<PAGE>

================================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                               -----------------

                                   FORM 10-Q

                  QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

                     For the quarter ended March 31, 2002

                          Commission File No. 0-21935

                               -----------------

                               Modem Media, Inc.
            (Exact name of registrant as specified in its charter)

                     DELAWARE                   06-1464807
                  (State or other            (I.R.S. Employer
                  jurisdiction of           Identification No.)
                 incorporation or
                   organization)

                                230 East Avenue
                               Norwalk, CT 06855
                                (203) 299-7000
             (Address of principal executive offices and zip code)

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

   There were 25,939,577 shares of the Registrant's Common Stock, $.001 par
value, outstanding as of April 15, 2002.

================================================================================

<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                       Page
                                                                                                       ----
<S>                                                                                                    <C>
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS AND RISK FACTORS...........................................   2

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements
         Consolidated Balance Sheets as of March 31, 2002 and December 31, 2001.......................   3
         Consolidated Statements of Operations for the three months ended March 31, 2002 and 2001.....   4
         Consolidated Statements of Cash Flows for the three months ended March 31, 2002 and 2001.....   5
         Notes to Consolidated Financial Statements...................................................   6

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations........  13

Item 3.  Quantitative and Qualitative Disclosures About Market Risk...................................  19

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings............................................................................  20

Item 6.  Exhibits and Reports on Form 8-K.............................................................  20
         Signatures...................................................................................  21
</TABLE>



<PAGE>

          SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS AND RISK FACTORS

   This document includes forward-looking statements within the meaning of
Section 21E(i)(1) of the Securities and Exchange Act of 1934, as amended. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause our actual results to be materially different from
any future results expressed or implied by these statements. Such factors
include, among other things, the following:

  .   our history of operating losses;

  .   the scope and timing of new assignments and client initiatives;

  .   the devotion of resources to new business development;

  .   spending levels and budget constraints of our clients;

  .   our dependence on a limited number of clients;

  .   variability of our operating results;

  .   our ability to accurately estimate costs in fixed-fee engagements;

  .   our ability to attract and retain qualified professionals;

  .   the ability of CentrPort to meet its obligations under its real estate
      lease, of which we are guarantor;

  .   our ability to sub-lease our unoccupied office space;

  .   the ability of our sub-tenant to continue to meet its obligations under
      our sub-lease agreement for our New York City office space;

  .   the cost and timing of the restructuring of our Paris, France office;

  .   our need and ability to manage the level of our staff and capacity in the
      future;

  .   our dependence on key management staff;

  .   exclusivity arrangements with clients that may limit our ability to
      provide services to others;

  .   our ability to integrate acquired companies, if any;

  .   the timing and amount of our capital expenditures;

  .   the timing of collections from our clients;

  .   our ability to manage future growth, if any;

  .   our ability to respond to rapid technological change;

  .   our dependence on the future growth of the Internet;

  .   the long-term effects of the North American and international recession;

  .   changes in government regulation, including regulation of privacy issues;
      and

  .   the effect of recent terrorist activities and resulting military actions.


   In light of these and other uncertainties, the forward-looking statements
included in this document should not be regarded as a representation by us that
our plans and objectives would be achieved.

                                      2

<PAGE>

                        PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                      MODEM MEDIA, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

              (In thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                                                                                      March 31,  December 31,
                                                                                                        2002         2001
                                                                                                     ----------- ------------
                                                                                                     (unaudited)
                                              ASSETS
<S>                                                                                                  <C>         <C>
Current assets:
   Cash and cash equivalents........................................................................  $ 39,550     $ 40,918
   Short-term investments...........................................................................        46           77
   Accounts receivable, net of bad debt reserve of $450 and $528, respectively......................    13,961       16,309
   Unbilled revenues................................................................................     3,424          521
   Deferred income taxes............................................................................     2,536        3,214
   Prepaid expenses and other current assets........................................................     3,938        4,603
                                                                                                      --------     --------
      Total current assets..........................................................................    63,455       65,642
Noncurrent assets:
   Property and equipment, net of accumulated depreciation of $14,980 and $13,711, respectively.....    14,557       16,007
   Goodwill, net of accumulated amortization of $12,920 and $12,938, respectively ..................    46,487       46,547
   Deferred income taxes............................................................................    10,498       10,934
   Other assets.....................................................................................     3,763        3,825
                                                                                                      --------     --------
      Total noncurrent assets.......................................................................    75,305       77,313
                                                                                                      --------     --------
      Total assets..................................................................................  $138,760     $142,955
                                                                                                      ========     ========

                               LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable.................................................................................  $  3,643     $  3,727
   Pre-billed media.................................................................................     9,234        9,789
   Deferred revenues................................................................................     4,388        3,810
   Deferred gain on sale of CentrPort preferred stock...............................................        --        2,317
   Accrued expenses and other current liabilities...................................................    11,894       16,464
                                                                                                      --------     --------
      Total current liabilities.....................................................................    29,159       36,107
Noncurrent liabilities:
   Capital lease obligations, less current portion..................................................       526          268
   Other liabilities................................................................................     7,888        7,665
Stockholders' equity:
   Common stock, $.001 par value--145,000,000 shares authorized, 26,146,026 and 26,023,754 issued,
    respectively....................................................................................        26           26
   Preferred stock, $.001 par value--5,000,000 shares authorized, none issued and outstanding.......        --           --
   Paid-in capital..................................................................................   191,608      190,785
   Accumulated deficit..............................................................................   (88,108)     (89,647)
   Treasury stock, 206,732 and 199,773 shares of common stock, respectively, at cost................    (1,219)      (1,200)
   Accumulated other comprehensive income...........................................................    (1,120)      (1,049)
                                                                                                      --------     --------
      Total stockholders' equity....................................................................   101,187       98,915
                                                                                                      --------     --------
      Total liabilities and stockholders' equity....................................................  $138,760     $142,955
                                                                                                      ========     ========
</TABLE>




                See notes to consolidated financial statements.

                                      3

<PAGE>

                      MODEM MEDIA, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                   (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                              March 31,
                                                          -----------------
                                                            2002      2001
                                                          -------   -------
                                                             (unaudited)
    <S>                                                   <C>       <C>
    Revenues............................................. $20,029   $34,376
    Cost of revenues.....................................  11,029    19,683
                                                          -------   -------
    Gross profit.........................................   9,000    14,693
    Operating expenses:
       Sales and marketing...............................     554     1,257
       General and administrative........................   5,882    10,851
       Restructuring and other charges, net..............     767     2,448
       Depreciation and amortization.....................   1,400     1,735
       Amortization of goodwill..........................      --       857
                                                          -------   -------
           Total operating expenses......................   8,603    17,148
                                                          -------   -------
    Operating income (loss)..............................     397    (2,455)
    Gain on sale of CentrPort stock......................   2,317        --
    Interest income, net.................................      14       455
                                                          -------   -------
    Income (loss) before income taxes....................   2,728    (2,000)
    Provision (benefit) for income taxes.................   1,189    (2,128)
                                                          -------   -------
    Net income........................................... $ 1,539   $   128
                                                          =======   =======
    Net income per share:
       Basic............................................. $  0.06   $  0.01
                                                          =======   =======
       Diluted........................................... $  0.06   $  0.00
                                                          =======   =======
    Weighted-average number of common shares outstanding:
       Basic.............................................  25,859    25,440
                                                          =======   =======
       Diluted...........................................  26,038    25,760
                                                          =======   =======
</TABLE>

                See notes to consolidated financial statements.

