##### Table of Contents

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SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

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FORM 10-Q

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

For the quarter ended June 30, 2003

Commission File No. 0-21935

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

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

230 East AvenueNorwalk, 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 o
|----- | ----

There were 25,959,665 shares of the Registrants Common Stock, $0.001 par value, issued and outstanding as of August 1, 2003.

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##### Table of Contents

TABLE OF CONTENTS

|                                                            |                                                                                                 | Page
|----------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ----
|                                                            |                                                                                                 |     
|SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS AND RISK FACTORS | 2                                                                                              
|                                                            |                                                                                                 |     
|PART I. FINANCIAL INFORMATION                               |                                                                                                
|                                                            |                                                                                                 |     
|Item 1.                                                     | Financial Statements (unaudited)                                                                |     
|                                                            | Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002                           | 3   
|                                                            | Consolidated Statements of Operations for the three and six months ended June 30, 2003 and 2002 | 4   
|                                                            | Consolidated Statements of Cash Flows for the six months ended June 30, 2003 and 2002           | 5   
|                                                            | Notes to Consolidated Financial Statements                                                      | 6   
|                                                            |                                                                                                 |     
|Item 2.                                                     | Managements Discussion and Analysis of Financial Condition and Results of Operations           | 12  
|                                                            |                                                                                                 |     
|Item 3.                                                     | Quantitative and Qualitative Disclosures About Market Risk                                      | 19  
|                                                            |                                                                                                 |     
|Item 4.                                                     | Controls and Procedures                                                                         | 19  
|                                                            |                                                                                                 |     
|PART II. OTHER INFORMATION                                  |                                                                                                
|                                                            |                                                                                                 |     
|Item 1.                                                     | Legal Proceedings                                                                               | 20  
|Item 4.                                                     | Submission of Matters to a Vote of Security Holders                                             | 20  
|Item 6.                                                     | Exhibits and Reports on Form 8-K                                                                | 21  
|                                                            | Signatures                                                                                      | 22  

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##### Table of Contents

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 allocation 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 part of our San Francisco office space,
| |   |                                                                                                                                            
| |  | our need and ability to manage the level of our staff and capacity in the future,                                                          
| |   |                                                                                                                                            
| |  | the potential future impairment of our goodwill,                                                                                           
| |   |                                                                                                                                            
| |  | our dependence on key management staff,                                                                                                    
| |   |                                                                                                                                            
| |  | exclusivity arrangements with clients that may limit our ability to provide services to others,                                            
| |   |                                                                                                                                            
| |  | pricing pressure for our services,                                                                                                         
| |   |                                                                                                                                            
| |  | our ability to integrate acquired companies, if any,                                                                                       
| |   |                                                                                                                                            
| |  | the timing and amount of our capital expenditures,                                                                                         
| |   |                                                                                                                                            
| |  | utilization and recoverability of our deferred tax assets,                                                                                 
| |   |                                                                                                                                            
| |  | the timing of collections from our clients,                                                                                                
| |   |                                                                                                                                            
| |  | our ability to manage future growth,                                                                                                       
| |   |                                                                                                                                            
| |  | our ability to respond to rapid technological change,                                                                                      
| |   |                                                                                                                                            
| |  | our dependence on the future growth of the internet,                                                                                       
| |   |                                                                                                                                            
| |  | the long-term effects of the global recession,                                                                                             
| |   |                                                                                                                                            
| |  | changes in government regulation, including regulation of privacy issues and                                                               
| |   |                                                                                                                                            
| |  | the effect of terrorist activities and 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



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##### Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MODEM MEDIA, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share
amounts)(unaudited)

|                                                                                                            |  | June 30,2003 |         | December 31, 2002 |  
|----------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | ----------------- | -
|                                                                                                            |  |              |         |                   |  
|ASSETS                                                                                                      |  |              |         |                   |  
|Current assets:                                                                                             |  |              |         |                   |  
|Cash and cash equivalents                                                                                   |  | $            | 50,304  |                   | $
|Accounts receivable, net of bad debt reserve of $224 and $281, respectively                                 |  |              | 8,604   |                   |  
|Unbilled revenues                                                                                           |  |              | 1,738   |                   |  
|Deferred income taxes                                                                                       |  |              | 5,773   |                   |  
|Prepaid expenses and other current assets                                                                   |  |              | 1,171   |                   |  
|                                                                                                            |  |              |         |                   |  
|Total current assets                                                                                        |  |              | 67,590  |                   |  
|Noncurrent assets:                                                                                          |  |              |         |                   |  
|Property and equipment, net                                                                                 |  |              | 7,760   |                   |  
|Goodwill                                                                                                    |  |              | 43,156  |                   |  
|Deferred income taxes                                                                                       |  |              | 13,532  |                   |  
|Other assets                                                                                                |  |              | 3,336   |                   |  
|                                                                                                            |  |              |         |                   |  
|Total noncurrent assets                                                                                     |  |              | 67,784  |                   |  
|                                                                                                            |  |              |         |                   |  
|Total assets                                                                                                |  | $            | 135,374 |                   | $
|                                                                                                            |  |              |         |                   |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                        |  |              |         |                   |  
|Current liabilities:                                                                                        |  |              |         |                   |  
|Accounts payable                                                                                            |  | $            | 1,059   |                   | $
|Pre-billed media                                                                                            |  |              | 10,013  |                   |  
|Deferred revenues                                                                                           |  |              | 2,284   |                   |  
|Accrued restructuring                                                                                       |  |              | 3,015   |                   |  
|Accrued expenses and other current liabilities                                                              |  |              | 7,161   |                   |  
|                                                                                                            |  |              |         |                   |  
|Total current liabilities                                                                                   |  |              | 23,532  |                   |  
|Noncurrent liabilities:                                                                                     |  |              |         |                   |  
|Accrued restructuring                                                                                       |  |              | 15,043  |                   |  
|Other liabilities                                                                                           |  |              | 1,044   |                   |  
|Stockholders equity:                                                                                       |  |              |         |                   |  
|Common stock, $.001 par value145,000,000 shares authorized, 26,224,308 and 26,188,475 issued, respectively |  |              | 26      |                   |  
|Preferred stock, $.001 par value5,000,000 shares authorized, none issued and outstanding                   |  |              |        |                   |  
|Paid-in capital                                                                                             |  |              | 192,202 |                   |  
|Deferred compensation                                                                                       |  |              | (320    | )                 |  
|Accumulated deficit                                                                                         |  |              | (94,542 | )                 |  
|Treasury stock, 264,522 and 219,422 shares of common stock, respectively, at cost                           |  |              | (1,351  | )                 |  
|Accumulated other comprehensive loss                                                                        |  |              | (260    | )                 |  
|                                                                                                            |  |              |         |                   |  
|Total stockholders equity                                                                                  |  |              | 95,755  |                   |  
|                                                                                                            |  |              |         |                   |  
|Total liabilities and stockholders equity                                                                  |  | $            | 135,374 |                   | $
|                                                                                                            |  |              |         |                   |  

The accompanying notes are an integral part of these consolidated financial
statements.

