Net income per Common and Common Equivalent Share (Diluted) |  |                              |       
|As reported                                                 |  | $                            | 0.14  
|Employee stock option compensation expense                  |  |                              | (0.05 
|                                                            |  |                              |       
|Pro forma                                                   |  | $                            | 0.09  
|                                                            |  |                              |       



The
Company uses the Black-Scholes valuation model for estimating the fair value of options granted. The following represents the estimated fair value of options granted and the weighted-average assumptions used for calculation:



|                                                         |  | Three months ended March 31, |     
|-------------------------------------------------------- |  | ---------------------------- | ----
|                                                         |  | 2003                         |     
|Weighted average estimated fair value per option granted |  | $                            | 9.40
|Average exercise price per option granted                |  | $                            | 9.33
|Stock volatility                                         |  |                              | 52.3
|Risk-free interest rate                                  |  |                              | 3.83
|Expected option life in years                            |  |                              | 10  
|Expected stock dividend yield                            |  |                              | 0   



|(7) |  | Recently Issued Accounting Pronouncements
|--- |  | -----------------------------------------



In June 2001, the FASB Issued Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations
(SFAS No. 143). SFAS No. 143 requires a company to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets. A
company also records a corresponding asset that is depreciated over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation will be adjusted at the end of each period to reflect the passage of
time and changes in the estimated future cash flows underlying the obligation. The Company was required to adopt SFAS No. 143 on January 1, 2003. The Company does not have asset retirement obligations and the adoption of SFAS No. 143 did not have an
impact on the Companys financial statements.



In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities (SFAS 146). This Statement addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring). This Statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Whereas, under EITF Issue No. 94-3, a liability for an
exit cost was recognized at the date of an entitys commitment to an exit plan. SFAS 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. As such, the Company adopted the provisions of SFAS 146
effective January 1, 2003. The adoption of these provisions has not had an impact on our financial statements.



In November 2002, the FASB issued FASB Interpretation (FIN) No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of



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Notes to Unaudited Consolidated Financial Statements

(amounts in thousands, except per share data)



Indebtedness of Others. FIN No. 45 clarifies and expands existing disclosure
requirements for guarantees, including loan guarantees, and clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial
recognition and initial measurement provisions of FIN No. 45 are applicable on a prospective basis for guarantees issued or modified after December 31, 2002. The adoption of the disclosure requirements of FIN No. 45 during 2002, as well as the
initial recognition and initial measurement provisions of FIN No. 45 in 2003, did not have an impact on our financial statements.



In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based CompensationTransition and Disclosure, an amendment of
FASB Statement No. 123. This Statement amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee
compensation. In addition, this Statement amends the disclosure requirements of Statement No. 123 to require prominent disclosures in both annual and interim financial statements. Since the Company is continuing to account for stock-based
compensation according to APB 25, the adoption of SFAS No. 148 in the first quarter of 2003 requires the Company to provide prominent disclosures about the effects of FAS 123 on reported income and required it to disclose these effects in the
interim financial statements (see note 6).



In
January 2003, the FASB issued FIN No. 46, Consolidation of Variable Interest Entitiesan Interpretation of Accounting Research Bulletin No. 51. FIN No. 46 clarifies rules for consolidation of special purpose entities. FIN No. 46 is
effective for variable interest entities created after January 31, 2003 and to variable interest entities in which a Company receives an interest after that date. This pronouncement is effective on July 1, 2003 for variable interest entities
acquired before February 1, 2003. The Company does not expect the adoption of FIN No. 46 to have a significant impact on its financial statements.



In November 2002, the EITF issued EITF Issue No. 00-21, Accounting for Revenue Arrangements with Multiple Deliverables (EITF
00-21). EITF 00-21 addresses how to determine whether a revenue arrangement involving multiple deliverables contains more than one unit of accounting for the purposes of revenue recognition and how the revenue arrangement consideration should
be measured and allocated to the separate units of accounting. The final consensus will be applicable to agreements entered into in fiscal periods beginning after June 15, 2003, with early adoption permitted. Management believes the adoption of EITF
00-21 will not have a significant effect on the Companys results of operations or its financial condition.