                                      4

<PAGE>

                      MODEM MEDIA, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                (In thousands)

<TABLE>
<CAPTION>
                                                                                   Three Months Ended
                                                                                       March 31,
                                                                                   -----------------
                                                                                     2002     2001
                                                                                   -------   -------
                                                                                      (unaudited)
<S>                                                                                <C>       <C>
Cash flows from operating activities:
   Net income..................................................................... $ 1,539   $   128
   Adjustments to reconcile net income to net cash used in operating activities:
       Non-cash restructuring costs...............................................      --     1,582
       Depreciation and amortization..............................................   1,400     1,735
       Amortization of goodwill...................................................      --       857
       Non-cash income taxes......................................................   1,114    (2,187)
       Gain from the sale of CentrPort stock......................................  (2,317)       --
       Provision for bad debt expense.............................................       3        82
       Other......................................................................      70       459
       Changes in assets and liabilities:
          Accounts receivable.....................................................   2,266     5,576
          Unbilled revenues.......................................................  (2,903)     (266)
          Prepaid expenses and other current assets...............................     665     1,691
          Accounts payable, accrued expenses and other current liabilities........  (3,137)   (2,644)
          Pre-billed media........................................................    (555)   (6,835)
          Deferred revenues.......................................................     578    (1,855)
          Other, net..............................................................     (83)     (510)
                                                                                   -------   -------
              Net cash used in operating activities...............................  (1,360)   (2,187)
Cash flows from investing activities:
   Purchases of property and equipment............................................     (50)   (1,062)
   Purchases of short-term investments............................................      --      (342)
   Maturities of short-term investments...........................................      31        --
                                                                                   -------   -------
              Net cash used in investing activities...............................     (19)   (1,404)
Cash flows from financing activities:
   Purchases of treasury stock....................................................     (19)       (3)
   Principal payments made under capital lease obligations........................     (55)     (108)
   Exercises of stock options and issuances of stock under the employee stock
     purchase plan................................................................     399       916
   Repayment of debt..............................................................    (300)     (318)
                                                                                   -------   -------
              Net cash provided by financing activities...........................      25       487
                                                                                   -------   -------
Effect of exchange rates on cash and cash equivalents.............................     (14)        1
                                                                                   -------   -------
Net decrease in cash and cash equivalents.........................................  (1,368)   (3,103)
Cash and cash equivalents, beginning of the period................................  40,918    35,564
                                                                                   -------   -------
Cash and cash equivalents, end of the period...................................... $39,550   $32,461
                                                                                   =======   =======
</TABLE>

                See notes to consolidated financial statements.

                                      5

<PAGE>

                      MODEM MEDIA, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  Basis of Presentation and Summary of Significant Accounting Policies

   Nature of Operations--Modem Media, Inc. (the "Company") is an interactive
marketing strategy and services firm. The Company is a marketing partner to
many of the world's leading companies and uses digital marketing and
technologies to help its clients realize greater value from their most vital
asset--their customers. The Company leverages its experience in marketing and
business strategy, database marketing, creative design and technology
development to address the unique business objectives, challenges and
opportunities of each of its client companies. Headquartered in Norwalk,
Connecticut, the Company also maintains offices in San Francisco, Toronto,
London, Munich, Hong Kong and Sao Paulo.

   Basis of Presentation--The accompanying consolidated financial statements
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosure normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. However, the Company believes that the disclosures are adequate to
make the information presented not misleading. The consolidated balance sheet
as of March 31, 2002 and the consolidated statements of operations and cash
flows for the three months ended March 31, 2002 and 2001 are unaudited. The
consolidated financial statements reflect all adjustments (consisting only of
normal recurring adjustments) that are, in the opinion of management, necessary
for a fair presentation of the Company's financial position and results of
operations. The operating results for the three months ended March 31, 2002 and
2001 are not necessarily indicative of the results to be expected for any other
interim period or any future year. These consolidated financial statements
should be read in conjunction with the audited financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001.

   Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the dates of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.

   Reclassifications--Certain reclassifications have been made in the prior
period consolidated financial statements to conform to the current period
presentation.

   Revenue Recognition and Billing--A majority of the Company's revenues are
derived from fixed-fee or retainer assignments. The Company adopted Staff
Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial
Statements. Among other things, SAB No. 101 provides guidance on applying
generally accepted accounting principles to certain revenue recognition issues.
The Company recognizes revenues as services are rendered. Unbilled revenues
represent labor costs incurred and estimated earnings in excess of billings and
production and other client reimbursable out-of-pocket costs in excess of
billings. Amounts billed to clients in excess of revenues recognized to date
are classified as deferred revenues. The Company periodically reviews its
deferred revenues related to client projects to determine if the Company has
further obligation to the client for certain projects. Effective January 1,
2002, the Company adopted Financial Accounting Standards Board ("FASB")
Emerging Issues Task Force Issue No. 01-14, "Income Statement Characterization
of Reimbursements Received for Out-of-Pocket Expenses Incurred" ("EITF 01-14").
The Company's adoption of EITF 01-14 results in increased revenues and
increased cost of revenues. Prior periods have been restated to conform to this
presentation. The Company had revenues and cost of revenues related to such
expenses of $0.8 million and $0.9 million for the first quarter of 2002 and
2001, respectively.

   Restructuring and Other Charges--Restructuring and other charges include the
costs associated with the Company's restructuring actions taken in the periods
presented. Charges were recorded at the time the decision

                                      6

<PAGE>

                      MODEM MEDIA, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

was made to restructure operations and when the Company approved the
restructuring plans. The charges consisted of costs that were incremental to
the Company's ongoing operations and were incurred to close offices and
restructure operations in certain locations, reduce excess office facilities
and equipment and employee termination-related charges. A liability was
recorded for costs that could be reasonably estimated (see Note 5).

   Business Concentrations and Credit Risk--The Company's services have been
provided primarily to a limited number of clients located worldwide in a
variety of industries. The Company had revenues from three clients representing
15.3%, 14.8% and 10.5% of revenues during the quarter ended March 31, 2002. The
Company had revenues from one client representing 25.3% of total revenues
during the quarter ended March 31, 2001. The Company generally does not require
its clients to provide collateral. Additionally, the Company is subject to a
concentration of credit risk with respect to its accounts receivable. The
Company had four clients accounting for 17.5%, 15.7%, 13.3% and 12.4% of total
gross accounts receivable as of March 31, 2002. The Company had two clients
accounting for 13.4% and 11.5% of total gross accounts receivable as of March
31, 2001.

   Goodwill--Goodwill represents acquisition costs in excess of the fair value
of net assets acquired. Carrying values are tested annually for impairment and
between annual tests if events or circumstances change. The Company adopted
SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS No. 142") effective
January 1, 2002 (see Notes 4 and 8).

   Net Income Per Share--In accordance with SFAS No. 128, Earnings Per Share,
basic net income per share is computed using the weighted-average number of
common shares outstanding during each period. Diluted net income per share
gives effect to all potentially dilutive securities that were outstanding
during each period.

<TABLE>
<CAPTION>
                                                                Three Months
                                                               Ended March 31,
                                                               ---------------
                                                                2002    2001
                                                               ------  ------
                                                               (In thousands)
  <S>                                                          <C>     <C>
  Basic weighted-average number of common shares outstanding.. 25,859  25,440
  Potentially dilutive effect of stock options and warrants...    179     320
                                                               ------  ------
  Diluted weighted-average number of common shares outstanding 26,038  25,760
                                                               ======  ======
</TABLE>

   Recently Issued Accounting Pronouncements--In August 2001, the FASB issued
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets,
("SFAS No. 144"). This statement addresses financial accounting and reporting
for the impairment or disposal of long-lived assets. The statement supersedes
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, and provides guidance on classification
and accounting for such assets when held for sale or abandoned. The statement
is effective for fiscal years beginning after December 15, 2001. The Company
adopted this pronouncement on January 1, 2002 and adoption of SFAS No. 144 did
not have a material effect on the Company's financial position or results of
operations.