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MODEM MEDIA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share
amounts)(unaudited)



|                                                             |  | Three Months Ended June 30, |        | Six Months Ended June 30, |  
|------------------------------------------------------------ |  | --------------------------- | ------ | ------------------------- | -
|                                                             |  |                             |        |                           |  
|                                                             |  | 2003                        |        | 2002                      |  
|                                                             |  |                             |        |                           |  
|                                                             |  |                             |        |                           |  
|Revenues                                                     |  | $                           | 15,480 |                           | $
|Cost of revenues                                             |  |                             | 6,857  |                           |  
|                                                             |  |                             |        |                           |  
|Gross profit                                                 |  |                             | 8,623  |                           |  
|                                                             |  |                             |        |                           |  
|Operating expenses:                                          |  |                             |        |                           |  
|Selling, general and administrative                          |  |                             | 4,913  |                           |  
|Restructuring and other charges, net                         |  |                             |       |                           |  
|Depreciation and amortization                                |  |                             | 870    |                           |  
|                                                             |  |                             |        |                           |  
|Total operating expenses                                     |  |                             | 5,783  |                           |  
|                                                             |  |                             |        |                           |  
|Operating income (loss)                                      |  |                             | 2,840  |                           |  
|Gain on sale of CentrPort stock                              |  |                             |       |                           |  
|Interest income                                              |  |                             | 136    |                           |  
|Other expense, net                                           |  |                             | (169   | )                         |  
|                                                             |  |                             |        |                           |  
|Income (loss) from continuing operations before income taxes |  |                             | 2,807  |                           |  
|Provision (benefit) for income taxes                         |  |                             | 1,138  |                           |  
|                                                             |  |                             |        |                           |  
|Income (loss) from continuing operations                     |  |                             | 1,669  |                           |  
|                                                             |  |                             |        |                           |  
|Discontinued operations:                                     |  |                             |        |                           |  
|Operating loss                                               |  |                             |       |                           |  
|Benefit for income taxes                                     |  |                             |       |                           |  
|                                                             |  |                             |        |                           |  
|Income from discontinued operations                          |  |                             |       |                           |  
|                                                             |  |                             |        |                           |  
|Income (loss) before cumulative effect of accounting change  |  |                             | 1,669  |                           |  
|Cumulative effect of accounting change                       |  |                             |       |                           |  
|                                                             |  |                             |        |                           |  
|Net income (loss)                                            |  | $                           | 1,669  |                           | $
|                                                             |  |                             |        |                           |  
|Basic and diluted per share data:*                           |  |                             |        |                           |  
|Income (loss) from continuing operations                     |  | $                           | 0.06   |                           | $
|Income from discontinued operations                          |  |                             |       |                           |  
|                                                             |  |                             |        |                           |  
|Income (loss) before cumulative effect of accounting change  |  |                             | 0.06   |                           |  
|Cumulative effect of accounting change                       |  |                             |       |                           |  
|                                                             |  |                             |        |                           |  
|Net income (loss)                                            |  | $                           | 0.06   |                           | $
|                                                             |  |                             |        |                           |  
|Weighted-average number of common shares outstanding:        |  |                             |        |                           |  
|Basic                                                        |  |                             | 25,958 |                           |  
|                                                             |  |                             |        |                           |  
|Diluted                                                      |  |                             | 26,124 |                           |  
|                                                             |  |                             |        |                           |  

* Numbers may not add due to rounding.

The accompanying notes are an integral part of these consolidated financial statements.

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MODEM MEDIA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)(unaudited)

|                                                                                         |  | Six Months Ended June 30, |       
|---------------------------------------------------------------------------------------- |  | ------------------------- | ------
|                                                                                         |  |                           |       
|                                                                                         |  | 2003                      |       
|                                                                                         |  |                           |       
|                                                                                         |  |                           |       
|Cash flows from operating activities:                                                    |  |                           |       
|Net income (loss)                                                                        |  | $                         | 2,270 
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                           |       
|Depreciation and amortization                                                            |  |                           | 1,801 
|Non-cash restructuring and other charges                                                 |  |                           |      
|Gain from the sale of CentrPort stock                                                    |  |                           |      
|Cumulative effect of accounting change  goodwill impairment                             |  |                           |      
|Non-cash income taxes                                                                    |  |                           | 1,010 
|Provision for doubtful accounts                                                          |  |                           |      
|Other, net                                                                               |  |                           |      
|Amortization of deferred compensation                                                    |  |                           | 106   
|Changes in assets and liabilities:                                                       |  |                           |       
|Accounts receivable                                                                      |  |                           | 3,343 
|Unbilled revenues                                                                        |  |                           | (829  
|Prepaid expenses and other assets                                                        |  |                           | 363   
|Accounts payable, accrued expenses and other liabilities                                 |  |                           | (2,737
|Pre-billed media                                                                         |  |                           | (2,291
|Deferred revenues                                                                        |  |                           | (59   
|Accrued restructuring charges                                                            |  |                           | (1,470
|                                                                                         |  |                           |       
|Net cash provided by operating activities                                                |  |                           | 1,507 
|                                                                                         |  |                           |       
|Cash flows from investing activities:                                                    |  |                           |       
|Purchases of property and equipment                                                      |  |                           | (874  
|Collection of notes receivable                                                           |  |                           | 602   
|                                                                                         |  |                           |       
|Net cash used in investing activities                                                    |  |                           | (272  
|                                                                                         |  |                           |       
|Cash flows from financing activities:                                                    |  |                           |       
|Purchases of treasury stock                                                              |  |                           | (100  
|Payments of notes payable and capital lease obligations                                  |  |                           | (209  
|Exercises of stock options and purchases under employee stock purchase plan              |  |                           | 54    
|                                                                                         |  |                           |       
|Net cash used in financing activities                                                    |  |                           | (255  
|                                                                                         |  |                           |       
|Effect of exchange rates on cash and cash equivalents                                    |  |                           | 12    
|                                                                                         |  |                           |       
|Net increase in cash and cash equivalents                                                |  |                           | 992   
|Cash and cash equivalents, beginning of the period                                       |  |                           | 49,312
|                                                                                         |  |                           |       
|Cash and cash equivalents, end of the period                                             |  | $                         | 50,304
|                                                                                         |  |                           |       

The accompanying notes are an integral part of these consolidated financial
statements.

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MODEM MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 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 some 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 maintains offices in San Francisco, London and São Paulo.

Basis of
PresentationThe accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).  Certain information and footnote
disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been 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 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 and six months ended June 30, 2003 and 2002 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,
2002.

Discontinued OperationsIn the third quarter of 2002, the operations of the Companys offices in Toronto, Munich
and Hong Kong ceased.  In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, as adopted by the Company on January 1, 2002, the results
of these operations have been reclassified and are separately presented for all reporting periods as discontinued operations. A restructuring charge related to these activities was recorded in second quarter of 2002 and is included within operating
loss from discontinued operations.

Principles of ConsolidationThe accompanying consolidated financial statements include all
of the accounts of the Company and its subsidiaries.  All significant intercompany transactions have been eliminated in consolidation.

Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent 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The Company recognizes revenues as services are rendered in accordance with SEC Staff Accounting Bulletin No. 101, Revenue
Recognition in Financial Statements(SAB No. 101).  A majority of its revenues are derived from fixed-bid and retainer-based assignments.  Unbilled revenues represent labor costs incurred and estimated earnings in excess of
billings and production and other client-reimbursable out-of-pocket costs incurred in excess of billings.  Amounts billed to clients in excess of revenues recognized to date are classified as deferred revenues.  The Companys clients
hire it on a fixed-bid, retainer or time-and-materials basis.  The Company reassesses its estimated costs on fixed-bid 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-bid contracts, if any, are recognized in the period in which such losses are determined. The cost of online media and
email campaigns purchased by the Company for its clients is not included in revenue because the Company acts as an agent on behalf of its clients.