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Notes to Unaudited Consolidated Financial Statements

(amounts in thousands, except per share data)





|(8) |  | Comprehensive Income
|--- |  | --------------------



The Companys comprehensive income is as follows:



|                                                           |  | Three months ended March 31, |      
|---------------------------------------------------------- |  | ---------------------------- | -----
|                                                           |  | 2003                         |      
|Net income                                                 |  | $                            | 3,389
|Other comprehensive income, net of taxes                   |  |                              |      
|Unrealized holding losses on securities available for sale |  |                              | (2   
|                                                           |  |                              |      
|Total comprehensive income                                 |  | $                            | 3,387
|                                                           |  |                              |      





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



We have made, and continue to make, various forward-looking statements with respect to our financial position, business strategy,
projected costs, projected savings and plans and objectives of management. Such forward-looking statements are identified by the use of forward-looking words or phrases such as anticipates, intends, expects,
plans, believes, estimates, or words or phrases of similar import. Although we believe that our expectations are based on reasonable assumptions within the bounds of our knowledge, investors and prospective
investors are cautioned that such statements are only projections and that actual events or results may differ materially from those expressed in any such forwarding looking statements. Our actual consolidated quarterly or annual operating results
have been affected in the past, or could be affected in the future, by factors, including, without limitation, general economic, business and market conditions; relationships with credit card issuers and other marketing partners; our continued
access to credit; regulations affecting the use of credit card files and other data; extreme weather conditions; participating restaurants continued acceptance of reward dining programs and the availability of other alternative sources of
capital to them.



CRITICAL ACCOUNTING POLICIES AND
ESTIMATES



Our discussion and analysis of our financial
condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements
requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including
those related to the provision for rights to receive losses, the valuation allowance for net deferred tax assets, investments and intangible assets. We base our estimates on historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions.



We believe the
following critical accounting policies affect our more significant judgments and estimates used in the preparation of the consolidated financial statements. We provide allowances for rights to receive losses based on our estimate of losses resulting
from the inability of our merchants to remain in business and provide a vehicle to repay the cash advanced for food and beverage. If the financial condition of our merchant base were to deteriorate, resulting in their inability to provide food and
beverage to our members thereby reducing the cash we advanced to them, additional allowances may be required.



We would record a valuation allowance to reduce our deferred tax assets when future realization is in question. We consider future taxable income and
ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. In the event we determine that we would be able to realize our deferred tax assets in the future in excess of our net recorded amount, an
adjustment to the deferred tax asset would increase income in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an adjustment to the
deferred tax asset would be charged to income in the period such determination was made.



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We record an investment
impairment charge when we believe an investment has experienced a decline in value that is other than temporary. Future adverse changes in market conditions or poor operating results of underlying investments could result in losses or an inability
to recover the carrying value of the investments that may not be reflected in an investments current carrying value, thereby possibly requiring an impairment charge in the future.



We continually evaluate whether events and changes in circumstances warrant
the recognition of an impairment loss of unamortized goodwill. The conditions that would trigger an impairment assessment of unamortized goodwill include a significant, sustained negative trend in our operating results or cash flows, a decrease in
demand for our dining programs, a change in the competitive environment and other industry and economic factors. Recoverability of an asset is measured by comparison of its carrying amount to the expected future cashflows that the asset is expected
to generate. Any impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair market value. Significant management judgment is required in the forecasting of future operating results which are used
in the preparation of projected cashflows and, should different conditions prevail or judgments to be made, material write-down of goodwill could occur.



We adopted SFAS No. 142 in the first quarter of 2002. With the adoption of SFAS No. 142, we assessed the impact based on a two-step approach to assess
goodwill based on applicable reporting units and reassessed any intangible assets, including goodwill, recorded in connection with our previous acquisitions. There were no impairment charges recorded as a result of our assessments. As of March 31,
2003, we had unamortized goodwill of $9,671.



The Company
recognizes gross dining sales as revenue when our members transact in one of our participating merchants. Revenue is only recognized if the member transaction qualifies in accordance with the rules of the particular marketing program. The amount of
revenue recognized is that portion of the total spending by the member that the Company is entitled to receive in cash, in accordance with the terms of the contract with the merchant. For the typical cash advance based contract where we have
acquired or prepaid for food and beverage credits or other services on a wholesale basis, we often leave some portion of the members spend with the merchant to provide liquidity for payment of sales tax and tips. For example, if the total
spend by the member is one hundred dollars at our participating merchants, as evidenced by the full amount of the credit card transaction, and our contract provides for us to leave behind 20%, the amount of gross dining sales recognized is eighty
dollars representing what we will actually realize in cash. Similarly, for members transactions at merchants in the revenue management program where we have not advanced cash and the rewards or savings may vary by the time of day or day of the
week, revenue is only recognized to the extent that we are contractually entitled to receive cash for a portion of the members spend. The same one hundred dollar transaction referred to above in a revenue management merchant may only yield
thirty dollars in cash to be realized; however, there is no cash advanced, the transaction has less risk, and there is no cost of the rights to receive sold.