   In July 2001, the FASB issued SFAS No. 141, Business Combinations ("SFAS No.
141"), and SFAS No. 142. SFAS No. 141 requires that all business combinations
initiated after June 30, 2001 be accounted for using the purchase method of
accounting. Under SFAS No. 142, goodwill and other intangible assets with
indefinite lives are no longer amortized, but are reviewed for impairment on an
annual basis, unless impairment indicators arise sooner. Separable intangible
assets that are not deemed to have indefinite lives will continue to be
amortized over their estimated useful lives, but with no maximum life. The
amortization provisions of SFAS No. 142 apply immediately to goodwill and other
intangible assets acquired after June 30, 2001. Goodwill and other intangible
assets acquired on or prior to such date will be accounted for under SFAS No.
142 by the Company

                                      7

<PAGE>

                      MODEM MEDIA, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

beginning on January 1, 2002. This statement eliminates goodwill amortization
upon adoption and requires an initial assessment for goodwill impairment within
six months of adoption and at least annually thereafter. The Company adopted
this pronouncement on January 1, 2002. The Company is in the process of
performing the required transitional fair value impairment test on its goodwill
and reviewing separable intangible assets, if any, as of January 1, 2002. The
Company recorded $0.9 million, or $0.03 per share, of goodwill amortization for
the first quarter of 2001. As a result of the adoption of SFAS No. 142, the
Company no longer records goodwill amortization (see Notes 4 and 8).

   In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations ("SFAS No. 143"). This statement addresses financial accounting and
reporting obligations associated with the retirement of long-lived assets and
the associated asset retirement costs. SFAS No. 143 requires the recognition of
the fair value of a liability for an asset retirement obligation in the period
in which it is incurred if a reasonable estimate of fair value can be made. The
statement is effective for fiscal years beginning after June 15, 2002. The
Company does not expect that adoption of SFAS No. 143 will have a material
effect on the Company's financial position or results of operations.

2.  CentrPort, Inc.

   In November 1999, the Company and certain employees formed CentrPort LLC to
focus on developing intelligent marketing platforms to build and enhance
customer relationships across multiple communication channels. In December
2000, CentrPort LLC, which was originally organized as a Delaware limited
liability company, was reorganized as CentrPort, Inc. ("CentrPort"), a Delaware
corporation. Immediately after this reorganization, the Company sold a portion
of its ownership in CentrPort, formerly its majority-owned subsidiary. A
consortium of third party investors (the "CentrPort Investors") purchased
8,332,000 shares of preferred stock of CentrPort from the Company ("CentrPort
Preferred Stock Sale") in exchange for $2.5 million in cash, and a $2.5 million
note receivable originally due in December 2001, subject to certain conditions.
In addition, the Company received a warrant to purchase 391,604 shares of
CentrPort common stock from CentrPort ("CentrPort Warrant").

   Concurrent with the CentrPort Preferred Stock Sale, the CentrPort Investors
agreed to invest up to $22.0 million directly into CentrPort. At the closing of
the transaction, $16.5 million was paid by the CentrPort Investors to CentrPort
in exchange for 36,660,800 shares of newly issued CentrPort preferred stock.
Subject to CentrPort's securing certain revenue commitments by April 1, 2001,
an additional payment of $5.5 million ("Contingent Payment") would be due from
the CentrPort Investors to CentrPort in December 2001. CentrPort did not secure
these certain commitments and as such the Contingent Payment was not made by
the CentrPort Investors to CentrPort.

   In addition, concurrent with the CentrPort Preferred Stock Sale the Company
purchased 1,842,657 shares of CentrPort common stock from certain minority
CentrPort stockholders in exchange for approximately $1.9 million of its common
stock, or 315,858 shares (the "Founders' Stock Transaction"). In connection
with the Founders' Stock Transaction, the Company recorded a charge to equity
of approximately $1.4 million based on the excess of the value paid for the
founders' stock and its estimated fair value on the date the Company acquired
the stock.

   The CentrPort Preferred Stock Sale, the CentrPort Warrant, the investment by
the CentrPort Investors directly into CentrPort and the Founders' Stock
Transaction are hereinafter collectively referred to as the "CentrPort
Transactions." As a result of the CentrPort Transactions, the Company's
ownership in CentrPort preferred and common stock, combined, was reduced from
59.0% to 15.2%. Through the date of the CentrPort Transactions, the Company
consolidated CentrPort and recognized 100% of the losses incurred by CentrPort
in consideration that the Company was CentrPort's sole funding source. Such
losses aggregated approximately $5.7 million. Subsequent to the CentrPort
Transactions, the Company has accounted for its investment in CentrPort under
the cost method.

                                      8

<PAGE>

                      MODEM MEDIA, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   In conjunction with the CentrPort Transactions, the Company designated
CentrPort as a preferred vendor and committed to resell at least $5.0 million
of CentrPort's products and services during 2001 pursuant to a value added
reseller agreement ("CentrPort Commitment"). Based primarily on the uncertain
nature of its ability to meet this CentrPort Commitment, the Company deferred
its gain of $4.1 million on the CentrPort Preferred Stock Sale. The original
agreement provided that, if the CentrPort Commitment was not met, the Company
was to remit the value of the shortfall to CentrPort in either CentrPort common
stock, from its holdings pursuant to a contractual per share fixed value, or in
cash, at its election. As of December 31, 2001, the Company had sold $2.7
million in CentrPort products and services applicable to the CentrPort
Commitment. As a result, the Company recognized $1.7 million, in the fourth
quarter of 2001, of the $4.1 million deferred gain that was recorded as of
December 31, 2000. The remaining balance of the deferred gain on its balance
sheet was equal to $2.3 million as of December 31, 2001. In February 2002, the
Company, CentrPort and the CentrPort Investors were party to agreements which
amended various conditions and commitments including (a) the extinguishment of
its CentrPort Commitment to sell further CentrPort products and services, (b)
the extinguishment of its obligation to pay the value of its shortfall in
either cash or CentrPort common stock and (c) the extension of its $2.5 million
note receivable due from the CentrPort Investors to the Company until December
31, 2002. Accordingly, the Company recognized the remaining deferred gain of
$2.3 million in the first quarter of 2002.

   In addition, as a result of a valuation the Company received from an
independent firm regarding its investment in CentrPort, as of December 31,
2001, the Company concluded that its investment in CentrPort was impaired.
Accordingly, the Company reduced its investment in CentrPort from $3.7 million,
reflected at December 31, 2000, to $0.5 million by recording a $3.2 million
charge in the fourth quarter of 2001. Should the demand for CentrPort products
and services continue to decline, the value of the Company's remaining
CentrPort investment may become further impaired.