In accordance with Emerging Issue Task Force (EITF) Issue No. 01-14, Income Statement Characterization of Reimbursements Received for Out-Of-Pocket
Expenses Incurred (EITF 01-14), the Company reports reimbursable pass-through expenses as a component of revenues and cost of revenues.  This component of revenue was less than 3% of total revenues for all periods
reported.

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##### Table of Contents

MODEM MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

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 19%, 19% and 12% of revenues for the three months ended June 30, 2003, and revenues from two
clients representing 23% and 20% of revenues for the six months ended June 30, 2003.  The Company had revenues from four clients representing 16%, 15%, 11% and 11% of revenues for the three months ended June 30, 2002.  The Company had
revenues from five clients representing 16%, 13%, 11%, 11% and 11% of revenues for the six months ended June 30, 2002.  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 three clients accounting for 20%, 19% and 15% of total gross accounts receivable as of June 30, 2003.  The Company had three clients accounting for 38%,
18% and 14% of total gross accounts receivable as of December 31, 2002.

Income TaxesThe Company accounts for income taxes
under the liability method in accordance with SFAS No. 109, Accounting for Income Taxes.  In accordance with such standard, the provision for income taxes includes deferred income taxes resulting from items reported in different periods
for income tax and financial statement purposes.  Deferred income tax assets and liabilities represent the expected future tax consequences of the differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases.  The effects of changes in tax rates on deferred income tax assets and liabilities are recognized in the period that includes the enactment date.

Stock-Based CompensationThe Company follows the disclosure-only provisions of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123
encourages, but does not require, companies to record compensation expense for stock-based employee compensation plans at fair value.  The Company has elected to continue to account for stock-based compensation to employees using the intrinsic
value method presented in Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees and related interpretations.  Accordingly, the compensation cost of stock options is measured as the excess,
if any, of the quoted market price of the Companys stock at the date of grant over the exercise price and is charged to operations either when earned or over the vesting period.  Income tax benefits attributable to stock options exercised
are credited to paid-in capital.

If compensation expense for stock options awarded under the Companys plans were to have been
determined in accordance with SFAS No. 123, the Companys pro forma net income (loss) and pro forma net income (loss) per share would have been as follows:

|                                                                       |  | Three Months Ended June 30,           |       | Six Months Ended June 30,             |  
|---------------------------------------------------------------------- |  | ------------------------------------- | ----- | ------------------------------------- | -
|                                                                       |  |                                       |       |                                       |  
|                                                                       |  |                                       | 2003  |                                       |  
|                                                                       |  |                                       |       |                                       |  
|                                                                       |  |                                       |       |                                       |  
|                                                                       |  | (in thousands, except per share data) |       | (in thousands, except per share data) |  
|Net income (loss) as reported                                          |  | $                                     | 1,669 |                                       | $
|Stockbased compensation recorded, net of tax                          |  |                                       | 32    |                                       |  
|                                                                       |  |                                       |       |                                       |  
|Sub total                                                              |  |                                       | 1,701 |                                       |  
|Stock-based compensation expense determined under SFAS 123, net of tax |  |                                       | 634   |                                       |  
|                                                                       |  |                                       |       |                                       |  
|Pro forma net income (loss)                                            |  | $                                     | 1,067 |                                       | $
|                                                                       |  |                                       |       |                                       |  
|Net income (loss) per share:                                           |  |                                       |       |                                       |  
|Basic and diluted income (loss) per share, as reported                 |  | $                                     | 0.06  |                                       | $
|                                                                       |  |                                       |       |                                       |  
|Basic and diluted income (loss) per share, pro forma                   |  | $                                     | 0.04  |                                       | $
|                                                                       |  |                                       |       |                                       |  

The effects of applying SFAS No. 123 in the
pro forma net income (loss) disclosures above are not likely to be representative of the effects on pro forma disclosures of future years.

During the first quarter of 2003, as a partial payment under the Companys management incentive plan, the Company issued approximately 244,000 options to
purchase its common stock to certain management employees at an exercise price of $0.58 per share.  The Company recorded deferred compensation expense of approximately $0.4 million relating to these options, which represents the difference
between the exercise price and the fair market value of the Companys common stock on the date of grant.  This balance will be amortized on a straight-line basis over the vesting period, which ends on December 31, 2004.  The Company
has amortized approximately $0.05 million and $0.1 million of deferred compensation during the three and six months ended June 30, 2003, respectively.

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##### Table of Contents

MODEM MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

Cash and Cash EquivalentsThe Company considers all highly liquid investments with a
maturity of three months or less at the time of purchase to be cash equivalents.  Although cash balances are maintained in high quality financial institutions, the balances at times exceed insurable amounts.

Property and EquipmentProperty and equipment are stated at cost and are depreciated principally using the straight-line method over their estimated
useful lives of three to five years for computers and software, and five to seven years for furniture and other.  Purchased software and third-party costs incurred to develop software for internal use are capitalized and amortized principally
over three years.  Leasehold improvements are amortized over the lesser of their estimated useful lives or the remaining lease term.

GoodwillGoodwill represents acquisition costs in excess of the fair value of net assets acquired.  In July 2001, the FASB issued SFAS No. 141,
Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets.  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 is no longer amortized but is reviewed for impairment annually, as well as when a triggering event indicates impairment may have occurred.  This statement eliminated goodwill amortization upon adoption and required
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 goodwill test for impairment consists of a two-step process that
begins with an estimation of the fair value of the reporting unit.  The first step of the process is a screen for potential impairment and the second step measures the amount of impairment, if any. SFAS No. 142 required an entity to complete
the first step of the transitional goodwill impairment test within six months of adopting the statement.  The Company performed the required transitional fair value impairment test on its goodwill as of January 1, 2002.  As a result of
completing this test, the Company determined that the goodwill associated with its Munich operation was fully impaired as of January 1, 2002.  Accordingly, the Company recorded a goodwill impairment charge of $3.4 million as a cumulative effect
of an accounting change retroactive to January 1, 2002.  There was no income tax benefit associated with this charge because the Company believed it was not likely that future taxable income in Germany would be sufficient to realize the related
income tax benefit.

Net Income (Loss) Per ShareIn accordance with SFAS No. 128, Earnings Per Share, basic net income
(loss) per share is computed using the weighted-average number of common shares outstanding during each period.  Diluted net income (loss) per share gives effect to all potentially dilutive securities that were outstanding during each
period.  For the three months ended June 30, 2003 and 2002, outstanding options to purchase shares of common stock of approximately 1.7 million and 2.6 million, respectively, were not included in the computation of diluted net income (loss) per
share because to do so would have an antidilutive effect for the periods presented.  For the six months ended June 30, 2003 and 2002, outstanding options of approximately 2.1 million and 4.5 million, respectively, were likewise excluded. 
The following table details the computation of basic and diluted earnings per share for continuing operations:

|                                                                                  |  | Three Months Ended June 30,              |        | Six Months Ended June 30,                |  
|--------------------------------------------------------------------------------- |  | ---------------------------------------- | ------ | ---------------------------------------- | -
|                                                                                  |  |                                          |        |                                          |  
|                                                                                  |  | 2003                                     |        | 2002                                     |  
|                                                                                  |  |                                          |        |                                          |  
|                                                                                  |  | (in thousands, except per share amounts) |        | (in thousands, except per share amounts) |  
|Income (loss) from continuing operations                                          |  | $                                        | 1,669  |                                          | $
|                                                                                  |  |                                          |        |                                          |  
|Weighted average common shares outstandingbasic                                  |  |                                          | 25,958 |                                          |  
|Assumed conversion of dilutive securities                                         |  |                                          | 166    |                                          |  
|                                                                                  |  |                                          |        |                                          |  
|Weighted average common shares outstandingdiluted                                |  |                                          | 26,124 |                                          |  
|                                                                                  |  |                                          |        |                                          |  
|Basic and diluted earnings per share for income (loss) from continuing operations |  | $                                        | 0.06   |                                          | $
|                                                                                  |  |                                          |        |                                          |  

Fair Value of Financial
InstrumentsThe carrying values of the Companys assets and liabilities approximate fair value because of the short maturities of these financial instruments.

