##### Table of Contents




UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D. C. 20549








FORM 10-Q








(Mark One)





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




For the quarterly period ended September 30, 2002





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











iDINE REWARDS NETWORK INC.


(Exact name of registrant as specified in its charter)











DELAWARE

84-6028875(State of other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)11900 Biscayne Boulevard, Miami, Florida

33181(Address of principal executive offices)

(zip code)305-892-3300(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





As of October 23, 2002, there were 20,061,865 shares of the Registrants $.02 par value common stock outstanding.




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##### Table of Contents




INDEX





iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA NETWORK INC.)


AND SUBSIDIARIES





PART I.

FINANCIAL INFORMATION

PAGE NO.Item 1.

Financial Statements:Consolidated Balance SheetsSeptember 30, 2002 (unaudited) and December 31, 2001

3Consolidated Statements of Income And Comprehensive Income (Loss) Three and nine months ended September 30, 2002 and 2001 (unaudited)

4Consolidated Statements of Cash FlowsNine months ended September 30, 2002 and 2001 (unaudited)

5-6Notes to Unaudited Consolidated Financial Statements

7-13Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

14-22Item 3.

Quantitative and Qualitative Disclosure About Market Risk

22-23Item 4.

Controls and Procedures

23PART II.

OTHER INFORMATION

24-25SIGNATURE



25




2




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iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA NETWORK INC.)


AND SUBSIDIARIES





Consolidated Balance Sheets


(in thousands, except per share data)





Assets

September 30, 2002


December 31, 2001*(unaudited)Current assets:Cash and cash equivalents

$
3,522


$
13,957Short term investments


2,708



1,001Accounts receivable, net


8,589



5,528Rights to receive, net


99,596



68,965Deferred tax asset


3,281



Prepaid expenses and other current assets


1,158



1,022Total current assets


118,854



90,473Property and equipment, net


8,353



8,479Other assets


536



767Deferred tax asset


387



Excess of cost over net assets acquired


9,671



9,671Total assets

$
137,801


$
109,390Liabilities and Shareholders EquityCurrent liabilities:Secured non-recourse revolving debt


55,500



55,500Accounts payable  Rights to receive


13,361



10,179Accounts payable  trade


12,055



7,161Accrued expenses and other current liabilities


7,171



2,605Deferred membership fee income


2,068



2,476Total current liabilities


90,155



77,921Other long-term liabilities


473



1,080Total liabilities


90,628



79,001Shareholders 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 and outstanding 1,344 and 4,071 shares, respectively


134



414Common stock, par value $0.02 per share; authorized 70,000 shares; issued and outstanding 20,082 and 15,781 shares,
respectively


402



316Additional paid-in capital


45,971



43,150Cumulative other comprehensive income (loss)


11



(265
)Retained earnings (deficit)


913



(12,968
)Treasury stock, at cost (81 shares)


(258
)


(258
)Total shareholders equity


47,173



30,389Total liabilities and shareholders equity

$
137,801


$
109,390


See accompanying notes to unaudited consolidated financial statements.





|* |  | The balance sheet at December 31, 2001 is derived from the registrants audited consolidated financial statements. See accompanying notes to consolidated
financial statements.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA NETWORK INC.)


AND SUBSIDIARIES





Consolidated Statements of Income and Comprehensive Income (Loss)





Three months and nine
months ended September 30, 2002 and 2001


(unaudited)


(in
thousands, except per share data)








Three Months Ended September 30,


Nine Months Ended September 30,2002


2001


2002


2001Operating revenue:Gross dining sales

$
81,251


$
47,584


$
203,613


$
146,056Cost of sales


43,659



25,561



110,069



79,417Member rewards and savings


16,569



10,079



40,209



31,073Net revenue from dining sales


21,023



11,944



53,335



35,566Membership and renewal fee income


1,114



1,700



3,831



5,282Other operating revenue


24



115



136



588Total operating revenues


22,161



13,759



57,302



41,436Operating expenses:Salaries and benefits


4,703



4,236



13,418



13,331Sales commission and expense


3,311



1,430



7,666



4,160Member and merchant marketing


1,610



1,156



4,935



2,603Printing and postage


1,536



1,267



4,365



3,519General and administrative


5,065



3,964



12,948



12,536Total operating expenses


16,225



12,053



43,332



36,149Operating income


5,936



1,706



13,970



5,287Other income (expense):Interest and other income


79



204



105



499Interest expense and financing costs


(500
)


(880
)


(1,665
)


(3,474
)Income before income tax provision


5,515



1,030



12,410



2,312Income tax provision (benefit)


1,523



85



(2,153
)


85Net income

$
3,992


$
945


$
14,563


$
2,227Operating income per share of common stock:Basic


0.29



0.09



0.76



0.28Diluted


0.24



0.08



0.60



0.26Net income per share of common stock:Basic


0.20



0.04



0.79



0.08Diluted


0.16



0.04



0.62



0.08Weighted average number of common and common equivalent shares outstanding:Basic


19,931



15,792



17,551



15,917Diluted


24,649



16,125



23,353



16,246





See accompanying notes to unaudited consolidated financial statements.




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iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA NETWORK INC.)