3.  Comprehensive Income

   The Company reflects its comprehensive income, such as unrealized gains and
losses on its foreign currency translation adjustments and available-for-sale
securities, as a separate component of stockholders' equity as required by SFAS
No. 130, Reporting Comprehensive Income. The Company has not recorded the tax
effects related to the currency translation adjustments because such
adjustments relate to investments in international subsidiaries whose earnings
are not expected to be distributed for the foreseeable future. The components
of accumulated other comprehensive income are summarized as follows:

<TABLE>
<CAPTION>
                                                     March 31, December 31,
                                                       2002        2001
                                                     --------- ------------
                                                         (In thousands)
    <S>                                              <C>       <C>
    Foreign currency translation adjustment.........  $(1,120)   $(1,049)
    Available-for-sale securities...................       --         --
                                                      -------    -------
       Total accumulated other comprehensive income.  $(1,120)   $(1,049)
                                                      =======    =======
</TABLE>

                                      9

<PAGE>

                      MODEM MEDIA, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


4.  Goodwill--Adoption of SFAS 142

   The following table depicts the Company's net income and earnings per share
adjusted for the impact of goodwill amortization during the reported periods:

<TABLE>
<CAPTION>
                                                    Three Months
                                                  Ended March 31,
                                                  ----------------
                                                    2002     2001
                                                   ------   -----
                                                   (In thousands,
                                                  except per share
                                                      amounts)
              <S>                                 <C>       <C>
                 Reported net income............. $1,539    $ 128
                 Add back: Goodwill amortization.     --      857
                                                   ------   -----
                 Adjusted net income............. $1,539    $ 985
                                                   ======   =====
              Basic earnings per share:..........
                 Reported net income............. $ 0.06    $0.01
                 Add back: Goodwill amortization.     --     0.03
                                                   ------   -----
                 Adjusted net income............. $ 0.06    $0.04
                                                   ======   =====
              Diluted earnings per share:
                 Reported net income............. $ 0.06    $0.00
                 Add back: Goodwill amortization.     --     0.03
                                                   ------   -----
                 Adjusted net income (*)......... $ 0.06    $0.04
                                                   ======   =====
</TABLE>
--------
(*) numbers may not add, due to rounding

5.  Restructuring and Other Charges, Net

   In the first quarter of 2002, the Company reduced staff, primarily in Europe
and Asia, to better align capacity with the demand from its clients. As a
result of these actions, a restructuring charge of $0.8 million was recorded
for the three months ended March 31, 2002. The accruals established by the
Company, and activities related thereto, are summarized as follows:

<TABLE>
<CAPTION>
                                                 Balances at   Charges                           Balances at
                                                 December 31,  (Net of    Cash    Non-Cash        March 31,
                                                     2001     Reversals)  Uses      Uses   Other    2002
                                                 ------------ ---------- -------  -------- ----- -----------
                                                                       (in thousands)
<S>                                              <C>          <C>        <C>      <C>      <C>   <C>
Excess facilities...............................   $ 8,187       $ --    $  (279)   $ --   $121    $8,029
Restructuring of Paris, France office, including
  severance.....................................     1,221         --       (462)    (61)    --       698
Other severance.................................       757        767       (694)     (1)    --       829
Other...........................................         4         --         --      --     (4)       --
                                                   -------       ----    -------    ----   ----    ------
   Total........................................   $10,169       $767    $(1,435)   $(62)  $117    $9,556
                                                   =======       ====    =======    ====   ====    ======
                                                              Less: current portion.............    2,548
                                                                                                   ------
                                                              Long-term portion.................   $7,008
                                                                                                   ======
</TABLE>


                                      10

<PAGE>

                      MODEM MEDIA, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


6.  Geographic Information

   Information about the Company's operations in different geographic regions
is as follows:

<TABLE>
<CAPTION>
                                                     March 31,
                                                 ----------------
                                                  2002     2001
                                                 -------  -------
                                                  (in thousands)
              <S>                                <C>      <C>
              Revenues:
                 North America (1).............. $15,001  $26,323
                 International (2)..............   5,028    8,053
                                                 -------  -------
                     Total...................... $20,029  $34,376
                                                 =======  =======
              Income (loss) before income taxes:
                 North America.................. $ 3,294  $ 2,580
                 International..................    (566)  (4,580)
                                                 -------  -------
                     Total...................... $ 2,728  $(2,000)
                                                 =======  =======
              Net income:
                 North America.................. $ 2,172  $ 4,713
                 International..................    (633)  (4,585)
                                                 -------  -------
                     Total...................... $ 1,539  $   128
                                                 =======  =======
</TABLE>
--------
(1) Revenues for North America include $0.5 million and $0.7 million of
    revenues related to reimbursable pass-through expenses for the quarters
    ended March 31, 2002 and 2001, respectively. Revenues for the United
    States, which is a component included in North America, were $14.3 million
    and $24.9 million for the quarters ended March 31, 2002 and 2001,
    respectively, inclusive of pass-through revenue.

(2) Revenues for International include $0.3 million and $0.2 million of
    revenues related to reimbursable pass-through expenses for the quarters
    ended March 31, 2002 and 2001, respectively. Revenues for the United
    Kingdom, which is a component included in International, were $3.8 million
    and $5.2 million for the quarters ended March 31, 2002 and 2001,
    respectively, inclusive of pass-through revenue.

7.  Legal Proceedings

   Litigation--Beginning in August 2001, a number of substantially identical
class action complaints alleging violations of the federal securities laws were
filed in the United States District Court for the Southern District of New York
naming as defendants the Company, certain of its officers (G.M. O'Connell,
Chairman, Steven Roberts, former Chief Financial Officer, and, in certain
actions, Robert C. Allen II, Board member, a Managing Director and former
President), and certain named underwriters of the Company's initial public
offering (FleetBoston Robertson Stephens, Inc., BankBoston Robertson Stephens,
Inc., Bear Stearns & Co., Inc., Nationsbanc Montgomery Securities and Banc of
America Securities LLC). The complaints have since been consolidated into a
single action, and a consolidated amended complaint was filed on April 24,
2002. The amended complaint alleges, among other things, that the underwriters
of the Company's initial public offering violated the securities laws by
failing to disclose certain alleged compensation arrangements (such as
undisclosed commissions or stock stabilization practices) in the offering's
registration statement and by engaging in manipulative practices to
artificially inflate the price of Modem Media stock in the after-market
subsequent to the IPO. The Company defendants are named in the amended
complaint pursuant to Section 11 of the Securities Act of 1933, and Section
10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 on the basis of an
alleged failure to disclose the underwriters' alleged compensation arrangements
and manipulative practices. The complaint seeks unspecified damages. Similar
complaints have been filed against over 300 other issuers that have

                                      11

<PAGE>

                      MODEM MEDIA, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

had initial public offerings since 1998 and all such actions have been included
in a single coordinated proceeding. The Company intends to defend these actions
vigorously. However, due to the inherent uncertainties of litigation, the
Company cannot accurately predict the ultimate outcome of the litigation. Any
unfavorable outcome of this litigation could have an adverse impact on the
Company's business, liquidity, financial condition and results of operations.

   In August 2001, the Company's subsidiary, Modem Media Canada, Inc. ("Modem
Media Canada"), brought suit against Citi Core Properties, Ltd. ("Landlord") in
Ontario Supreme Court for breach of an office lease on the basis that the
Landlord did not complete the building into which Modem Media Canada was to
move (the "Space"). Modem Media Canada is claiming approximately $1.2 million
in damages. The Landlord has counter-sued the Company, Modem Media Canada and
certain of the Company's officers and directors for breach of lease and is
seeking damages in the amount of approximately $16.0 million. After the
Landlord counter-sued the Company, the Landlord went into receivership. The
Space was repossessed by a mortgage holder and has been sold to an unrelated
third-party. The Company believes that it has meritorious defenses to the
counter-claims and intends to defend this action vigorously. The Company
believes that the resolution of these matters will not have a material adverse
effect on its business, financial condition and results of operations.

   From time-to-time, the Company becomes involved in various routine legal
proceedings in the ordinary course of its business. Other than as noted above,
the Company believes that the outcome of pending legal proceedings and
unasserted claims in the aggregate will not have a material adverse effect on
its consolidated results of operations, consolidated financial position or
liquidity.