Foreign Currency TranslationThe Companys financial statements were prepared in accordance with the requirements of SFAS No. 52, Foreign Currency
Translation.  Under this method, net foreign currency transaction gains and losses are included in the accompanying consolidated statements of operations.

Comprehensive IncomeThe Company reflects its comprehensive income such as unrealized gains and losses on the Companys 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 indefinite investments in international subsidiaries.

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MODEM MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

Comprehensive income (loss) consists of net income (loss) and foreign currency translation adjustments.  Comprehensive income (loss) was $1.6 million and
$(1.6) million for the three months ended June 30, 2003 and 2002, respectively.  Comprehensive income (loss) was $2.3 million and $(3.4) million for the six months ended June 30, 2003 and 2002, respectively.

Recently Issued Accounting Pronouncements

In
March 2003, the EITF published Issue No. 00-21 Accounting for Revenue Arrangements with Multiple Deliverables (EITF 00-21).  This issue addresses certain aspects of the accounting by a vendor for arrangements under which it
performs multiple revenue-generating activities and how to determine whether such an arrangement involving multiple deliverables contains more than one unit of accounting for purposes of revenue recognition.  The guidance is effective for
revenue arrangements that the Company entered into in fiscal periods beginning after June 15, 2003.  Accordingly, the Company adopted EITF 00-21 on July 1, 2003.  The Company is currently evaluating what impact, if any, EITF 00-21 will
have on its Consolidated Financial Statements.

In April 2003, the FASB issued Statement No. 149, Amendment of Statement No. 133 on
Derivative Instruments and Hedging Activities, (Statement No. 149). Statement No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging activities under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. Statement No. 149 is effective for contracts entered into or
modified after June 30, 2003, and for hedging relationships designated after June 30, 2003 and is to be applied prospectively. The Company does not use derivative instruments, and therefore, the Company does not believe that the adoption of
Statement No. 149 will have a material impact on its consolidated financial statements.

In May 2003, FASB Statement No. 150,
Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, (Statement No. 150) was issued. Statement No. 150 establishes standards for how an issuer classifies and measures in its
balance sheet certain financial instruments with characteristics of both liabilities and equity. Statement No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise effective at the beginning of the
first interim period beginning after June 15, 2003.  The Company is not party to any such financial instruments as defined under Statement No. 150, and therefore, the Company has determined that the adoption of this statement will not have a
material effect on its consolidated financial statements or disclosures.

NOTE 2. Discontinued Operations and Restatement of Prior Period Financial Results

In the third quarter of 2002, the operations of the Companys offices in Toronto, Munich and Hong Kong ceased.  In accordance with SFAS No. 144, the results
of these operations have been reclassified and are separately presented for all reporting periods as discontinued operations. Revenue for discontinued operations for the three and six months ended June 30, 2002 was $0.8 million and $2.1 million,
respectively

In connection with the reclassification of the results of these operations, the Company also noted certain errors within
accrued liabilities associated with its continuing operations that were generated in prior periods.  Therefore, the Company has restated its historical results to adjust for these items.  The impact of these adjustments served to decrease
selling, general and administrative expenses and the loss from continuing operations before income taxes by approximately $0.1 million in the first quarter of 2002.  The correction for these items had no impact on the timing or amount of the
Companys revenue or cash flow.  The impact of the restatement on the net loss for the six months ended June 30, 2002 is as follows:

|                                     |  | Six Months EndedJune 30, 2002            |       
|------------------------------------ |  | ---------------------------------------- | ------
|                                     |  |                                          |       
|                                     |  | (in thousands, except per share amounts) |       
|                                     |  | As Previously Reported                   |       
|                                     |  |                                          |       
|Net loss                             |  | $                                        | (4,077
|Basic and diluted net loss per share |  | $                                        | (0.16 

NOTE 3. Restructuring and Other Charges, Net

Continuing Operations

The Company initiated a series of restructuring
actions in 2002 to align capacity with both revenue and the demand from its clients.  These actions were completed in the third and fourth quarters of 2002 and included staff reductions and a reduction in office space in the Companys U.S.
and London offices.

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MODEM MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

Discontinued Operations

Due to the decline in client demand, the Company decided in the second quarter of 2002 to close its offices in Toronto, Munich and Hong Kong, ceasing operations in
the third quarter of 2002.

The accruals established by the Company in respect to both continuing and discontinued operations, and
activities related thereto, are summarized as follows:

|                      |  | Balances atDecember 31,2002 |        | Cash Uses |                | Other  |   | Balances atJune 30, 2003 |    
|--------------------- |  | --------------------------- | ------ | --------- | -------------- | ------ | - | ------------------------ | ---
|                      |  |                             |        |           |                |        |   |                          |    
|                      |  |                             |        |           | (In thousands) |        |   |                          |    
|Facilities            |  | $                           | 19,192 |           | $              | (1,660 | ) | $                        | 152
|Severance             |  |                             | 114    |           |                | (66    | ) |                          |   
|Other exit costs      |  |                             | 222    |           |                | (61    | ) |                          | 165
|                      |  |                             |        |           |                |        |   |                          |    
|Total                 |  | $                           | 19,528 |           | $              | (1,787 | ) | $                        | 317
|                      |  |                             |        |           |                |        |   |                          |    
|Less: current portion |  |                             |        |           |                |        |   |                          |    
|                      |  |                             |        |           |                |        |   |                          |    
|Long-term portion     |  |                             |        |           |                |        |   |                          |    
|                      |  |                             |        |           |                |        |   |                          |    

Included in other within the
facilities category is $0.3 million in interest expense and $0.1 million of the impact of foreign currency translation adjustments and is partially offset by a reclass of $0.2 million from facilities to other exit costs
to better reflect the remaining restructure accrual.

NOTE 4. CentrPort Transactions

In conjunction with the CentrPort Transactions, described in detail in Note 3 to the Companys 2002 Consolidated Financial Statements, 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 the Companys 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 the Companys holdings pursuant to a contractual per share fixed value, or in cash, at the Companys 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 the Companys 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 the extinguishment of the Companys CentrPort Commitment to sell further CentrPort products and services, the extinguishment of the Companys obligation to pay
the value of the shortfall in either cash or CentrPort common stock and the extension of the Companys $2.5 million note receivable due from the CentrPort Investors to it until December 31, 2002, which was subsequently satisfied. 
Accordingly, the Company recognized the remaining deferred gain of $2.3 million in the first quarter of 2002.