AND SUBSIDIARIES





Consolidated Statements of Cash Flows





Nine months ended September 30, 2002 and 2001


(unaudited)


(in thousands)








2002


2001Cash flows from operating activities:Net income

$
14,563


$
2,227Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization


2,997



3,430Amortization of deferred financing cost


329



935Provision for deferred taxes


(3,668
)


Provision for Rights to receive losses


10,827



6,643Changes in assets and liabilities:Accounts receivable


(1,561
)


(1,435
)Rights to receive


(39,775
)


(3,300
)Prepaid expenses and other current assets


(485
)


(83
)Other assets


(270
)


(654
)Accounts payable


5,636



734Change in income tax payable


2,271



83Accrued expenses and other current liabilities


3,822



716Deferred membership fee income


(408
)


(771
)Net cash provided by (used in) operating activities


(5,722
)


8,525Cash flows from investing activities:Increase in short term investments


(1,708
)


(3,177
)Additions to property and equipment


(2,866
)


(3,355
)Decrease in restricted deposits and investments


(56
)


(129
)Net cash used in investing activities


(4,630
)


(6,661
)Cash flows from financing activities:Payment of put options on common stock






(3,200
)Retirement of convertible notes






(2,000
)Net proceeds from private equity placement


26,280



Preferred stock tender offer


(26,280
)


Preferred stock dividends


(698
)


(902
)Exercise of options and conversion of warrants, net


647



21Conversion of preferred stock


(32
)


Repayment of revolving securitization






(942
)Purchase of common stock






(45
)Net cash used in financing activities

$
(83
)

$
(7,068
)








(Continued)




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iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA NETWORK INC.)


AND SUBSIDIARIES





Consolidated Statements
of Cash Flows, Continued





Nine months ended September 30, 2002 and 2001


(unaudited)


(in thousands)





2002


2001Net decrease in cash and cash equivalents

$
(10,435
)

$
(5,204
)Cash and cash equivalents:Beginning of year


13,957



12,470End of period

$
3,522


$
7,266Supplemental disclosures of cash flow information:Cash paid during the period for:Interest

$
1,187


$
2,125Dividends

$
1,256


$
451Income taxes

$



$
15








|See |  | accompanying notes to unaudited consolidated financial statements.
|--- |  | ------------------------------------------------------------------



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iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA NETWORK INC.)


AND SUBSIDIARIES





Notes to Unaudited Consolidated Financial Statements


(amounts in thousands, except per share data)










(1)    Basis of Presentation





The condensed consolidated financial statements, other than the consolidated balance sheet of December 31, 2001, included herein are
unaudited; however, they contain all normal recurring accruals and adjustments which, in the opinion of management, are necessary to present fairly the consolidated balance sheets of iDine Rewards Network Inc. (formerly Transmedia Network Inc.) and
its subsidiaries (collectively, the Company) at September 30, 2002, the consolidated results of its statements of income and comprehensive income (loss) for the three and nine months ended September 30, 2002 and 2001 and the consolidated
statements of cash flows for the nine months ended September 30, 2002 and 2001. All intercompany accounts and transactions have been eliminated. The results of operations for the three and nine months ended September 30, 2002 are not necessarily
indicative of the results to be expected for the full year.





The accompanying unaudited consolidated financial
statements do not include all footnotes and certain financial presentations normally required under accounting principles generally accepted in the United States. Therefore, these financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto for the year ended September 30, 2001, included in the Companys Form 10-K filed with the Securities and Exchange Commission on December 31, 2001 and the audited consolidated financial
statements and notes thereto for the transition period ended December 31, 2001, included in the Companys Form 10-KT filed with the Securities and Exchange Commission on March 26, 2002. The balance sheet as of December 31, 2001 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.





Certain prior
year amounts have been reclassified to conform to the current presentation.





(2)    CEO Compensation Agreement





On September 26, 2002, the Board of Directors appointed fellow board member George S. Wiedemann as
President and Chief Executive Officer. Mr. Wiedemann, who had been on iDines Board since 1998, will continue to serve as a director. Also, on September 26, 2002, Gene M. Henderson, the former President and Chief Executive Officer, resigned. As
part of his termination agreement, Mr. Henderson will receive cash payments equivalent to approximately twice his annual salary and bonus as well as continued health care coverage for a defined period. The net after tax impact on earnings of this
agreement, after adjusting for previously recorded accrued bonuses, is $1,022 or $0.04 per diluted share and is recorded in its entirety during the three months ended September 30, 2002. Mr. Henderson has also resigned from the board of directors.




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iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA NETWORK INC.)


AND SUBSIDIARIES





Notes to Unaudited Consolidated Financial
Statements


(amounts in thousands, except per share data)




(3)    Equity Private Placement and Preferred Stock Tender Offer





On June 12, 2002, the Company sold three million shares of common stock at $9.50 per share in a private placement to a group of fifteen
unaffiliated institutional investors from which the Company received $26,280, net of financial advisory, agent and legal fees.





The entire net proceeds from the stock issuance were intended to be used to buyback shares of the Companys outstanding Series A Convertible Preferred Stock. The Company commenced a cash tender offer on June 13, 2002 to purchase
up to 2,475 shares, or 61.1%, of its outstanding Series A Convertible Preferred Stock at a price of $10.62 per share. The tender offer expired on July 15, 2002, and a total of 3,177 shares of the Series A Convertible Preferred Stock were tendered.
Since more than the maximum 2,475 shares of the Series A Convertible Preferred Stock were tendered, iDine accepted and paid for shares on a pro rata basis from among the validly tendered shares.





In addition to the purchase price, tendering stockholders also received a payment in lieu of cash dividends for the period July 1 through July 15, 2002 equal to $0.006
per share of Series A Convertible Preferred Stock accepted. The Company has indicated that it will, in all likelihood, exercise its right to force conversion of the remaining preferred shares in the fourth quarter of 2002.