8.  Subsequent Events

   Stock Option Exchange Offers--In October 2001, the Company completed a
voluntary stock option exchange offer to its eligible employees, which
commenced in September 2001. Participating employees had the opportunity to
cancel previously granted options with an exercise price greater than $6.00 per
share in exchange for an equal number of new options, which were granted on
April 17, 2002. The exercise price of these new options was set at the fair
market value ($4.15) of the Company's stock as of April 17, 2002. As a result
of this program, 75,800 options were canceled in October 2001 and 70,800 were
granted on April 17, 2002.

   Goodwill Impairment--As a result of the continued decline in revenues for
the Company's German operations in the first quarter of 2002, a delay in a
project for one of its major clients and diminishing new business prospects,
the Company believes that its $3.4 million of goodwill associated with this
German operation is fully or partially impaired. The Company is in the process
of performing the SFAS 142 required transitional fair value impairment test on
its goodwill and reviewing separable intangible assets, if any, as of January
1, 2002. As part of this review, the Company will determine to what extent its
German goodwill is impaired. This testing is expected to be completed during
the second quarter of 2002.

                                      12

<PAGE>

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

Overview

   Founded in 1987, Modem Media is an interactive marketing strategy and
services firm. We are a marketing partner to many of the world's leading
companies, including Delta Air Lines, General Electric, General Motors, IBM,
Kodak, Kraft, Michelin and Royal Philips Electronics. We use digital marketing
and technologies to help these and other clients realize greater value from
their most vital asset--their customers. We approach this goal through the
following business basics:

  .   We add profitable new customers for our clients, through brand awareness,
      demand generation, lead generation and customer acquisition initiatives;

  .   We increase our clients' sales from current customers, through loyalty,
      retention, cross-sell and up-sell initiatives and through digital
      services and experiences that expand the breadth, depth and lifetime
      value of customer relationships; and

  .   We improve our clients' marketing productivity, by migrating high cost
      sales, service and communication activities on-line and optimizing the
      cost and impact of activities that are already executed on-line.

   We leverage our experience in marketing and business strategy, database
marketing, creative design and technology development to address the unique
business objectives, challenges and opportunities of each of our client
companies. We tailor solutions across integrated service offerings that include:

   Marketing Insights, Strategy and Planning

      We help our clients discover and mine untapped opportunities to create
   revenue, reduce costs and capture the full value potential of their
   customers. This work begins and ends with our clients' customers:
   understanding their needs and preferences, assessing their value to our
   client's business, prioritizing customer segments, and defining pragmatic
   strategies to realize value potential. Our planning teams guide clients on
   topics as wide-ranging as digital branding, technology master planning and
   media partnership strategy.

   Marketing Platform Design and Development

      We design and build marketing platforms that enable our clients to
   create, manage and grow profitable relationships with their customers. These
   platforms include websites and wireless applications, intranets and
   extranets, that support our client's needs in communications, commerce and
   customer care. Our marketing platform teams bring expertise in both the
   creative and technical aspects of digital platform design, including user
   interface and experience design, information architecture, application
   development, content management and personalization systems, and marketing
   automation tools.

   Marketing Program Design and Execution

      We conceive, create and distribute the marketing programs that turn our
   clients' prospects into customers. We test, track and optimize digital
   experiences to achieve each client's marketing goals most effectively and
   efficiently. This work entails the development of innovative marketing ideas
   and rigorous data analysis. Our marketing programs teams bring expertise in
   creative design and execution, marketing plan development, media services,
   database marketing, and database management and analysis.

Restructuring and Other Charges

   During the first three quarters of 2000, we incurred substantial costs to
expand and integrate our operations both in our North American and
international offices, as well as to develop our infrastructure. Starting in the

                                      13

<PAGE>

fourth quarter of 2000 and continuing through the first quarter of 2002, we
implemented various restructuring plans focusing on improving our
organizational effectiveness and profitability through the reduction of costs
as a result of the economic downturn and decreasing demand for our services
from our clients. These activities included (a) the closure of our Tokyo, Japan
office, (b) the closure of our New York City office and consolidation of its
operations into our office in Norwalk, Connecticut, (c) the decision made in
the fourth quarter of 2001 to restructure our operations in Paris, France,
which is expected to be completed in the second quarter of 2002, (d) the
reduction of our San Francisco office space, (e) the cancellation of our move
of our Toronto operations to a new, larger location as a result of the breach
of our lease by our landlord and (f) the reduction of corporate staff and
reduction of our capacity across multiple offices.

   In the first quarter of 2002, we reduced staff, primarily in Europe and
Asia, to better align our capacity with the demand from our clients. As a
result of these actions, we recorded a restructuring charge of $0.8 million for
the three months ended March 31, 2002. As a result of the restructuring actions
mentioned above, including office closures, restructuring, staff cut-backs and
attrition, our capacity, or full-time equivalents (defined as employees plus
temporary staff), has been reduced by approximately 50%, from September 30,
2000 to March 31, 2002. We periodically monitor accruals for prior
restructuring charges taken and, as of March 31, 2002, we consider the accruals
to be adequate (see Note 5 of "Notes to Consolidated Financial Statements").

   Due to adverse market conditions and lower revenues in our Hong Kong office,
our estimates of future operating performance and cash flows in Hong Kong have
declined substantially. If business conditions do not improve, we may decide to
restructure our operations in Hong Kong during 2002.

Goodwill Impairment

   In October 1999, we acquired 100% of the outstanding capital stock of MEX
Multimedia Experts GmbH, a developer of interactive business solutions in
Munich, Germany, for $5.4 million, which was comprised of $3.0 million in cash
and $2.4 million of our common stock. As a result of the continued decline in
revenues for our German operations in the first quarter of 2002, a delay in a
project for one of its major clients and diminishing new business prospects, we
believe that our $3.4 million of goodwill associated with this German operation
is fully or partially impaired. We are in the process of performing the SFAS
142 required transitional fair value impairment test on our goodwill and
reviewing separable intangible assets, if any, as of January 1, 2002. As part
of this review, we will determine to what extent our German goodwill is
impaired. This testing is expected to be completed during the second quarter of
2002.

CentrPort Transactions and Investment

   We and certain employees formed CentrPort LLC in November 1999 to focus on
developing intelligent marketing platforms to build and enhance customer
relationships across multiple communication channels. In December 2000,
CentrPort LLC, which was originally organized as a Delaware limited liability
company, was reorganized as CentrPort, Inc. ("CentrPort"), a Delaware
corporation. Immediately after this reorganization, we sold a portion of our
ownership in CentrPort, formerly our majority-owned subsidiary. A consortium of
third party investors (the "CentrPort Investors") purchased 8,332,000 shares of
preferred stock of CentrPort from us ("CentrPort Preferred Stock Sale") in
exchange for $2.5 million in cash and a $2.5 million note receivable originally
due in December 2001, subject to certain conditions. In addition, we received a
warrant to purchase 391,604 shares of CentrPort common stock from CentrPort
("CentrPort Warrant").

   Concurrent with the CentrPort Preferred Stock Sale, the CentrPort Investors
agreed to invest up to $22.0 million directly into CentrPort. At the closing of
the transaction, $16.5 million was paid by the CentrPort Investors to CentrPort
in exchange for 36,660,800 shares of newly issued CentrPort preferred stock.
Subject to CentrPort's securing certain revenue commitments by April 1, 2001,
an additional payment of $5.5 million ("Contingent Payment") would be due from
the CentrPort Investors to CentrPort in December 2001. CentrPort did not secure
these certain commitments and as such the Contingent Payment was not made by
the CentrPort Investors to CentrPort.

                                      14

<PAGE>

   In addition, concurrent with the CentrPort Preferred Stock Sale, we
purchased 1,842,657 shares of CentrPort common stock from certain minority
CentrPort stockholders in exchange for approximately $1.9 million of our common
stock, or 315,858 shares (the "Founders' Stock Transaction"). In connection
with the Founders' Stock Transaction, we recorded a charge to equity of
approximately $1.4 million based on the excess of the value paid for the
founders' stock and its estimated fair value on the date we acquired the stock.