The Company is guarantor
for CentrPorts obligations under its lease for office space at 450 Post Road East, Westport, Connecticut for 16,900 square feet, which expires on June 30, 2010, subject to renewal.  As of June 30, 2003, the aggregate remaining base rent
and estimated operating expenses due under this lease was $6.0 million, subject to adjustment in accordance with the terms of the lease.  This balance reduces by approximately $0.8 million per year through June 30, 2010.  The lease
provides that once 50% of the original lease term has expired, which will occur in July 2005, this guaranty may be replaced with an irrevocable letter of credit in favor of the landlord in an amount not to exceed the remaining base rent.  Upon
expiration of 50% of the lease term, CentrPort is required to obtain such a letter of credit.  Additionally, CentrPort has agreed to cooperate with the Company to secure the Companys release from its guaranty prior to that time, if
possible.  In the event that CentrPort were to default on its lease obligation, the Company would be liable for the aggregate remaining base rent and operating expenses at the time of default by CentrPort.  In the event of a default, the
Company would take all appropriate action to be reimbursed for this liability.  Based on the Companys understanding of CentrPorts overall business conditions and financial viability, no provision has been recorded for this potential
liability.

NOTE 5. 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 its officers
(G.M. OConnell, Chairman, Steven Roberts, former Chief Financial Officer, and, in certain

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MODEM MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

actions, Robert C. Allen II, Board member, a Managing Director and former President), and certain named underwriters of its 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 Underwriters). 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 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.

On June 30, 2003, a
committee of our Board of Directors conditionally approved a proposed partial settlement with the plaintiffs in this matter.  The settlement would provide, among other things, a release of Modem Media, Inc. and of the individual defendants for
the conduct alleged in the action to be wrongful in the amended complaint.  The Company would agree to undertake other responsibilities under the partial settlement, including agreeing to assign away, not assert, or release certain potential
claims it may have against its Underwriters.  Any direct financial impact of the proposed settlement is expected to be borne by the Companys insurers.  The committee agreed to approve the settlement subject to a number of conditions,
including the participation of a substantial number of other issuer defendants in the proposed settlement, the consent of the Companys insurers to the settlement, and the completion of acceptable final settlement documentation. 
Furthermore, the settlement is subject to a hearing on fairness and approval by the court overseeing the IPO Litigation.  The settlement is partial because the Underwriters are not party to the settlement.

If the settlement is not finalized, the Company will continue to defend these actions vigorously. However, due to the inherent uncertainties of litigation, the
Company cannot accurately predict the ultimate outcome of the litigation if the litigation is not settled. Any unfavorable outcome of this litigation could have an adverse impact on the Companys business, financial condition and results of
operations.

In August 2001, the Companys subsidiary, Modem Media Canada, Inc. (Modem Media Canada), brought suit
against City 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 its officers and directors for breach of lease and is seeking damages in the amount of approximately $16.0
million. The Space was repossessed by a mortgage holder and has been sold to an unrelated third party. The Company is currently in discovery for this litigation.  The Company believes that there is no basis for the counterclaims, it has
meritorious defenses to the counterclaims and the Company intends to defend this action vigorously. Based on this belief, 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 business, financial condition and
results of operations.

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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 some of the worlds leading companies, including Delta Air Lines, General Motors, Michelin, IBM, Hewlett Packard, Sprint and Kraft.  We define interactive marketing as the use of any interactive channel to reach and
serve any target customer with the intention of generating measurable value, both to that customer and to the marketer.  These channels include web sites and other internet applications, wireless applications, electronic mail,
online marketing, advertising, promotions and other emerging communication channels.  We use interactive marketing to help our 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 online and optimizing the cost and impact of activities that
already are executed online.                                       
| |   |                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                    

We provide marketing and business strategy,
marketing programs, 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 the
following:

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 by understanding their needs and preferences,
assessing their value to the 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
architecture and 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 web sites and wireless applications, intranets and extranets that support our clients 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, 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 data analysis.  Our marketing program teams bring expertise in creative design and execution, marketing plan development, media services, as well as database marketing, management and analysis.

Headquartered in Norwalk, Connecticut, we also maintain offices in San Francisco, London and São Paulo.

Application of Critical Accounting Policies and Estimates

The preparation of financial statements in
conformity with generally accepted accounting principles requires us to make estimates and assumptions.  These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosures of contingent assets and
liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during a reporting period.  Actual results can differ from those estimates and it is possible that the differences could be
material.

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We believe the following accounting policies are critical to the understanding of the more significant judgments
and estimates used in the preparation of our consolidated financial statements:

| |  | revenue recognition,                                         
| | - | -------------------------------------------------------------
| |   |                                                              
| |  | allowance for doubtful accounts,                             
| |   |                                                              
| |  | accounting for restructuring liabilities,                    
| |   |                                                              
| |  | accounting for income taxes,                                 
| |   |                                                              
| |  | valuation of long-lived assets, investments and goodwill, and
| |   |                                                              
| |  | lease guarantees.                                            

Revenue Recognition

We recognize revenues as services are rendered in accordance with SEC Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements(SAB
No. 101).  A majority of our revenues are derived from fixed-bid and retainer-based assignments.  Unbilled revenues represent labor costs incurred and estimated earnings in excess of billings and production and other
client-reimbursable out-of-pocket costs incurred in excess of billings.  Amounts billed to clients in excess of revenues recognized to date are classified as deferred revenues.  Our clients hire us on a fixed-bid, retainer or
time-and-materials basis.  We reassess our estimated costs on fixed-bid 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-bid contracts, if any, are recognized in the period in which such losses are determined.  Out-of-pocket and other pass-through expenses are recognized as revenue in
the period incurred. The cost of online media and email campaigns purchased by us for our clients is not included in revenue because we act as an agent on behalf of our clients.

Allowance for Doubtful Accounts

We assess the required amount of
allowance for doubtful accounts based on past experience and the review of the aging and analysis of specific accounts.

Accounting for Restructuring
Liabilities

Restructuring charges include the costs associated with our restructuring actions taken in the periods
presented.  Charges were recorded at the time the decision was made and plans were approved to restructure operations.  The charges consisted of actual and estimated costs that were incremental to our ongoing operations and were incurred
to close offices, reduce excess office facilities and equipment, and terminate employees.  Due to the continuing high level of available office space and lack of demand in the San Francisco, Norwalk and London real estate markets, we determined
that expected lease terms are significantly less favorable than the original assumptions and will not improve in the foreseeable future.  The liability is equal to the future minimum lease payments under contractual obligations offset by
estimated future sublease payments.  In determining these estimates, we evaluated our potential to sublease our excess space and our ability to renegotiate various leases at more favorable terms and in some instances obtain relief through
relocation of office space.  These sublease estimates, which were made in connection with our real estate advisers, are based on current and projected conditions in the real estate and economic markets in which we have excess office
space.  If actual market conditions are more or less favorable than those we have projected, we may be required to adjust existing accrued restructuring expenses associated with this excess office space (see Note 3 of Notes to Consolidated
Financial Statements).

Accounting for Income Taxes

We follow the provisions of SFAS No. 109, Accounting for Income Taxes.  As part of the process of preparing our consolidated financial statements, we are
required to estimate an income tax provision for each of the jurisdictions in which we operate.  This process involves estimating the actual current tax provision or benefit together with assessing temporary differences resulting from differing
treatment of items for tax and accounting purposes.  These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheet.  We then assess the likelihood that deferred tax assets will be
recovered from future taxable income and, to the extent it is determined that recovery is not likely, a valuation allowance is established.  Significant management judgment is required in determining the provision or benefit for income taxes
and the amount of valuation allowance that would be required.  Historically, we have not taken benefits for losses generated by most of our foreign entities and accordingly have recorded a valuation allowance against their deferred tax
assets.  In the event that actual results differ from these estimates or we adjust these estimates in future periods, we may need to establish an additional valuation allowance that could materially impact our financial condition and results of
operations.