(4)    Tax Valuation Allowance





As a result of the Companys recent history of losses prior to fiscal 2001, the Company had maintained a valuation allowance on the net deferred tax asset that had resulted from net operating loss
carryforwards and deductible temporary differences, principally the provision for Rights to receive losses. At December 31, 2001, the valuation allowance was $8,757.





During the three month period ended June 30, 2002, the Company evaluated the need to maintain a valuation allowance given its sustained level of profitability and expected
continued profitable operating results, and determined that the valuation allowance would no longer be required. As a result of this redetermination, a reversal of the valuation allowance with a corresponding income tax benefit of $3,676 or 16 cents
per share was posted during the second quarter ended June 30, 2002. In addition, an estimated benefit of approximately $4,493 was reflected in the Companys calculation of its projected 2002 estimated annual effective tax rate at June 30, 2002.





The effective rate was further revised in the three months ended September 30, 2002 due to the Companys
better than budgeted profitability. The revised annual effective tax rate was utilized in calculating the current quarter tax expense of $1,523. This revised annual effective tax rate will be utilized, and adjusted if necessary, for the remainder of
2002.




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iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA NETWORK INC.)


AND SUBSIDIARIES





Notes to Unaudited Consolidated Financial
Statements


(amounts in thousands, except per share data)




Factors contributing to the elimination of the valuation allowance were (i) profits for year ended December
31, 2001 and six months ended June 30, 2002, of $3.3 million and approximately $10.6 million, respectively, and (ii) the Companys expectation of continuing profits through the remainder of 2002 and in 2003. The Company expects to be recording
income tax at the statutory rate of 38% beginning the first quarter of calendar year 2003.





(5)    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 September 30,
2002 were $55,500. Based on the level of eligible Rights to receive at that date, the Company had $24,500, the full amount available under the securitization, available for borrowings. 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 September 30, 2002, 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 and nine-month periods ended September 30, 2002, the effective interest rate for the facility was
3.5% and 3.9% per annum, respectively.





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. JP Morgan 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, 2002 for a new 364-day renewable term and the Company paid fees of $200 that will be amortized over the renewable term. There were no material changes to the terms of the facility.




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iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA 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. Potentially dilutive securities were not considered for the three and nine-month periods ended September 30,
2001 since their effect would be antidilutive.





Three months ended


Nine months ended09/30/02


09/30/01


09/30/02


09/30/01Net income

$
3,992


$
945


$
14,563


$
2,227Series A Preferred Stock dividends


(101
)


(301
)


(698
)


(902
)Net income available to common stockholders

$
3,891


$
644


$
13,865


$
1,325Weighted average number of common and common equivalent shares outstandingBasic


19,931



15,792



17,551



15,917Series A Preferred Stock


1,952







3,331



Stock options


1,365



192



1,271



188Warrants


1,401



141



1,199



141Diluted


24,649



16,125



23,352



16,246Net income per shareBasic EPS


0.20



0.04



0.79



0.08Diluted EPS


0.16



0.04



0.62



0.08





The 1,952 and 3,331 of preferred shares, respectively, were
dilutive and included with the preferred stock dividend of $101 and $698, respectively, in the calculation of diluted EPS for the three and nine months ended September 30, 2002. The diluted share base for the three and nine months ended September
30, 2001 excludes 4,140 and 4,146 of convertible preferred shares, respectively.





As discussed in Note 3, the
nine-month periods ending September 30, 2002, reflect the reversal of the valuation allowance associated with the Companys net deferred tax asset. The impact of this redetermination was 16 cents per 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




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iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA NETWORK INC.)


AND SUBSIDIARIES





Notes to Unaudited Consolidated Financial
Statements


(amounts in thousands, except per share data)







Financial Accounting Standards (SFAS) No. 123, the Companys net income would have been reduced to the
pro forma amounts indicated below:





Three months ended September 30,


Nine months ended September 30,2002


2001


2002


2001Net incomeAs reported

$
3,992


$
945


$
14,563


$
2,227Employee stock option compensation expense


(683
)


(444
)


(1,928
)


(1,618
)Pro forma

$
3,309


$
501


$
12,635


$
609Net income per Common and Common Equivalent Share (Diluted)As reported

$
0.16


$
0.04


$
0.62


$
0.08Employee stock option compensation expense


(0.03
)


(0.03
)


(0.08
)


(0.10
)Pro forma

$
0.13


$
0.01


$
0.54



(0.02
)


(7)    Goodwill and Other Intangible Assets





In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) Nos. 141 and 142,
Business Combinations (SFAS 141) and Goodwill and Other Intangible Assets (SFAS 142). SFAS No. 141 replaces Accounting Principles Board Opinion (APB) No. 16 and eliminates pooling-of-interests
accounting prospectively. It also provides guidance on purchase accounting related to the recognition of intangible assets and accounting for negative goodwill. SFAS No. 142 changes the accounting for goodwill from an amortization method to an
impairment-only approach. Under SFAS No. 142, goodwill will be tested at least annually and whenever events or circumstances occur indicating that goodwill might be impaired. SFAS No. 141 and SFAS No. 142 are effective for all business combinations
completed after June 30, 2001. Upon a companys adoption of SFAS No. 142, a company ceases to amortize goodwill recorded for business combinations consummated prior to July 1, 2001, and intangible assets acquired prior to July 1, 2001 that do
not meet the criteria for recognition under SFAS No. 141 are reclassified to goodwill. Companies are required to adopt SFAS No. 142 for fiscal years beginning after December 15, 2001.