   The CentrPort Preferred Stock Sale, the CentrPort Warrant, the investment by
the CentrPort Investors directly into CentrPort, and the Founders' Stock
Transaction are hereinafter collectively referred to as the "CentrPort
Transactions." As a result of the CentrPort Transactions, our ownership in
CentrPort preferred and common stock, combined, was reduced from 59.0% to
15.2%. Through the date of the CentrPort Transactions, we consolidated
CentrPort and recognized 100% of the losses incurred by CentrPort in
consideration that we were CentrPort's sole funding source. Such losses
aggregated approximately $5.7 million. Subsequent to the CentrPort
Transactions, we have accounted for our investment in CentrPort under the cost
method.

   In conjunction with the CentrPort Transactions, we designated CentrPort as a
preferred vendor and committed to resell at least $5.0 million of CentrPort's
products and services during 2001 pursuant to a value added reseller agreement
("CentrPort Commitment"). Based primarily on the uncertain nature of our
ability to meet this CentrPort Commitment, we deferred our gain of $4.1 million
on the CentrPort Preferred Stock Sale. The original agreement provided that, if
the CentrPort Commitment was not met, we were to remit the value of the
shortfall to CentrPort in either CentrPort common stock, from our holdings
pursuant to a contractual per share fixed value or in cash, at our election. As
of December 31, 2001, we had sold $2.7 million in CentrPort products and
services applicable to the CentrPort Commitment. As a result, we recognized
$1.7 million, in the fourth quarter of 2001, of the $4.1 million deferred gain
that was recorded as of December 31, 2000. The remaining balance of the
deferred gain on our balance sheet was equal to $2.3 million as of December 31,
2001. In February 2002, we, CentrPort and the CentrPort Investors were party to
agreements, which amended various conditions and commitments including (a) the
extinguishment of our CentrPort Commitment to sell CentrPort products and
services, (b) the extinguishment of our obligation to pay the value of our
shortfall in either cash or CentrPort common stock and (c) the extension of our
$2.5 million note receivable due from CentrPort Investors to us until December
31, 2002. Accordingly, we recognized the remaining deferred gain of $2.3
million in the first quarter of 2002 (see Note 2 of "Notes to Consolidated
Financial Statements").

   In addition, as a result of a valuation we received from an independent firm
regarding our investment in CentrPort, as of December 31, 2001, we concluded
that our investment in CentrPort was impaired. Accordingly, we reduced our
investment in CentrPort from $3.7 million, reflected at December 31, 2000, to
$0.5 million by recording a $3.2 million charge, in the fourth quarter of 2001.
Should the demand for CentrPort products and services continue to decline, the
value of our remaining CentrPort investment may become further impaired (see
Note 2 of "Notes to Consolidated Financial Statements").

Historical Results of Operations

   Clients hire us on a fixed-fee, retainer or time-and-material basis. A
majority of our revenues are derived from fixed-fee and retainer engagements.
We recognize revenues as services are rendered, in accordance with Staff
Accounting Bulletin No. 101. We reassess our estimated costs on fixed-fee
engagements periodically and, as needed for specific engagements, losses are
accrued to the extent that costs incurred and anticipated costs to complete
engagements exceed total anticipated billings. Provisions for losses on
uncompleted fixed-fee contracts, if any, are recognized in the period in which
such losses are determined.

   Our results of operations and our business depend on our relationships with
a limited number of large clients with which we generally do not have long-term
contracts. Our clients generally have the right to terminate their
relationships with us without penalty and with relatively short or no notice.
Once an engagement is completed, we cannot be assured that a client will engage
us for further services. As a result, a client that generates substantial
revenues for us in one period may not be a substantial source of revenues in a
subsequent period. The

                                      15

<PAGE>

termination of our business relationships with any of our significant clients,
or a material reduction in the use of our services by any of our significant
clients, could adversely affect our future financial performance.

   Our ten largest clients accounted for 84.9% and 77.3% of consolidated
revenues for the quarters ended March 31, 2002 and 2001, respectively. Three
clients accounted for 15.3%, 14.8% and 10.5% of our consolidated revenues for
the quarter ended March 31, 2002. One client accounted for 25.3% of our
consolidated revenues for the quarter ended March 31, 2001. We expect a
relatively high level of client concentration to continue but it may not
necessarily involve the same clients from period to period.

   Cost of revenues consists of salaries, employee benefits and incentive
compensation for our professional services staff, costs for temporary staff
that we use to provide professional services and certain other direct costs.
Sales and marketing expenses consist of salaries, employee benefits and
incentive compensation of new business development and other sales and
marketing staff and certain other marketing costs. General and administrative
expenses include salaries, employee benefits and incentive compensation of
administrative and other non-billable employees and office rent, utilities,
professional and consulting fees, travel, telephone and other related expenses.

   Although we had operating income of $0.4 million in the first quarter of
2002, we have experienced operating losses in twelve of the seventeen quarters
in the period January 1, 1998 through March 2002. We have experienced
significant revenue fluctuations both in North America and internationally for
the first quarter of 2002 as compared to the first quarter of 2001. As a result
of the economic downturn and consequent decreased demand from clients in North
America and internationally for our services, we experienced a reduction in
revenues in the first quarter of 2002 compared to the first quarter of 2001.
During the first quarter of 2002, 74.9% of our revenues were generated in North
America and 25.1% were generated internationally, as compared to 76.3% and
23.7%, respectively for the first quarter of 2001.

Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001

   Revenues.  Revenues decreased $14.4 million, or 41.7%, to $20.0 million for
the three months ended March 31, 2002 from $34.4 million for the three months
ended March 31, 2001. This decline in revenues was primarily attributable to a
decrease in the total billable hours and average revenue per hour for the three
months ended March 31, 2002 as compared to the three months ended March 31,
2001. The decrease in billable hours and average revenue per hour is primarily
due to the decrease in demand for our services attributable to the general
decline in the global economy, the closing of our office in Tokyo, Japan during
2001, ceasing operations in our office in Paris, France and the winding down of
a large project for one client in Europe. Effective January 1, 2002, we adopted
Financial Accounting Standards Board ("FASB") Emerging Issues Task Force Issue
No. 01-14, "Income Statement Characterization of Reimbursements Received for
Out-of-Pocket Expenses Incurred" ("EITF 01-14"). We had revenues and cost of
revenues related to reimbursable pass-through expenses of $0.8 million and $0.9
million for the first quarter of 2002 and 2001, respectively.

   North American revenues decreased $11.3 million, or 43.0%, to $15.0 million
for the three months ended March 31, 2002 from $26.3 million for the three
months ended March 31, 2001. This decline in revenues was primarily
attributable to a decrease in the North American billable hours and average
revenue per hour for the three months ended March 31, 2002 as compared to the
three months ended March 31, 2001. The decrease in billable hours and average
revenue per hour is primarily due to the decrease in demand for our services
attributable to the general decline in the domestic economy. We had North
American revenues and cost of revenues related to reimbursable pass-through
expenses of $0.5 million and $0.7 million for the first quarter of 2002 and
2001, respectively.

   International revenues decreased $3.1 million, or 37.6%, to $5.0 million for
the three months ended March 31, 2002 from $8.1 million for the three months
ended March 31, 2001. This decline in revenues was primarily attributable to a
decrease in the international billable hours and average revenue per hour for
the three months ended March 31, 2002 as compared to the three months ended
March 31, 2001. The decrease in billable hours and average revenue per hour is
primarily due to the decrease in demand for our services attributable to the

                                      16

<PAGE>

general decline in the global economy. Additionally, billable hours were down
due to the closing of our office in Tokyo, Japan during 2001, ceasing
operations in our office in Paris, France and the winding down of a large
project for one client in Europe. We had international revenues and cost of
revenues related to reimbursable pass-through expenses of $0.3 million and $0.2
million for the first quarter of 2002 and 2001, respectively.