Fee income, which is now principally renewal fees from the cash reward iDine Prime members, is recognized over the
membership period, usually twelve months beginning in the month the fee is received. Cardholder membership fees are cancelable and refunded to members, if requested, on a pro rata basis based on the remaining portion of the membership.



The forward-looking information set forth in this Form
10-Q is as of its filing date with the SEC,, and we undertake no duty to update this information. Should events occur subsequent to make it necessary to update the forward-looking information contained in this Form 10-Q, the updated forward-looking
information will be filed with the SEC in a Quarterly Report on Form 10-Q,, an earnings release included as an exhibit to a Form 8-K, or in a Form 8-K, each of which will be available at the SECs website at www.sec.gov.



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The following
discussion should be read in conjunction with the consolidated financial statements provided under Part II, Item 8 of the Form 10-K. Certain statements contained herein may constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, as discussed more fully herein.



|(a) |  | Net Dining RevenueComparison of three months ended March 31, 2003 and 2002
|--- |  | ---------------------------------------------------------------------------





|                              |  | 2003 |         |   | 2002    |  
|----------------------------- |  | ---- | ------- | - | ------- | -
|                              |  | RTR  |         |   | NON-RTR |  
|Qualified member dining spend |  | $    | 100,011 |   |         | $
|Sales yield                   |  |      | 76.6    | % |         |  
|Gross dining sales            |  |      | 76,619  |   |         |  
|Cost of RTR                   |  |      | 39,730  |   |         |  
|Provision for RTR losses      |  |      | 4,221   |   |         |  
|Processing fee                |  |      | 265     |   |         |  
|                              |  |      |         |   |         |  
|Total cost of sales           |  | $    | 44,216  |   |         | $
|                              |  |      |         |   |         |  
|Member rewards and savings    |  |      |         |   |         |  
|                              |  |      |         |   |         |  
|Net dining revenue            |  |      |         |   |         |  
|                              |  |      |         |   |         |  



RTR              Rights to receive

NON-RTR   represents sales where there was no cash advanced to the merchant (i.e. arrears and revenue management)



Results of operationsComparison of three months ended March 31, 2003 and 2002 (in thousands except average ticket)



Qualified member dining spend in our
participating restaurants for the three months ended March 31, 2003 was $121,247, an increase of $42,603 or 54.2%, over the comparable period in the prior year. During the period, our enrolled accounts increased from 8.5 million at March 31, 2002 to
13.2 million at March 31, 2003, while participating merchants increased from approximately 7.8 at March 31, 2002 to approximately 10.3 at March 31, 2003. The average dining ticket decreased from $52.84 for the three months ended March 31, 2002, to
$51.54 for the same period in 2003. Favorably impacting the increased dining spend during the periods were the increase in the number of dining transactions from 1,488 for the three months ended March 31, 2002, to 2,353 for the same period in 2003.
This increase resulted in the higher overall spend for the three months ended March 31, 2003 versus the same period in the prior year.



Sales yield, which represents gross dining sales as a percentage of qualified member dining spend, decreased from 72.4% for the three
months ended March 31, 2002 to 68.1% for the three months ended March 31, 2003. The difference in the sales yield reflects the various propositions



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(amounts in thousands except per share data)



available to our participating merchants. Under our typical cash advance plan, the merchant receives cash in advance for food and beverage
credits, customarily in the ratio of 1:2. Gross dining sales are recognized as the portion of the ticket recovered from the merchant, typically 80%. The 20% is left with the merchants to provide the merchant with liquidity for items such as sales
tax and tips. In this example, our sales yield would be 80%. The sales yield is affected not only by the percentage of the dining ticket (spend) left behind in our cash advance deal, but also by the amount of spend associated with our revenue
management and arrears plan deals (non-Rights to receive plans). Non-Rights to receive spend increased 128.1% to $21,236 when comparing the three months ended March 31, 2003 with the same period in the prior year. In these performance-based plans,
the merchant receives no cash advance. When a member dines at these establishments, we receive between 15% and 35% of the transaction from the merchant. Sales yield on non-RTR transactions decreased from 31.3% for the three months ended March 31,
2002 to 28.1% for the three months ended March 31, 2003. While the actual cash received, and therefore the sales recognized from these transactions is less than the cash advance plan, we have neither the cost of capital nor a material credit risk
for these merchants.