Historically, the Companys business combinations have primarily consisted of reacquiring franchise rights from franchisees and have been accounted for using the
purchase method of accounting. The primary intangible asset to which we generally allocated value in these business combinations was the reacquired franchise rights. We have determined that the reacquired franchise rights do not meet the criteria of
SFAS 141 to be recognized as an asset apart from goodwill.




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iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA NETWORK INC.)


AND SUBSIDIARIES





Notes to Unaudited Consolidated Financial
Statements


(amounts in thousands, except per share data)










The Company adopted SFAS No. 142 on January 1, 2002, the beginning of
fiscal 2002. In connection with the adoption of SFAS No. 142, the Company has performed a goodwill impairment assessment. No impairment charge has been recognized as of the date of adoption of SFAS No. 142. The following table presents the pro forma
effect of SFAS No. 142 for the three and nine months ended September 30, 2002 and 2001:





Three months ended September 30,

Nine months ended September 30,2002

2001

2002

2001Reported net income

$
3,992

$
945

$
14,563

$
2,227Goodwill amortization





160





480Adjusted net income

$
3,992

$
1,105

$
14,563

$
2,707Basic earnings per share:Reported net income

$
0.20

$
0.04

$
0.79

$
0.08Goodwill amortization





0.01





0.03Adjusted net income

$
0.20

$
0.05

$
0.79

$
0.11Diluted earnings per share:Reported net income

$
0.16

$
0.04

$
0.62

$
0.08Goodwill amortization





0.01





0.03Adjusted net income

$
0.16

$
0.05

$
0.62

$
0.11





(8)    Recently Issued Accounting Pronouncements





In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS 143,
Accounting for Asset Retirement Obligations. This statement addresses the diverse accounting practices for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. We plan to
adopt this standard on January 1, 2003. We do not expect the adoption of this standard to have an effect on the Companys consolidated financial statements.





In August 2001, FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This Statement establishes a single accounting model for the impairment or disposal
of long-lived assets. As required by SFAS No. 144, the Company adopted this new accounting standard on January 1, 2002. The adoption of SFAS No. 144 did not have an impact on the Companys consolidated financial statements.





In April 2002, the FASB issued Statement of Financial Accounting Standard No. 145, Rescission of FASB Statements No. 4,
44 and 64, Amendment to FASB Statement No. 13, and Technical Corrections (SFAS 145). SFAS 145 eliminates the requirement (in SFAS No. 4) that gains and losses from the extinguishments of debt be aggregated and classified as
extraordinary items, net of the related income tax. In addition, SFAS No. 145 requires sales-lease back treatment for certain modifications of a capital lease that result in the lease being classified as an operating lease. The




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iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA NETWORK INC.)


AND SUBSIDIARIES





Notes to Unaudited Consolidated Financial
Statements


(amounts in thousands, except per share data)







rescission of SFAS No. 4 is effective for fiscal years beginning after May 15, 2002, which for the Company would be January 1, 2003. Earlier application is encouraged. Any gain or loss on
extinguishment of debt that was previously classified as an extraordinary item would be reclassified to other income (expense). The remainder of the statement is generally effective for fiscal years beginning after May 15, 2002. The Company does not
expect that the adoption of SFAS No. 145 will have a material impact on the Companys financial condition, cash flows and results of operations.





In July 2002, the FASB issued Statement of Financial Accounting Standards No. 146, Accounting for Exit or Disposal Activities (SFAS 146). SFAS 146 will be effective for the
Company for disposal activities initiated after December 31, 2002. The Company is in the process of evaluating the effect that adopting SFAS 146 will have on its financial statements, but does not expect that the adoption of SFAS No. 146 will have a
material impact on the Companys financial condition, cash flows and results of operations.





(9)    Comprehensive Income





The Companys comprehensive
income (loss) is as follows:


Three months ended September 30,


Nine months ended September 30,2002


2001


2002

2001Net income

$
3,992


$
945


$
14,563

$
2,227Other comprehensive income (loss), net of taxesUnrealized holding gain (losses) on securities available for sale


(8
)


(621
)


276


(696
)Total comprehensive income

$
3,984


$
324


$
14,839

$
1,531





(10)    Certain Relationships and Related
Transactions





In March 2002, the Company and Responsys Inc. (Responsys) entered into an
agreement for Responsys to provide e-mail marketing services to the Company. The term of the agreement is from May 31, 2002 to May 31, 2004, and the anticipated payments to be made, based on the level of services provided for in the contract, are
approximately $290. At the time the agreement was signed, George S. Wiedemann was the President, Chief Executive Officer, a Director, and a stockholder of Responsys. Prior to Mr. Wiedemann becoming the President and Chief Executive Officer of iDine,
he had resigned as President and Chief Executive Officer of Responsys. Mr. Wiedemann remains a Director and stockholder of Responsys.




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##### Table of Contents

iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA NETWORK INC.)


AND SUBSIDIARIES


(Amounts in thousands except per share data)





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 the net deferred tax asset, and 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 that may result from the inability of certain of our merchants to continue to participate in our dining program and thereby provide a vehicle to repay the cash advanced for food and beverage.
If the financial condition of our merchant base were to deteriorate, and result 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 record a valuation allowance to reduce our deferred tax asset when future realization is in question. We consider future taxable income and
ongoing prudent and feasible tax planning strategies in assessing the need for such a 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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iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA NETWORK INC.)