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At June 30, 2003, we had a valuation allowance of $1.3 million associated with $20.6 million of gross deferred tax
assets.  The net deferred tax asset of $19.3 million represents net operating loss carry forwards and deductible temporary differences, which are more likely than not to be utilized in the future.  We considered all of the available
evidence in evaluating the recoverability of our deferred tax assets; however, a change in circumstances, including expectations as to our projected future taxable income, may have a material impact on the recoverability of deferred tax assets and
on future operating results.

Valuation of Long-lived Assets, Investments and Goodwill

We have a significant amount of long-lived assets, including fixed assets, goodwill and investments.  We periodically evaluate the realizability of all of our
long-lived assets.  Future events could cause us to conclude that impairment exists and that the asset values associated with a given operation have become impaired.  Any resulting impairment loss could have a material impact on our
financial condition and results of operations.

We performed our annual goodwill impairment test during the fourth quarter of 2002 and
determined that the goodwill was not impaired.  We will continue to perform a goodwill impairment test annually, as well as when a triggering event indicates impairment may have occurred.  If our projections of future cash flows are lower
than the current estimates, we may be required to recognize an impairment charge up to the carrying value of the goodwill of $43.2 million.

Lease
Guarantee

We are the guarantor for CentrPorts obligations under its lease for office space at 450 Post Road East,
Westport, Connecticut, for 16,900 square feet, which expires on June 30, 2010, subject to renewal.  As of June 30, 2003, the aggregate remaining base rent and estimated operating expenses due under this lease was $6.0 million, subject to
adjustment in accordance with the terms of the lease.  This balance reduces by approximately $0.8 million per year through June 30, 2010.  The lease provides that once 50% of the original lease term has expired, which will occur in July
2005, this guaranty may be replaced with an irrevocable letter of credit in favor of the landlord in an amount not to exceed the remaining base rent.  Upon expiration of 50% of the lease term, CentrPort is required to 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.  In the event that CentrPort were to default on its lease obligation, we would be liable for the
aggregate remaining base rent and operating expenses at the time of default by CentrPort.  In the event of a default, we would take all appropriate action to be reimbursed for this liability. Based on our understanding of CentrPorts
overall business conditions and financial viability, no provision has been recorded for this potential liability.

Historical Results of Operations

Clients hire us on a fixed-fee, retainer or time-and-materials basis.  A majority of our revenues are derived from fixed-fee engagements.  We recognize
revenues as services are rendered in accordance with SAB 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 anticipated billings.  Provisions for losses on uncompleted fixed-fee contracts, if any, are recognized in the period in which such losses are determined. The cost of online media and email
campaigns purchased by us for our clients is not included in revenue because we act as an agent on behalf of our clients.

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 revenue for us in one period may
not be a substantial source of revenue in a subsequent period.  The 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 90% and 87% of consolidated revenues for the
three months ended June 30, 2003 and 2002, respectively, and 86% and 88% of consolidated revenues for the six months ended June 30, 2003 and 2002, respectively.  Three clients individually accounted for 19%, 19% and 12% of our revenues in the
three months ended June 30, 2003.  Two clients accounted for 23% and 20% of our revenues in the six months ended June 30, 2003.  Four clients individually accounted for 16%, 15%, 11% and 11% of our revenues in the three months ended June
30, 2002.  Five clients accounted for 16%, 13%, 11%, 11% and 11% of our revenues in the six months ended June 30, 2002.  We expect a relatively high level of client concentration to continue which 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.  Selling, general and administrative expenses consist of salaries, employee benefits and incentive compensation of sales and
marketing, new business

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development, administrative and other non-billed employees, certain other marketing costs, office rent, utilities, professional and consulting fees, travel, telephone and
other related expenses.

Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002

Revenues.  Revenues decreased $3.0 million, or 16%, to $15.5 million for the three months ended June 30, 2003 from $18.5 million for the three months
ended June 30, 2002.  This decline in revenues was primarily attributable to a decrease in total billed hours and was partially offset by an increase in average revenue per billed hour. This decline in total billed hours was attributable to a
decrease in demand for our services due to the continued overall reduction in marketing spending from most of our significant clients.

Cost of Revenues.  Cost of revenues decreased $2.3 million, or 25%, to $6.9 million for the three months ended June 30, 2003 from $9.2 million for the
three months ended June 30, 2002.  This decrease in cost of revenues was primarily due to a reduction in employee compensation and related expenses principally related to reductions in staff and to lower incentive compensation expense.  In
addition, incentive compensation expense was lower for the quarter ended June 30, 2003 versus the quarter ended June 30, 2002 due to the fact that the incentive compensation expense accrual recorded in the first quarter of 2003 was deemed adequate
based on current facts and circumstances.

Gross Profit.  Gross profit margin increased to 56% of revenues for the three
months ended June 30, 2003 from 50% for the three months ended June 30, 2002; this increase was primarily due to an increase in average revenue per billed hour and to lower incentive compensation expense. This increase in gross profit margin was
partially offset by an increase in average cost of revenue per billed employee and to lower utilization (billed hours divided by total capacity hours of billed employees) of 72% for the three months ended June 30, 2003 versus 77% for the same period
in 2002.

Selling, General and Administrative.  Selling, general and administrative expenses decreased $1.7 million, or 26%,
to $4.9 million for the three months ended June 30, 2003 from $6.6 million for the three months ended June 30, 2002.  Selling, general and administrative expenses represented 32% of revenues for the three months ended June 30, 2003 as compared
to 36% for the three months ended June 30, 2002.  The decrease in selling, general and administrative expenses were primarily due to a reduction in employee compensation and related expenses principally caused by a reduction in staff. In
addition, facilities-related expenses decreased due to the restructuring actions taken in 2002.

Restructuring and Other Charges,
Net.There were no restructuring and other charges for the three months ended June 30, 2003.  Restructuring and other charges of $7.4 million for the three months ended June 30, 2002 include costs related to office leases for our
excess facilities, fixed asset dispositions and severance costs related to the reduction of staff across multiple offices.

Depreciation and Amortization. Depreciation and amortization decreased $0.3 million to $0.9 million for the three months ended June 30, 2003 from $1.2
million for the three months ended June 30, 2002.  Depreciation and amortization represented 6% of revenues for the three months ended June 30, 2003 and 7% for the three months ended June 30, 2002.  The decrease in depreciation and
amortization was attributable to the restructuring actions taken, which included the write-off of certain property and equipment in 2002 and to certain assets becoming fully depreciated during 2002.

Interest Income. Interest income decreased by $0.1 million to $0.1 million for the three months ended June 30, 2003 from $0.2 million for the three
months ended June 30, 2002.  This decrease was primarily attributable to the decrease in average interest rates for the three months ended June 30, 2003 compared to the same period in 2002.

Other Expense, Net. Other expense, net increased $0.1 million to $0.2 million for the three months ended June 30, 2003 from $0.1 million for the three
months ended June 30, 2002. Due to additional accruals recorded in the fourth quarter of 2002, for the present value of the future costs of our excess office space in San Francisco, Norwalk and London, other expense increased primarily as a result
of an increase in interest expense related to these accruals.