Gross dining sales for the
three months ended March 31, 2003 were $82,595, an increase of $25,624 or 45.0%, over the same period in the prior year. The primary reason for the increased sales was the expansion of almost all our airline relationships to include greater numbers
of active members and accounts from existing airline partners such as United Airlines, Delta Airlines, Continental Airlines and American Airways. Other significant sales increases when comparing the three months ended March 31, 2003 to the same
period in the prior year were generated from loyalty programs such as Upromise, Priority Club Rewards Dining, and Travelocity as well as through our corporate card program which includes corporations such as Pfizer Inc., Merck & Co., Ernst &
Young LLP and Novartis.



All territories recorded
increased sales when comparing the three months ending March 31, 2003 with the same periods in the prior year. We continue to expect increasing sales with the addition of members and restaurants in all sales territories as well as planned marketing
activities in the upcoming quarters.



Cost of
sales increased by $13,218 or 42.6% when comparing the three months ended March 31, 2003 to the same period in the prior year which is attributable to the overall increase in sales. However, as a percentage of sales, cost of sales varied from 54.4%
for the three months ended March 31, 2002 to 53.6% for the three months ended March 31, 2003. The decrease is the result of an increase in non-RTR sales as a percentage of overall dining sales from 5.1% for the three months ended March 31, 2002 to
7.2% for the three months ended March 31, 2003. There are no cost of sales (Rights to receive costs) associated with these sales and therefore the higher non-RTR sales result in a lower overall cost of sales as a percentage of gross dining sales.
Also contributing to the decrease in cost of sales as a percentage of sales, is the decrease in the provision for Rights to receive losses from 5.6% of gross dining sales for the three months ended March 31, 2002 to 5.1% of gross dining sales for
the three months ended March 31, 2003. Since Non-RTR sales do not involve the advancing of cash, a lower provision is assigned to those sales. The higher Non-RTR sales for the three months ended March 31, 2003



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versus the three months ended March 31, 2002 would result in the provision decreasing as a percentage of total gross sales for the 2003
period.



Member savings and rewards increased
$5,803 or 52.4% when comparing the three months ended March 31, 2003 with the same period in the prior year. As a percentage of sales, member savings and rewards increased from 19.4% during the three months ended March 31, 2002 to 20.4% during the
comparable period ended March 31, 2003. The increase was mainly the result of an increase in non-RTR sales. Member rewards and savings represent a greater percentage of non-RTR sales than on RTR sales due to the lower yield on the non-RTR sales. In
addition, non-RTR sales yield during the 2003 period was lower at 28.1% of qualified spend than in the same quarter in 2002 at 31.3%. This also contributed to the higher rate of rewards on non-RTR sales in the current quarter versus the same quarter
last year.



Membership and renewal fee income for
the three-month period ended March 31, 2003 was $1,346 compared to $1,412 for the comparable prior year periods. Marketing of the fee-based membership was reduced significantly in the past few years due to changes in the regulatory environment
regarding direct marketing solicitations. Our marketing strategy has shifted to focus mainly on marketing our dining programs through key affinity and loyalty partners at no fee billing to their members where we can take advantage of the registered
card platform and enroll large quantities of accounts at a very low cost of acquisition and solicitation, and often at lower effective member benefit costs.



Salaries and benefits increased $194 or 4.2% when comparing the three-month period ended March 31, 2003 with the same period in the prior
year. The increase during the three-month period is mainly the result of planned increased headcounts, mainly in Information Technology and Hotel and Restaurant Sales. Hotel salaries and benefits for the three months ended March 31, 2003 was $304.
Overall headcount has increased from 263 (not in thousands) employees at March 31, 2002 to 333 (not in thousands) employees at March 31, 2003. This was somewhat offset by the reduction in salaries relating to sales
consultants. We implemented a new sales consultants compensation structure in April 2002, whereby, sales consultants compensation is based predominantly on commissions earned. Prior to this, sales consultants received a base salary as well as
commission earned on sales for restaurants signed to the program. As in the past, commissions are earned only when a qualified dine occurs at one of our participating restaurants. While sales consultants compensation is reflected in commissions,
their benefits are reflected in salaries and benefits.