AND SUBSIDIARIES


(amounts in thousands except per share data)




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 revised estimates of useful lives or 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. We measure
impairment of unamortized goodwill utilizing the undiscounted cash flow method. The estimated cash flows are then compared to our goodwill amount; if the unamortized balance of the goodwill exceeds the estimated cash flows, the excess of the
unamortized balance is written off. As of September 30, 2002, we determined that there has been no impairment of goodwill.





We adopted Statement of Financial Accounting Standards (SFAS No. 142), Goodwill and Other Intangible Assets in January 2002. With the adoption of SFAS No. 142, we assessed the impact of SFAS 142 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. In lieu of amortization, we performed a quarterly impairment review of
our goodwill again in September 2002, and will perform, at least, an annual impairment review thereafter. We would have recorded approximately $480 of amortization for the nine months ended September 30, 2002. As of September 30, 2002, we had
unamortized goodwill of $9,671.





The Company recognizes gross dining sales as revenue when our members dine
in one of our participating restaurants. Revenue is only recognized if the member dining transaction qualifies in accordance with the rules of the particular dining 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 restaurant. For the typical cash advance based contract where we have acquired or prepaid for food and beverage credits on a wholesale
basis, we often leave some portion of the members dining spend with the merchant to provide liquidity for payment of sales tax and tips. For example, if the total dining spend by the member is one hundred dollars at our participating
restaurants, 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 dining transactions at restaurants 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 restaurant may only yield thirty dollars in cash to be realized; however,
there is no cash advanced, and therefore 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 a twelve-month period 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 September 30, 2002, 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 the next Quarterly Report on Form 10-Q available at the SECs website at www.sec.gov or as an earnings release.




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iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA NETWORK INC.)


AND SUBSIDIARIES


(amounts in thousands except per share data)




The following discussion should be read in conjunction with the consolidated financial statements provided
under Part II, Item 8 of the Form 10-K filed on December 31, 2001 and in conjunction with the consolidated financial statements provided under Part II, Item 8 the Form 10-KT filed on March 26, 2001. 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 September
30, 2002 and 2001





2002


2001RTR


NON-RTR


TOTAL


RTR


NON-RTR


TOTALQualified member spend

$
98,450


$
19,809


$
118,259


$
59,115


$
5,010


$
64,125Sales yield


77.1
%


26.9
%


68.7
%


78.1
%


28.8
%


74.2
%Gross dining sales


75,924



5,327



81,251



46,143



1,441



47,584Cost of sales


39,296







39,296



23,248







23,248Provision for RTR losses


4,174







4,174



2,278







2,278Processing fee


176



13



189



34



1



35Total cost of sales

$
43,646


$
13



43,659


$
25,560


$
1



25,561Member rewards and savings










16,569











10,079Net dining revenue









$
21,023










$
11,944





(b) Net Dining RevenueComparison of nine
months ended September 30, 2002 and 2001





2002


2001RTR


NON-RTR


TOTAL


RTR


NON-RTR


TOTALQualified member spend

$
248,416


$
39,596


$
288,012


$
179,467


$
13,619


$
193,086Sales yield


77.4
%


28.5
%


70.7
%


79.1
%


30.7
%


75.6
%Gross dining sales


192,319



11,294



203,613



141,871



4,185



146,056Cost of sales


98,763







98,763



71,680







71,680Provision for RTR losses


10,825







10,825



6,643







6,643Processing fee


454



27



481



1,063



31



1,094Total cost of sales

$
110,042


$
27



110,069


$
79,386


$
31



79,417Members rewards and savings










40,209











31,073Net dining revenue









$
53,335










$
35,566RTR                 Rights to receiveNON-RTR       represents sales where there was no cash advanced to the merchant (i.e. arrears and revenue
management)




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iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA NETWORK INC.)


AND SUBSIDIARIES


(amounts in thousands except per share data)







Results of operationsComparison of three and nine months ended September 30, 2002 and 2001





Qualified member dining spend in our participating restaurants for the three and nine months ended
September 30, 2002 was $118,259 and $288,012, respectively, an increase of $54,134 and $94,926 or 84.4% and 49.2%, respectively, over the comparable periods in the prior year. The average dining ticket decreased from $52.32 and $52.02 (in
dollars) for the three and nine months ended September 30, 2001, respectively, to $51.23 and $52.02 (in dollars), respectively, for the same periods in 2002. Impacting the increased dining spend during the periods were the increase
in the number of dines from 1,215 and 3,570, respectively, for the three and nine months ended September 30, 2001, to 2,308 and 5,536 for the same period in 2002. These increases resulted in the higher overall spend for the three and nine months
ended September 30, 2002 versus the same periods in the prior year. During the period, our enrolled accounts increased from 6.7 million at September 30, 2001 to 11.0 million at September 30, 2002, while participating merchants increased from
approximately seven thousand eight hundred at September 30, 2001 to approximately nine thousand at September 30, 2002.