   Cost of Revenues and Gross Profit.  Cost of revenues decreased $8.7 million,
or 44.0%, to $11.0 million for the three months ended March 31, 2002 from $19.7
million for the three months ended March 31, 2001. The decrease in cost of
revenues for the first quarter of 2002 compared to the first quarter of 2001
was primarily due to decreased full-time equivalent employees (defined as
employees plus temporary staff).

   Gross profit margin increased to 45.0% of revenues for the first quarter of
2002 from 42.7% for the first quarter of 2001. North American gross profit
margin was 48.7% for the three months ended March 31, 2002 as compared to 51.1%
for the three months ended March 31, 2001. International gross profit margin
was 33.8% for the three months ended March 31, 2002 as compared to 15.4% for
the three months ended March 31, 2001. Utilization was higher for the first
quarter of 2002 compared to the first quarter of 2001 for the Company in total
and for both North America and international utilization. This increase in
utilization was primarily attributable to the decrease in capacity as a result
of the restructuring actions taken during 2001 and 2002.

   Sales and Marketing.  Sales and marketing expenses for the three months
ended March 31, 2002 was $0.6 million, or 2.8% of revenues as compared to $1.3
million, or 3.7%, of revenues for the three months ended March 31, 2001. The
dollar and percentage decreases in sales and marketing expenses were primarily
the result of expense reduction action taken during 2001 and the first quarter
of 2002.

   General and Administrative.  General and administrative expenses decreased
$5.0 million, or 45.8%, to $5.9 million for the three months ended March 31,
2002 from $10.9 million for the three months ended March 31, 2001. General and
administrative represented 29.4% of consolidated revenues for the first quarter
of 2002 as compared to 31.6% for the first quarter of 2001. The dollar and
percentage decreases in general and administrative were primarily the result of
expense reduction actions taken during 2001 and the first quarter of 2002.

   Restructuring and Other Charges, net.  Restructuring charges of $0.8 million
for the first quarter of 2002, represent costs incurred in connection with
staff reductions, primarily in Europe and Asia, to better align our capacity
with the demand from our clients. The restructuring charges of $2.4 million for
the first quarter of 2001 represented (a) a reduction in our total workforce of
approximately 10%, (b) the costs associated with our decision to close our
office in Tokyo, Japan, which ceased operations in 2001, and (c) the reduction
of our capacity across multiple offices.

   Depreciation and Amortization.  Depreciation and amortization decreased $0.3
million, or 19.3%, to $1.4 million for the three months ended March 31, 2002
from $1.7 million for the three months ended March 31, 2001. Depreciation and
amortization represented 7.0% of consolidated revenues for the first quarter of
2002 and 5.0% for the first quarter of 2001. The decrease in depreciation and
amortization was primarily attributable to a decrease in property and equipment
which was the result of the restructuring actions taken, which included the
write-off of certain property and equipment.

   Amortization of Goodwill.  As a result of the adoption of SFAS No. 142,
effective January 1, 2002, we no longer record goodwill amortization.
Amortization of goodwill for the three months ended March 31, 2001 was $0.9
million (see Note 4 of "Notes to Consolidated Financial Statements").

   Gain on Sale of CentrPort Stock.  In conjunction with the CentrPort
Transactions, we designated CentrPort as a preferred vendor and committed to
resell at least $5.0 million of CentrPort's products and services during 2001
pursuant to a value added reseller agreement ("CentrPort Commitment"). Based
primarily on the uncertain

                                      17

<PAGE>

nature of our ability to meet this CentrPort Commitment, we deferred our gain
of $4.1 million on the sale of a portion of our preferred holdings in CentrPort
to the CentrPort Investors in 2000, as described previously. The original
agreement provided that, if the CentrPort Commitment was not met, we were to
remit the value of the shortfall to CentrPort in either CentrPort common stock
from our holdings pursuant to a contractual per share fixed value or in cash,
at our election. As of December 31, 2001, we had sold $2.7 million in CentrPort
products and services applicable to the CentrPort Commitment. As a result, we
recognized $1.7 million, in the fourth quarter of 2001, of the $4.1 million
deferred gain that was recorded at December 31, 2000. The remaining balance of
the deferred gain on our balance sheet was equal to $2.3 million as of December
31, 2001. In February 2002, we, CentrPort and the CentrPort Investors were
party to agreements, which amended various conditions and commitments including
(a) the extinguishment of our CentrPort Commitment to sell further CentrPort
products and services, (b) the extinguishment of our obligation to pay the
value of our shortfall in either cash or CentrPort common stock and (c) the
extension of our $2.5 million note receivable due from CentrPort Investors to
us until December 31, 2002. Accordingly, we recognized the remaining deferred
gain of $2.3 million in the first quarter of 2002 (see Note 2 of "Notes to
Consolidated Financial Statements").

   Interest Income, Net.  Interest income, net decreased by 97.0% during the
three months ended March 31, 2002 compared to the three months ended March 31,
2001 due primarily to lower interest rates realized on short-term investment
balances during the first quarter of 2002 as compared to the first quarter of
2001. Offsetting interest income in both quarters is the recognition of
interest expense related to the net present value liability of our
restructuring reserve related to our lease commitment for our unoccupied San
Francisco office space.

   Income Taxes.  We had a provision for income taxes of $1.2 million on a
pre-tax income of $2.7 million for the three months ended March 31, 2002,
compared to a benefit for income taxes of $2.1 million on a pre-tax loss of
$2.0 million for the three months ended March 31, 2001. The effective income
tax rate was 43.6% for the three months ended March 31, 2002 compared to an
effective income tax benefit rate of 106.4% for the three months ended March
31, 2001. The effective tax rates differ from the federal statutory rate
primarily due to the effect of losses of certain foreign subsidiaries on which
we did not recognize tax benefits in both periods. Additionally, in the three
months ended March 31, 2001, the effective rate was favorably impacted for the
domestic tax benefit of the write-off of our investment in Tokyo, Japan and was
offset by the tax effect of non-deductible goodwill amortization and state
taxes.

   Net Income. Our net income was $1.5 million, or $0.06 per basic and diluted
common share, for the quarter ended March 31, 2002, as compared to $0.1
million, or $0.01 per basic common share and essentially zero per diluted
common share, for the quarter ended March 31, 2001. The increase in net income
of $1.4 million was primarily due to lower restructuring and other charges and
lower amortization of goodwill partially offset by higher income taxes, as
mentioned above, and the gain on the sale of CentrPort stock.

Liquidity and Capital Resources

   We historically have financed our operations from funds generated from
operations and proceeds from our initial public offering. Net cash used in
operating activities was $1.4 million and $2.2 million for the three months
ended March 31, 2002 and 2001, respectively. The primary reason for the use of
cash for both periods was the payment of annual bonuses for the preceding year.

   Net cash used in investing activities was essentially zero and $1.4 million
for the three months ended March 31, 2002 and 2001, respectively. Investing
activities primarily reflect our purchases of property and equipment, and the
net effect of purchases and maturities of short-term investments.

   Net cash provided by financing activities was essentially zero and $0.5
million for the three months ended March 31, 2002 and 2001, respectively. The
primary sources of cash flows from financing activities in the first quarters
of 2002 and 2001 were proceeds from the exercise of employee stock options and
purchases under the employee stock purchase plan, offset in part by payments of
capital leases and repayments of debt.