Provision (Benefit) for Income Taxes. The provision for
income taxes for the three months ended June 30, 2003 was $1.1 million compared to a benefit for income taxes of $1.8 million for the three months ended June 30, 2002.  The effective income tax provision rate was 41% for the three months ended
June 30, 2003 compared to an effective income tax benefit rate of 31% for the three months ended June 30, 2002.  We provide for income taxes in the jurisdictions in which we pay income taxes at the statutory rates in effect in each
jurisdiction, adjusted for differences in providing for income taxes between financial reporting and income tax purposes.  The effective tax rates differ from the federal statutory rates due to the impact of state taxes, non-deductible items
and changes in the valuation allowances recorded against losses generated by certain foreign entities.

Income (Loss) from Continuing
Operations. Our income was $1.7 million, or $0.06 per common share, for the three months ended June 30, 2003, as compared to a loss of $4.0 million, or $0.15 per common share, for the three months ended June

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30, 2002.  This net increase of $5.7 million was primarily due to the absence of restructuring costs, lower employee compensation and related expenses due to an overall
reduction in staff, partially offset by higher income tax expense.

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Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002

Revenues. Revenues decreased $7.4 million, or 20% to $29.9 million for the six months ended June 30, 2003 from $37.3 million for the six months ended
June 30, 2002.  This decline in revenues was primarily attributable to a decrease in total billed hours partially offset by an increase in average revenue per billed hour. This decline in total billed hours was attributable to a decrease in
demand for our services due to the continued overall reduction in marketing spending from most of our significant clients.

Cost of Revenues.  Cost of revenues decreased $4.5 million, or 24% to $14.6 million for the six months ended June 30, 2003 from $19.1 million for the six
months ended June 30, 2002.  This decrease in cost of revenues was primarily due to a reduction in employee compensation and related expenses principally caused by a reduction in staff.

Gross Profit.  Gross profit margin increased to 51% of revenues for the six months ended June 30, 2003 from 49% for the six months ended June 30, 2002;
this increase was primarily due to an increase in average revenue per billed hour. This increase in gross profit margin was partially offset by an increase in average cost of revenue per billed employee and to lower utilization (billed hours divided
by total capacity hours of billed employees) of 73% for the six months ended June 30, 2003 versus 77% for the same period in 2002.

Selling, General and Administrative. Selling, general and administrative expenses decreased $2.5 million or 21% to $9.8 million for the six months ended
June 30, 2003 from $12.3 million for the six months ended June 30, 2002.  Selling, general and administrative expenses represented 33% of revenues for the six months ended June 30, 2003 and June 30, 2002.  The decrease in selling, general
and administrative expenses were primarily due to a reduction in employee compensation and related expenses principally caused by a reduction in staff. In addition, facilities-related expenses decreased due to the restructuring actions taken in
2002.

Restructuring and Other Charges, Net.There were no restructuring and other charges for the six months ended June 30,
2003.  Restructuring and other charges of $7.9 million for the six months ended June 30, 2002 include costs related to office leases for our excess facilities, fixed asset dispositions and severance costs related to the reduction of staff
across multiple offices.

Depreciation and Amortization. Depreciation and amortization decreased $0.7 million, or 28%, to
$1.8 million for the six months ended June 30, 2003 from $2.5 million for the six months ended June 30, 2002.  Depreciation and amortization represented 6% of revenues for the six months ended June 30, 2003 and 7% for the six months ended June
30, 2002.  The decrease in depreciation and amortization was attributable to the restructuring actions taken, which included the write-off of certain property and equipment in 2002 and to certain assets becoming fully depreciated during 2002.

Interest Income. Interest income decreased by $0.1 million to $0.3 million for the six months ended June 30, 2003 from
$0.4 million for the six months ended June 30, 2002.  This decrease was primarily attributable to the decrease in average interest rates for the six months ended June 30, 2003 compared to the same period in 2002.

Other Expense, Net. Other expense, net increased $0.1 million to $0.3 million for the six months ended June 30, 2003 from $0.2 million for the six months
ended June 30, 2002.  Due to additional accruals recorded in the fourth quarter of 2002, for the present value of the future costs of our excess office space in San Francisco, Norwalk and London, other expense increased primarily as a result of
an increase in interest expense related to these accruals.

Provision (Benefit) for Income Taxes. The provision for income
taxes for the six months ended June 30, 2003 was $1.5 million compared to a benefit for income taxes of $0.5 million for the six months ended June 30, 2002.  The effective income tax provision rate was 39% for the six months ended June 30, 2003
compared to an effective income tax benefit rate of 25% for the six months ended June 30, 2002.  We provide for income taxes in the jurisdictions in which we pay income taxes at the statutory rates in effect in each jurisdiction, adjusted for
differences in providing for income taxes between financial reporting and income tax purposes.  The effective tax rate differs from the federal statutory rate due to the impact of state taxes, non-deductible items and changes in the valuation
allowances recorded against losses generated by certain foreign entities.

Income (Loss) from Continuing Operations. Our
income was $2.3 million, or $0.09 per common share, for the six months ended June 30, 2003, as compared to a loss of $1.6 million, or $0.06 per common share, for the six months ended June 30, 2002.  This net increase of $3.9 million was
primarily due to the absence of restructuring expenses, lower employee compensation and related expenses due to an overall reduction in staff, partially offset by higher income tax expense.

Cumulative Effect of Accounting Change. In accordance with SFAS No. 142, we performed the required transitional impairment test on our goodwill as of
January 1, 2002.  As a result of completing this test, we determined that the goodwill associated with our Munich operation was fully impaired as of January 1, 2002.  Accordingly, we recorded a goodwill impairment charge of $3.4 million as
a cumulative effect of an accounting change retroactive to January 1, 2002.  There was no income tax

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benefit associated with this charge since we believed it was more likely than not that future taxable income in Munich, Germany would not be sufficient to realize the related
income tax benefit.

Liquidity and Capital Resources

We historically have
financed our operations primarily from funds generated from operations.  Net cash provided by operating activities was $1.5 million and $8.3 million for the six months ended June 30, 2003 and 2002, respectively.

Net cash used in investing activities was $0.3 million and $0.1 million for the six months ended June 30, 2003 and 2002, respectively.  During the first six
months of 2003 and 2002, we invested $0.9 million and $0.1 million in capital expenditures, respectively.  In addition, during the first six months of 2003 we collected $0.6 million of notes receivable.

Net cash used in financing activities was $0.3 million for each of the six months ended June 30, 2003 and 2002. Our primary use of cash from financing activities
during the six months ended June 30, 2003 and 2002 were repayments of debt and capital lease obligations of $0.2 million and $0.7 million, respectively, and the purchase of treasury stock for $0.1 million and $0.02 million, respectively. 
Offsetting these items for the six months ended June 30, 2003 and 2002 were proceeds from the exercise of employee stock options and purchases under the employee stock purchase plan of $0.1 million and $0.4 million, respectively.

We are the guarantor for CentrPorts obligations under its lease for office space at 450 Post Road East, Westport, Connecticut, for 16,900 square
feet, which expires on June 30, 2010, subject to renewal.  As of June 30, 2003, the aggregate remaining base rent and estimated operating expenses due under this lease was $6.0 million, subject to adjustment in accordance with the terms of the
lease.  This balance reduces by approximately $0.8 million per year through June 30, 2010.  The lease provides that once 50% of the original lease term has expired, which will occur in July 2005, this guaranty may be replaced with an
irrevocable letter of credit in favor of the landlord in an amount not to exceed the remaining base rent.  Upon expiration of 50% of the lease term, CentrPort is required to 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.  In the event that CentrPort were to default on its lease obligation, we would be liable for the aggregate remaining base rent and operating
expenses at the time of default by CentrPort.  In the event of a default, we would take all appropriate action to be reimbursed for this liability.  Based on our understanding of CentrPorts overall business conditions and financial
viability, no provision has been recorded for this potential liability.