Sales yield, which represents gross dining sales as a percentage of qualified member dining spend, decreased from 74.2% and 75.6%, respectively, for the three and nine months ended September 30, 2001 to 68.7% and 70.7%, respectively,
for the three and nine months ended September 30, 2002. The difference in the sales yield reflects the various propositions 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 295.4% and 190.7%, respectively, to $19,809 and $39,596, respectively, when comparing the three and nine months ended September 30, 2002
with the same periods 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. Typically, these
non-cash advance deals result in sales yield between 15% and 35%. Sales yield on these non-RTR deals also decreased from 28.8% and 30.7%, respectively, for the three and nine months ended September 30, 2001 to 26.9% and 28.5%, respectively, for the
three and nine months ended September 30, 2002. 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 and nine months ended September 30, 2002 were $81,251 and $203,613,
respectively, an increase of $33,667 and $57,557 or 70.8% and 39.4%, respectively, over the same periods in the prior year. The primary reason for the increased sales has been the expansion of almost all our airline relationships, to not only
include new airlines such as Alaska




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iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA NETWORK INC.)


AND SUBSIDIARIES


(amounts in thousands except per share data)







Mileage Dining (started in September 2001), but also to include greater numbers of active members and
accounts from existing airline partners such as United Airlines, Delta Airlines, Continental Airlines and US Airways. The Upromise affiliation that started in April 2001 has developed in 2002 to where they have become a significant partner. Upromise
members can dine at iDine restaurants and use their savings for college tuition through the use of a Section 529 defined plan. A Section 529 plan is an investment plan operated by a state designed to help families save for future college costs. As
long as the plan satisfies a few basic requirements, the federal tax law provides special tax benefits to the plan participant (Section 529 of the Internal Revenue Code).





All territories, with the exception of a small Midwest territory, recorded increased sales when comparing the three and nine months ending September 30, 2002 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 $18,098 and $30,652 or 70.8% and 38.6%, respectively, when comparing the three and nine months ended September
30, 2002 to the same periods in the prior year. This increase is attributable to the overall increase in sales. However, as a percentage of sales, cost of sales varied from 54.4% for the nine months ended September 30, 2001 to 54.1% for the nine
month ended September 30, 2002. The decrease is the result of an increase in non-RTR sales as a percentage of overall dining sales from 2.9% for the nine months ended September 30, 2001 to 5.5% for the nine months ended September 30, 2002. 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. These reductions are somewhat offset by an increase in the
provision for Rights to receive losses from 4.5% of gross dining sales for the nine months ended September 30, 2001 to 5.3% of gross dining sales for the nine months ended September 30, 2002. During the three-month periods, cost of sales remained
stable as a percentage of gross dining sales. The decrease in cost of sales attributed to the increase in non-RTR sales during the three-month period ended September 30, 2002 was offset by the increase in the provision for Rights to receive losses
from 4.8% of gross dining sales for the three months ended September 30, 2001 to 5.1% of gross dining sales for the current three-month period. The increase in the provision for Rights to receive losses reflect our perception of the increased market
risk in the dining and hospitality industry as a result of the downturn in the US economy particularly over the past twelve months since September 11th.





Member savings and rewards increased $6,490 and $9,136 or 64.4% and 29.4%, respectively, when comparing the three and nine months ended September 30, 2002 with the same periods in the prior year.
However, as a percentage of sales, member savings and rewards decreased from 21.2% and 21.3%, respectively, during the three and nine months ended September 30, 2001 to 20.4% and 19.7%, respectively, during the comparable periods ended September 30,
2002. The reduction was mainly the result of an increase in spending by members obtained through our affiliate programs along with increased airline sales, both of which, have a slightly lower effective reward cost than our standard 20% benefit.
Finally, the corporate expense reduction program introduced in fiscal 2001 has a feature whereby the rebates to the corporate partners are not paid until a certain level of qualified spend is achieved by their employees. These foregone




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iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA NETWORK INC.)


AND SUBSIDIARIES


(amounts in thousands except per share data)







corporate partner savings are deferred and recognized on an effective rate basis as a reduction in our
overall savings and rewards expense over the term of the contracts.





Membership and renewal fee income for the
three and nine-month periods ended September 30, 2002 were $1,114 and $3,831, respectively, compared to $1,700 and $5,282, respectively, for the comparable prior year periods. Marketing of the fee-based membership was reduced significantly due to
changes in the regulatory environment regarding direct marketing solicitations. Our marketing strategy has shifted to focus mainly on marketing our dining programs to 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 a lower effective member benefit costs.





Salaries and benefits increased $467 and $87 or 11.0% and 0.7%, respectively, when comparing the three and nine-month periods ended September 30, 2002 with the same
periods in the prior year. The increase during the three and nine-month periods is mainly the result of planned increased headcounts. Overall headcount has increased from two hundred and fifty four employees at September 30, 2001 to three hundred
and twenty employees at September 30, 2002. 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 solely 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.





Sales commission and expense increased $1,881 and $3,506 or
131.5% and 84.3%, respectively, when comparing the three and nine-month periods ended September 30, 2002 with the same periods in the prior year. The increase in sales commissions for the 2002 periods 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 and nine-month periods increased 70.8% and 39.4%,
respectively, when compared to the same periods in the prior year.





Member and merchant marketing expenses
increased $454 and $2,332 or 39.3% and 89.6%, respectively, when comparing the three and nine-month periods ended September 30, 2002 with the same periods in the prior year. The main reason for the increase in member and merchant marketing during
the 2002 periods was increased compensation paid to partners, such as Upromise and America Online Inc., to provide us 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 $269 and $846 or 21.2% and 24.0%, respectively, when comparing the three and nine-month periods ended September 30, 2002 with the same periods in the prior year. This increase is principally due to the increase in the cost of
postage associated




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iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA NETWORK INC.)