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<PAGE>

   Our short-term significant commitments include net media obligations of $6.8
million, lease payments over the next twelve months aggregating $6.5 million,
net of sub-lease income, other severance costs of $0.8 million, payments under
a note payable of $0.2 million and the funding of certain international
operations that are not expected to be self-sufficient in the near-term. Our
long-term capital needs depend on numerous factors, including the rate at which
we are able to obtain new business from clients and expand our staff and
infrastructure, as needed, to accommodate growth or maintain our staff to
retain our talent base, as well as the rate at which we choose to invest in new
technologies. We have ongoing needs for capital, including working capital for
operations and capital expenditures to maintain and expand our operations as
needed.

   We are the guarantor for CentrPort's obligations under its ten-year lease
for office space, which expires on June 30, 2010, subject to renewal. As of
March 31, 2002, the aggregate remaining base rent and operating expenses due
under this lease is $6.3 million, subject to adjustment in accordance with the
terms of the lease. The lease provides that, once 50% of the original lease
term has expired, this guaranty may be replaced with an irrevocable letter of
credit in favor of the landlord for an amount not to exceed the remaining base
rent. CentrPort has committed to us that upon expiration of 50% of the lease
term, CentrPort will obtain such a letter of credit. Additionally, CentrPort
has agreed to cooperate with us to secure our release from our guaranty prior
to that time, if possible. We were previously a guarantor for CentrPort's lease
of certain network storage server equipment from a third-party vendor. In June
2001, the lessor of this equipment discharged our guaranty under this lease.

   We believe that our cash on hand and short-term investments, together with
funds available from operations, will be sufficient to meet our capital needs
for at least the next twelve months.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   Our consolidated financial statements are denominated in U.S. dollars. In
the first quarter of 2002, we derived 29.1% of our revenues from operations
outside of the U.S. We face foreign currency risks primarily as a result of the
revenues that we receive from services delivered through our foreign
subsidiaries. These subsidiaries incur most of their expenses in the local
currency. Accordingly, our foreign subsidiaries use the local currency as their
functional currency. We are also exposed to foreign exchange rate fluctuations,
primarily with respect to the British Pound, Euro, and Canadian Dollar, as the
financial results of foreign subsidiaries are translated into U.S. dollars for
consolidation. As exchange rates vary, these results, when translated, may vary
from expectations and adversely impact net income (loss) and operating
performance. The effect of foreign exchange rate fluctuation for the quarter
ended March 31, 2002 was not material. Currently, we do not hedge foreign
currency transactions into U.S. dollars because we believe that, over time, the
cost of a hedging program will outweigh any benefit of greater predictability
in our U.S. dollar denominated results. However, we will, from time-to-time,
reconsider the issue of whether a foreign currency-hedging program would be
beneficial to our operations.

   We are exposed to interest rate risk primarily through our investments in
cash equivalents and short-term investments. Our investment policy calls for
investment in short-term, low risk instruments. A rise in interest rates would
have an adverse impact on the fair value of fixed rate securities and,
conversely, if interest rates fall, floating rate securities may generate less
income. We limited our exposure to interest rate risk by investing in
securities with maturities of one year or less.

   Effective January 1, 1999, eleven of the fifteen members of the European
Union established fixed conversion rates between their existing sovereign
currencies and one common currency, the Euro. The participating countries
adopted the Euro as their common currency on January 1, 1999. On January 1,
2002, Euro-denominated currency was issued, and on June 30, 2002, all national
currencies of the participating countries will cease to be legal tender. Our
European operations are most significantly concentrated in the United Kingdom,
which, despite being a member of the European Union, is not participating in
the single currency at this time. While we are in the process of making certain
adjustments to our business and operations to accommodate the Euro conversion,
we do not believe, based on information available at this time, that the Euro
conversion will have a material adverse impact on our financial position or
results of operations.


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<PAGE>

                          PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

   Beginning in August 2001, a number of substantially identical class action
complaints alleging violations of the federal securities laws were filed in the
United States District Court for the Southern District of New York naming as
defendants Modem Media, Inc., certain of our officers (G.M. O'Connell,
Chairman, Steven Roberts, former Chief Financial Officer, and, in certain
actions, Robert C. Allen II, Board member, a Managing Director and former
President), and certain named underwriters of our initial public offering
(FleetBoston Robertson Stephens, Inc., BankBoston Robertson Stephens, Inc.,
Bear Stearns & Co., Inc., Nationsbanc Montgomery Securities and Banc of America
Securities LLC). The complaints have since been consolidated into a single
action, and a consolidated amended complaint was filed on April 24, 2002. The
amended complaint alleges, among other things, that the underwriters of our
initial public offering violated the securities laws by failing to disclose
certain alleged compensation arrangements (such as undisclosed commissions or
stock stabilization practices) in the offering's registration statement and by
engaging in manipulative practices to artificially inflate the price of Modem
Media stock in the after-market subsequent to the IPO. The Modem Media
defendants are named in the amended complaint pursuant to Section 11 of the
Securities Act of 1933, and Section 10(b) and Rule 10b-5 of the Securities
Exchange Act of 1934 on the basis of an alleged failure to disclose the
underwriters' alleged compensation arrangements and manipulative practices. The
complaint seeks unspecified damages. Similar complaints have been filed against
over 300 other issuers that have had initial public offerings since 1998 and
all such actions have been included in a single coordinated proceeding. Modem
Media intends to defend these actions vigorously. However, due to the inherent
uncertainties of litigation, we cannot accurately predict the ultimate outcome
of the litigation. Any unfavorable outcome of this litigation could have an
adverse impact on our business, liquidity, financial condition and results of
operations.

   In August 2001, our subsidiary, Modem Media Canada, Inc. ("Modem Media
Canada"), brought suit against Citi Core Properties, Ltd. ("Landlord") in
Ontario Supreme Court for breach of an office lease on the basis that the
Landlord did not complete the building into which Modem Media Canada was to
move (the "Space"). Modem Media Canada is claiming approximately $1.2 million
in damages. The Landlord has counter-sued us, Modem Media Canada and certain of
our officers and directors for breach of lease and is seeking damages in the
amount of approximately $16.0 million. After the Landlord counter-sued us, the
Landlord went into receivership. The Space was repossessed by a mortgage holder
and has been sold to an unrelated third party. We believe that we have
meritorious defenses to the counter-claim and we intend to defend this action
vigorously. We believe that the resolution of these matters will not have a
material adverse effect on our business, financial condition and results of
operations.

   From time-to-time, the Company becomes involved in various routine legal
proceedings in the ordinary course of its business. Other than as noted above,
the Company believes that the outcome of pending legal proceedings and
unasserted claims in the aggregate will not have a material adverse effect on
its consolidated financial position or liquidity.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

   (b) Reports on Form 8-K

   The Company filed a Form 8-K, dated March 1, 2002, reporting in Item 5 the
Company's issuance of a press release correcting its February 28, 2002 press
release that announced the Company's fourth quarter 2001 and year-end December
31, 2001.



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<PAGE>

                                  SIGNATURES

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

Date:  May 15, 2002
                                MODEM MEDIA, INC.

                                By.           /S/  MARC C. PARTICELLI
                                    --------------------------------------------
                                                 Marc C. Particelli
                                        Chief Executive Officer and Director
                                           (Principal Executive Officer)

                                By.         /S/  FRANK C. CONNOLLY, JR.
                                    --------------------------------------------
                                               Frank C. Connolly, Jr.
                                              Chief Financial Officer
                                           (Principal Financial Officer)

                                By.              /S/   MARK R. HAHN
                                    --------------------------------------------
                                                    Mark R. Hahn
                                            Vice President & Controller
                                           (Principal Accounting Officer)


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