Sales commission and expense increased $2,321 or 146.7% when comparing the three-month period ended March 31, 2003 with the same period in the prior year. The increase in sales commissions for the 2003 period is twofold. As
previously mentioned, the Company has changed the sales consultants compensation structure resulting in compensation being paid only in the form of sales commission. In addition to the new compensation structure, sales for the three-month period
increased 45.0% when compared to the same period in the prior year.



Member and merchant marketing expenses increased $480 or 41.9% when comparing the three-month period ended March 31, 2003 with the same period in the prior year. One of the principal reasons for the increase in member and
merchant marketing during the 2003 period was increased



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compensation paid to our loyalty partners, such as Upromise in exchange for access to their large membership. Also contributing to the
overall increase was the ramp up of marketing costs that were delayed from previous quarters. These marketing efforts were designed to stimulate our current member base by providing additional rewards and incentives to increase member spending in
our programs. The Company has also continued its marketing efforts to activate certain enrolled accounts not yet activated in our database, mainly airline frequent flyers.



Printing and postage increased $526 or 42.0% when comparing the three-month period ended March 31, 2003 with
the same period in the prior year. This increase is principally due to the increase in directory and fulfillment costs caused by the increase in our active member base and the increase in the number of restaurants in the program.



General and administrative expenses for the three months ended
March 31, 2003 were $4,871, an increase of $811 compared with the prior year period. During the three months ending March 31, 2003, we recorded a $311 charge ($193 on an after tax basis) for the total net severance related to the former Executive
Vice President of Restaurant Sales. Excluding the one-time charge relating to our former Executive Vice President of Restaurant Sales, general and administrative expenses increased $500 when comparing the three months ended March 31, 2003 to the
same periods in the prior year mainly due to increases in recruiting, moving expenses, general insurance and corporate travel.



Other expense, net of income during the three months ended March 31, 2003 amounted to $406 versus $673 for the same period in 2002, a
decrease of $267. The principal reasons for the change was a decrease of $165 in interest expense and financing costs mostly related to our $80 million securitization during the three months ended March 31, 2003 due to favorable interest rates and
the reduction in upfront financing fees. The effective interest rate of the securitization decreased from 4.3% for the three months ended March 31, 2002 to 2.9% for the three months ending March 31, 2003.



Income before taxes was $5,463 for the three months ended
March 31, 2003 compared to $3,017 for the same period in 2002. During the three months ended March 31, 2003, the Company recorded a tax expense of $2,074 compared to a tax benefit in the three months ended March 31, 2002 of $81. The 2003 earnings
reflect the Companys current fully taxable status whereas the 2002-quarter results did not provide for any taxes due to the availability of previous years of net operating loss carryforwards.



Net income was $3,389 or $0.14 per diluted share for the three
months ended March 31, 2003 compared to $3,098 or $0.15 per diluted share for the same period of the prior year. Earnings per share for the first quarter of 2002, assuming a fully diluted taxable position and statutory tax rates, would have been
$0.09 per diluted share on a tax adjusted basis versus the $0.14 in the quarter ended March 31, 2003.



|(b) |  | Liquidity and Capital Resources
|--- |  | -------------------------------



Our short term investments, cash and cash equivalents amounted to $12,068 at March 31, 2003. We believe that cash on hand, together with
short term investments, cash generated from



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operations, and cash available under the securitization facility, will be sufficient to fund the Companys normal cash requirements for
the 2003 fiscal year.



The $80 million revolving
securitization of our combined Rights to receive is privately placed through two asset backed commercial paper conduits. Borrowing capacity under the facility is recalculated weekly based on a formula driven advance rate applied to the current
balance of Rights to receive that is eligible to be securitized. The advance rate is determined based on recent sales trends and months on hand of Rights to receive. At March 31, 2003, we have the full capacity of $80,000 available under the
facility and the outstanding borrowing was $60,000. The facility provides various restrictive covenants regarding collateral eligibility, concentration limitations and also requires the Company to maintain net worth of at least $24,000. At March 31,
2003, we were in compliance with the covenants.