AND SUBSIDIARIES


(amounts in thousands except per share data)







with directory and newsletter mailings. We also had an increase in fulfillment costs relating to the increase
in our active members base. In addition, at the end of the second quarter of 2002, we had increased costs of mailings associated with the test of regional directories.





General and administrative expenses for the three and nine months ended September 30, 2002 were $5,065 and $12,948, respectively, an increase of $1,101 and $412 or 27.8%
and 3.3%, respectively, compared with the prior year periods. However, during the three months ending September 30, 2002, we recorded a $1,161 charge ($1,022 on an after tax basis) for the total net severance related to the former President and
Chief Executive Officer. Excluding the one-time charge relating to our former President and Chief Executive Officer, general and administrative expenses decreased $60 and $749 when comparing the three and nine months ended September 30, 2002 to the
same periods in the prior year. The main areas of decrease in general and administrative expenses are depreciation and amortization ($169 and $373 or 14.6% and 10.9%, respectively) primarily due to the adoption of Statement of Financial Accounting
Standards (SFAS No. 142), Goodwill and Other Intangible Assets and the change in the accounting for goodwill from an amortization method to an impairment-only approach; rent and office expense ($41 and $357 or 8.7% and 22.3%,
respectively) mainly due to a decrease in temporary staffing, building expenses, office supplies and equipment rental as well as the lower rent associated with the move of our New York offices; and programming and systems of ($6 and $321 or .8% and
14.3%, respectively) reflecting reduced cost of maintenance agreements and the decrease in program maintenance through the second quarter of 2002. This is partially offset by increases in professional fees ($210 and $236 or 54.0% and 15.9%,
respectively) mainly due to increased UCC filings, directors fees, as well as legal fees relating to our collection efforts. The nine-month period is also further offset by increases in other general and administrative expenses ($161 or 5.4%)
mainly due to increases in recruiting, general insurance and media barter/multi unit consulting costs.





Other
expense, net of income during the three and nine months ended September 30, 2002 amounted to $421 and $1,560, respectively, versus $676 and $2,975, respectively, for the same period in 2001, a decrease of $255 and $1,415, respectively. The principal
reasons for the change was a decrease of $380 and $1,809 in interest expense and financing costs mostly related to our $80 million securitization during the three and nine months ended September 30, 2002 due to favorable interest rates and the
reduction in upfront financing fees. The effective interest rate of the securitization decreased from 6.1% and 7.9%, respectively, for the three and nine months ended September 30, 2001 to 3.5% and 3.9%, respectively, for the three and nine months
ending September 30, 2002. Also, in August 2001, we prepaid two subordinated convertible promissory notes totaling $2,000 that were issued as part of the purchase price of our former Washington, DC franchise. The exclusion of interest expense
related to these notes during the three and nine months ended September 30, 2002 also served to reduce our overall interest expense.





Income before taxes was $5,515 and $12,410, respectively, for the three and nine months ended September 30, 2002 compared to $1,030 and $2,312 for the same periods in 2001. Income tax expense (benefit) was $1,523 and
($2,153), respectively, for the three and nine months ended September 30, 2002 compared to $85 and $85 for the same periods in 2001. In the quarter ended




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iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA NETWORK INC.)


AND SUBSIDIARIES


(amounts in thousands except per share data)







June 30, 2002, the valuation allowance was evaluated due to iDines six consecutive profitable quarters,
and the projection of continued profitability through fiscal 2002. This resulted in a tax benefit of $3,595 being recognized in the three-month period ended June 30, 2002. During the current three-month period ended September 30, 2002, we recorded
an income tax expense of $1,523 based on an estimated annual effective tax rate of 13%. The tax expense also included a catch-up adjustment of $806 for increasing the estimated annual effective tax rate from the second quarter due to the
Companys better than budgeted profitability.





Net income was $3,992 and $14,563 or $0.16 and $0.62 per
diluted share, respectively, for the three and nine months ended September 30, 2002 compared to $945 and $2,227 or $0.04 and $0.08 per diluted share, respectively, for the same periods of the prior year.





(b)    Liquidity and Capital Resources





Our short term investments, cash and cash equivalents amounted to $6,230 at September 30, 2002. We believe that cash on hand, together with short term investments, cash generated from operations, and
cash available under the securitization facility, will be sufficient to fund the Companys normal cash requirements for the 2002 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 September
30, 2002, we have the full capacity of $80,000 available under the facility and the outstanding borrowing was $55,500. 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 September 30, 2002, 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 periods ended September 30, 2002, the effective interest rate for the facility, inclusive of upfront financing fees, was 3.5% 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. JP Morgan Chase and BMO Nesbitt Burns Corp both act as 50 percent co-purchasers on the $80,000 facility. The credit agreement was renewed on May 14, 2002 for a new 364-days renewable term and the Company
paid renewal fees of $200. There were no material changes to the terms of the facility.




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iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA NETWORK INC.)