In October 2002, we established a program to repurchase over an
eighteen month period up to $5.0 million of our common stock.  The timing and amount of purchases will be dependent upon a number of factors, including the price and availability of our common stock, general market conditions and other uses of
funds.  The program may be discontinued at any time.  During the first six months of 2003, we repurchased 45,100 shares of common stock at an average price of $2.19 per share for a total cost of $0.1 million under this program.  In
aggregate we have purchased 57,790 shares of common stock at an average price of $2.25 per share for a total cost of $0.1 million as of June 30, 2003.

Recently Issued Accounting
Pronouncements

In March 2003, the EITF published Issue No. 00-21, Accounting for Revenue Arrangements with Multiple
Deliverables (EITF 00-21).  This issue addresses certain aspects of the accounting by a vendor for arrangements under which it performs multiple revenue-generating activities and how to determine whether such an arrangement
involving multiple deliverables contains more than one unit of accounting for purposes of revenue recognition.  The guidance is effective for revenue arrangements that we entered into in fiscal periods beginning after June 15, 2003. 
Accordingly, we adopted EITF 00-21 on July 1, 2003 and we are currently evaluating what impact, if any, EITF 00-21 will have on our Consolidated Financial Statements.

In April 2003, the FASB issued Statement No. 149, Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities, (Statement No.
149). Statement No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging
activities under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. Statement No. 149 is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated
after June 30, 2003 and is to be applied prospectively. We do not use derivative instruments, and therefore, we do not believe that the adoption of Statement No. 149 will have a material impact on our consolidated financial
statements.

In May 2003, FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity, (Statement No. 150) was issued. Statement No. 150 establishes standards for how an issuer classifies and measures in its balance sheet certain financial instruments with characteristics of both liabilities
and equity. Statement No.

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150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise effective at the beginning of the first interim period beginning after
June 15, 2003.  We are not party to any such financial instruments as defined under Statement No. 150, and therefore, we have determined that the adoption of this statement will not have a material effect on our consolidated financial
statements or disclosures.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our consolidated financial statements are denominated in U.S. dollars.  For the three months ended June 30, 2003 and 2002, we derived 14% and 19%, respectively,
of our revenues from operations outside of the U.S.  For the six months ended June 30, 2003 and 2002, we derived 14% and 21%, respectively, 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 with respect to the British Pound and Brazilian Real 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 three months and six months ended June 30,
2003 and 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 would 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.  We have limited our exposure to interest rate risk by investing in securities with maturities of one year or less.

ITEM 4.   CONTROLS AND PROCEDURES

We conducted an
evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and
15d-14(c) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report.  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and
procedures are effective in ensuring that material information required to be disclosed by us in the reports that we file and submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and
our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

During the quarter ended June 30,
2003, there has not occurred any change in our internal controls over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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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 Underwriters). 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.

On June 30, 2003, a
committee of our Board of Directors conditionally approved a proposed partial settlement with the plaintiffs in this matter.  The settlement would provide, among other things, a release of Modem Media, Inc. and of the individual defendants for
the conduct alleged in the action to be wrongful in the amended complaint.  We would agree to undertake other responsibilities under the partial settlement, including agreeing to assign away, not assert, or release certain potential claims we
may have against our underwriters.  Any direct financial impact of the proposed settlement is expected to be borne by our insurers.  The committee agreed to approve the settlement subject to a number of conditions, including the
participation of a substantial number of other issuer defendants in the proposed settlement, the consent of our insurers to the settlement, and the completion of acceptable final settlement documentation.  Furthermore, the settlement is subject
to a hearing on fairness and approval by the Court overseeing the IPO Litigations.  The settlement is partial because the Underwriters are not party to the settlement.

If the settlement is not finalized, we will continue to defend these actions vigorously. However, due to the inherent uncertainties of litigation, we cannot
accurately predict the ultimate outcome of the litigation if the litigation is not settled. Any unfavorable outcome of this litigation could have an adverse impact on our business, financial condition and results of operations.

In August 2001, our subsidiary, Modem Media Canada, Inc. (Modem Media Canada), brought suit against City 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. The Space was repossessed
by a mortgage holder and has been sold to an unrelated third party. We are currently in discovery for this litigation.  We believe that there is no basis for the counterclaims, we have meritorious defenses to the counterclaims and we intend to
defend this action vigorously. Based on this belief, 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, we become involved in various routine legal proceedings in the ordinary course of our business. Other than as noted above, we believe that the
outcome of pending legal proceedings and unasserted claims in the aggregate will not have a material adverse effect on our business, financial condition and results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a)   On April 30, 2003, we held our Annual
Meeting of Stockholders at our offices in Norwalk, Connecticut.

(b)   At the Annual Meeting, our stockholders elected nine Directors, each to serve for the following year and until
their successors are duly appointed.  The votes were cast for each of the following nominees for Director or were withheld with respect to such nominees, as follows:

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|                      |  | Votes |           
|--------------------- |  | ----- | ----------
|                      |  |       |           
|                      |  | For   |           
|                      |  |       |           
|Robert C. Allen, II   |  |       | 23,072,480
|Robert H. Beeby       |  |       | 23,073,496
|Richard M. Hochhauser |  |       | 23,074,136
|Gerald M. OConnell   |  |       | 23,073,496
|Marc C. Particelli    |  |       | 23,074,136
|Don Peppers           |  |       | 23,074,136
|Donald L. Seeley      |  |       | 23,074,136
|Larry Weber           |  |       | 23,074,136
|Joseph Zimmel         |  |       | 23,074,136

(c) In addition to the election of Directors, our stockholders ratified the appointment of
PricewaterhouseCoopers LLP as our independent auditors for 2003. The following votes were cast with respect to such appointment:

|For:      |  |  | 23,097,162 | 
|--------- |  |  | ---------- | 
|Against:  |  |  | 130        | 
|Abstain:  |  |  | 0          | 
|Non-Vote: |  |  | 0          | 

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)    Exhibits

|Exhibit No. |  | Description                                                                                                                                                                                                                                                 
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                                                                                                                             
|31.1        |  | Certification of Marc C. Particelli, President and Chief Executive Officer of Modem Media, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002                                                    
|            |  |                                                                                                                                                                                                                                                             
|31.2        |  | Certification of Frank J. Connolly, Jr., Chief Financial Officer of Modem Media, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002                                                              
|            |  |                                                                                                                                                                                                                                                             
|32          |  | Certification of Marc C. Particelli, President and Chief Executive Officer and Frank J. Connolly, Jr., Chief Financial Officer of Modem Media, Inc. pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b)    Reports on Form 8-K

We filed a Form 8-K, dated May 2, 2003, reporting in Item 9 and Item 12 that we issued a press release reporting our results of operations for the first quarter ended
March 31, 2003 and guidance as to future results of operations.

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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:  August 14, 2003 | MODEM MEDIA, INC.
|---------------------- | -----------------
|                       |                  
|                       | By               
|                       |                  
|                       |                  
|                       |                  
|                       | By               
|                       |                  
|                       |                  

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