The interest rate applicable to the facility is the rate equivalent to the rate (or if more than one rate, the weighted average of the rates) at which commercial paper (CP) having a term equal to the related CP tranche
period that may be sold by any placement agent or commercial paper dealer selected by the conduit on the first day of such CP tranche period, plus the amount of any placement agent or commercial paper dealer fees and commissions incurred or to be
incurred in connection with such sale. For the three-month period ended March 31, 2003, the effective interest rate for the facility, inclusive of upfront financing fees, was 2.9% per annum.



The conduit requires that a liquidity facility be provided by
an A1/P1 rated financial institution in the amount equal to 102% of the securitization amount. This liquidity facility must be renewed annually. JPMorgan Chase and BMO Nesbitt Burns Corp both act as 50 percent co-purchasers on the $80 million
facility. The credit agreement was renewed on May 14, 2003 for a new 364-day renewable term and the Company paid fees of $500 which will be amortized over the renewable term. JPMorgan Chase and BMO Nesbitt Burns Corp will both continue to act as 50
percent co-purchasers on the facility, and the facility limit was increased to $100 million. In addition, JPMorgan Chase has added to the terms that if there are any change in accounting standards or issuance of pronouncements released by any
accounting body, or any change in interpretation or application of existing or future accounting standards that in the judgement of JPMorgan Chase causes or requires the consolidation of assets and liabilities of its conduit with the assets and
liabilities of JPMorgan Chase, the program fee rate will increase from 0.85% to no more than 1.50% of the facility limit. There were no other material changes to the terms of the facility.



|(c) |  | Outlook
|--- |  | -------



As we look out at the remaining months of 2003, we are anticipating increased utilization of our program by the current member base as
well as increased activation of certain enrolled accounts not yet activated in our database, mainly our airline frequent flyers. The stimulation and activation of these portfolios should allow us to continue the present trend and increase 2003
dining sales by at least 15% over prior year. In an effort to achieve these results, we expect to increase spending on member marketing and communications over the upcoming months.



Aside from marketing expenses and sales commission, selling, general and administrative expenses are expected
to be reasonably maintained as we now have the infrastructure substantially in place to support the planned dining revenue growth. We have, however, planned increased expenditures in business intelligence systems to strengthen our database marketing
capabilities and will add some related headcount in marketing and information technology to support this. Interest expense may increase due to higher renewal fees as well as the increase in our current securitization borrowing limit.



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In addition, we launched a hotel revenue management product on the May 1, 2003 that
will focus initially on the high end, independent hoteliers. This more fragmented group, who traditionally do not have their own loyalty or rewards program, can immediately avail themselves of our cash back rewards or frequent flyer currencies as a
means of enticing new and recurring business. Our members will have access to the hotels BAR or best available rate and in addition will then receive a reward over and above the rate paid for the room. While we recognize that the
hotel space is fairly crowded with purveyors of hotel discount deals, we believe that the rate and reward value proposition that we will go to the market with will appeal to the hoteliers anxious to preserve price integrity but still
fill empty rooms and members who want to stay in attractive lodging at a reasonable net of reward cost. The expansion of our product offering into the hotel arena will result in some increases in information technology, marketing and head count in
order for us to test and launch this proposition.



Item 3.
Quantitative and Qualitative Disclosure about Market Risk



We are exposed to various types of market risk, including changes in interest rates. Market risk is the potential loss arising from adverse changes in the market rates and prices, such as interest
rates. Our exposure to market risk for changes in interest rates is limited to the exposure related to our debt instruments used to finance the purchase of Rights to receive and short term investments which are tied to market rates. Our current $80
million revolving securitization of the combined Rights to receive is privately placed through two asset backed commercial paper conduits. The interest rate applicable to this facility is the rate equivalent to the rate (or if more than one rate,
the weighted average of the rates) at which commercial paper (CP) having a term equal to the related CP tranche period that may be sold by any placement agent or commercial paper dealer selected by the conduit on the first day of such CP
tranche period, plus the amount of any placement agent or commercial paper dealer fees and commissions incurred or to be incurred in connection with such sale. As of March 31, 2003, we had $60,000 outstanding under this securitization. The
commercial paper and the interest payment are subject to interest rate risk. If market interest rates were to increase immediately and uniformly by 100 basis points at March 31, 2003, the interest payments would increase by approximately $600 per
annum. We are still reviewing a hedging strategy that would allow us to hedge against higher interest rates. This may include the purchase of an interest rate cap which will allow us to benefit from the current low rates while establishing a known
maximum interest rate cost.