AND SUBSIDIARIES


(amounts in thousands except per share data)










On December 9, 2000, we executed a Payment and Termination of
Exclusivity Agreement (the Agreement) with GE Financial Assurance (GEFA), the parent of SignatureCard, to extinguish all obligations associated with the Dining A La Card (DALC) acquisition, to eliminate
SignatureCard exclusivity rights in dealing with the airline frequent flyer member files, and to fully resolve and terminate the joint marketing and revenue sharing relationship. In consideration for the above, we paid GEFA $3,800 in cash and
honored GEFAs right to put 400 shares held by it as part of the acquisition consideration, at a value of $8 per share. This put right was exercised and we paid GEFA two equal installments on January 17 and on February 13, 2001 to repurchase
and retire the 400 shares at $8 per share. The $3,200 guaranteed value of the put was recorded in the prior fiscal year. We also cancelled 160 options of the original 400 issued as part of the original DALC purchase price, leaving SignatureCard with
240 options that were exercised on June 21, 2002 at a strike price of $4.00 per share. GEFA elected to exercise this option by having shares of iDine Rewards Network Inc. common stock withheld from the 240 shares, with such withheld shares having an
aggregate fair market value equal to the $960, which is the exercise price. Based on the market price of the Companys common stock at the date of GEFAs exercise, GEFA was issued a net amount of 149 shares of iDine Rewards Network Inc.
common stock.





(c)    Outlook





As we look out at the remaining months of 2002, 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 2002 sales by at least 40% over prior
year. In an effort to achieve these results, we expect to increase spending on member marketing and communications over the upcoming months. In the previous quarter ended June 30, 2002, marketing costs were higher than the current quarter mainly as
a result of specific regional directory testing and the execution of some previously delayed stimulation mailings. We believe that these marketing promotional investments are critical to sustaining our growth objectives, and we intend to
aggressively but prudently move forward in this area. 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 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. We are currently evaluating the expansion of our product offering with other verticals, with particular emphasis on applying our yield management strategy in the hotel space. We expect to launch this initiative in 2003, and we are
currently testing the value proposition with both members and hoteliers. Interest expense is expected to remain fairly stable or increase slightly due to the interest rate applicable to our $80 million securitization that is tied to the rate of
commercial paper.





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




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iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA NETWORK INC.)


AND SUBSIDIARIES


(dollars in thousands except per share data)




investments which are tied to market rates. Our current $80,000 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 September 30, 2002, we had $55,500 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 September 30, 2002, the interest payments would increase by approximately $555 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 September 30, 2002 of $5, as well as short-term investments in corporate and government bonds of $2,708. 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 duration of no more than 90 days.





Item 4.    Controls and Procedures





Disclosure Control and
Procedure





Within the 90 days prior to the date of this report, the Company carried out an evaluation, under
the supervision and participation of the Companys Chief Executive Officer and Chief Financial Officer (the Officers) of the effectiveness of the design and operation of the Companys disclosure controls and procedures pursuant
to the Securities and Exchange Act Rule 13a-14. Based upon the evaluation, the Officers concluded that the Companys disclosure controls and procedures are effective in timely alerting them to material information relating to the Company
required to be included in the Companys periodic SEC filings, including this report.





Internal
Control





There were no significant changes made in the Companys internal controls or in other factors
that could significantly affect these controls subsequent to the date of their evaluation.




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iDINE REWARDS NETWORK INC. (formerly TRANSMEDIA NETWORK INC.)


AND SUBSIDIARIES


(amounts in thousands except per share data)










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





On June 12, 2002, the Company sold 3,000 shares of common stock at $9.50 per share in a private placement to a group of 15 unaffiliated
institutional investors from which the Company received $26,280, net of financial advisory, agent and legal fees.





The net proceeds from the stock issuance were intended to be used to buyback shares of the Companys outstanding Series A Convertible Preferred Stock. The Company commenced a cash tender offer on June 13, 2002 to purchase up to
2,475 shares, or 61.1%, of its outstanding Series A Convertible Preferred Stock at a price of $10.62 per share. The tender offer expired on July 15, 2002, and a total of 3,177 shares of the Series A Convertible Preferred Stock were tendered. Since
more than 2,475 shares of the Series A Convertible Preferred Stock were tendered, iDine accepted and paid for shares on a pro rata basis from among the validly tendered shares.





In addition to the purchase price, tendering stockholders also received a payment in lieu of cash dividends for the period July 1 through July 15, 2002 equal to $0.006 per
share of Series A Convertible Preferred Stock accepted. The Company has indicated that it will, in all likelihood, exercise its right to force conversion of the remaining preferred shares in the fourth quarter of 2002.





Item 6





Exhibits and
reports on Form 8K





(a)      Exhibits





10.1

Gene M. Henderson Termination Agreement99.1

CEO Certificate99.2

CFO Certificate





(b)      Reports on
Form 8K





A Current Report on Form 8K dated September 23, 2002 was filed with the Securities and Exchange
Commission with attached press release announcing the election of Samuel Zell as the new Chairman of the Board of Directors.





A Current Report on Form 8K dated September 26, 2002 was filed with the Securities and Exchange Commission with attached press release announcing the appointment of George S. Wiedemann as President and Chief Executive Officer and the
resignation of Gene M. Henderson, the previous President and Chief Executive Officer.




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##### Table of Contents

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)November 14, 2002

/S/    GEORGE S. WIEDEMANNGeorge S. WiedemannPresident and Chief Executive OfficerNovember 14, 2002

/S/    STEPHEN E. LERCHStephen E. LerchExecutive Vice Presidentand Chief Financial Officer




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##### 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:  November 14, 2002





/S/    STEPHEN E. LERCHStephen E. LerchExecutive Vice President and Chief Financial Officer




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##### Table of Contents




CERTIFICATION





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: November 14, 2002





/S/    GEORGE S.
WIEDEMANNGeorge S. WiedemannPresident and Chief Executive Officer




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##### Table of Contents

Exhibit Index


Exhibit Number

Exhibit Description10.1

Gene M. Henderson Termination Agreement99.1

CEO Certificate99.2

CFO Certificate




28