Our short term
investments are made according to a policy to ensure the safety and preservation of our invested principal funds by limiting default risks, market risk and reinvestment risk. We had investments in equity securities at March 31, 2003 of $2, as well
as short-term investments in corporate and government bonds of $1,702. We plan to ensure the safety and preservation of our invested principal funds by limiting default risks, market risk and reinvestment risk. We plan to invest in high-credit
quality securities. Cash equivalents consist of short term investments with reputable financial institutions with durations of no more than 90 days.



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Item 4. Controls and Procedures



Disclosure Control and Procedure



The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the specified time periods. Within 90 days prior to the date of this report, iDine Rewards Network Inc.s President and Chief Executive Officer and iDine Rewards Network Inc.s Chief Operating Officer, Dining, and Chief
Financial Officer evaluated, with the participation of iDine Rewards Network Inc.s management, the effectiveness of the Companys disclosure controls and procedures. Based on the evaluation, which disclosed no significant deficiencies or
material weaknesses, iDine Rewards Network Inc.s President and Chief Executive Officer and iDine Rewards Network Inc.s Chief Operating Officer, Dining, and Chief Financial Officer concluded that the Companys disclosure controls and
procedures are effective. There were no significant changes in the Companys internal controls or in other factors that could significantly affect internal controls subsequent to the evaluation.



PART II
OTHER INFORMATION



Items 1, 3, 4, and 5



Items 1, 3, 4, and 5 of Part II are either inapplicable or are
answered in the negative and are omitted pursuant to the instructions to Part II.



Item 2



Changes in
securities and Use of Proceeds



|(a) |  | Issuance or Modification of Securities
|--- |  | --------------------------------------



Consistent with the terms of the Series A Convertible Preferred Stock, the Company exercised its right to convert all of its issued and
outstanding shares of Series A Convertible Preferred Stock into shares of the Companys Common Stock on January 23, 2003. As a result, 1,329 shares of the Companys Series A Preferred Stock were converted into 1,586 shares of the
Companys common stock.



Item 6



Exhibits and reports on Form 8K



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



|    
|----
|99-1
|    
|99-2



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



21



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##### Table of Contents

iDINE REWARDS NETWORK INC. AND SUBSIDIARIES

(amounts in thousands except per share data)



A Current Report on Form 8K dated January 13, 2003 was filed with the Securities and
Exchange Commission with attached press release announcing that the Company had given notice to the holders of its Series A Preferred Stock that it intended to exercise its right to convert all of its issued and outstanding shares of Series A
Preferred Stock into shares of the Companys Common Stock and a copy of the Companys December 24, 2002 press release and Notice of Conversion of Series A Preferred Stock was attached to this Form 8-K.



SIGNATURES



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



| |  |              |  |  |  | IDINE REWARDS NETWORK INC.
| |  | ------------ |  |  |  | --------------------------
| |  |              |  |  |  | (Registrant)              
|
| |  | May 15, 2003 |  |  |  |                           
| |  |              |  |  |  |                           
| |  |              |  |  |  |                           
|
| |  | May 15, 2003 |  |  |  |                           
| |  |              |  |  |  |                           



22



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##### Table of Contents



CERTIFICATIONS



I, George S. Wiedemann.
certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of iDine Rewards Network 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 15, 2003



|                                                         
|---------------------------------------------------------
|/s/    GEORGE S.
WIEDEMANN                               
|George S. Wiedemann President and Chief Executive Officer



---

##### Table of Contents



CERTIFICATION



I, Stephen E. Lerch certify
that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of iDine Rewards Network 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 15, 2003



|                                                                            
|----------------------------------------------------------------------------
|/s/    STEPHEN E.
LERCH                                                     
|Stephen E. Lerch Chief Operating Officer, Dining and Chief Financial Officer



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##### Table of Contents



Exhibit
Index



|Exhibit Number |  | Exhibit Description
|-------------- |  | -------------------
|              
|99.1           |  | CEO Certification  
|              
|99.2           |  | CFO Certification