U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.

FOR THE TRANSITION PERIOD FROM __ TO __.

COMMISSION FILE NUMBER: 0-18299

i3 MOBILE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 51-0335259
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

181 HARBOR DRIVE, STAMFORD, CONNECTICUT 06902
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE): (203) 428-3000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

COMMON STOCK, $0.01 PAR VALUE
(TITLE OF CLASS)

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

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

The aggregate market value of the voting common equity held by
non-affiliates of the registrant on March 26, 2002, is $1.37.

As of March 26, 2002, there were 22,564,840 shares of the registrant's
common stock ($0.01 par value) outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The Registrant intends to file a definitive Proxy Statement for its
Annual Meeting of Stockholders pursuant to Regulation 14A promulgated under the
Securities Exchange Act of 1934 within 120 days of the end of the fiscal year
ended December 31, 2001. Portions of such proxy statement are incorporated by
reference into Part III of this report.

PART I

The information set forth in this Report on Form 10-K, including,
without limitation, that contained in Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations, contains "forward
looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. When used in this report, the words "believe," "anticipate," "think,"
"intend," "plan," "expect," "project," "will be" and similar expressions
identify such forward-looking statements. Such forward looking statements
regarding future events and/or our future financial performance are subject to
certain risks and uncertainties, such as our ability to generate sufficient net
revenue from our new product offerings, the rate of growth of the market for
wireless content products, lack of consumer awareness of our products, consumer
acceptance of our products and the rate of growth of our subscriber base, delays
in the completion or release of products, the inability to secure content or
distribution from third parties, the failure of certain suppliers and vendors to
continue to supply and/or purchase services, and the risk of war, terrorism and
similar hostilities, that our forecasts will accurately anticipate market
demand, and the risks discussed in "Other Risks and Uncertainties," which could
cause actual events or our actual future results to differ materially from any
forward-looking statement. Although management believes that the assumptions
made and expectations reflected in the forward-looking statements are
reasonable, there is no assurance that the underlying assumptions will, in fact,
prove to be correct or that actual future results will not be different from the
expectations expressed in this report.

ITEM 1. BUSINESS

OUR BUSINESS

During 2001, we evolved from a company that distributes customized
text-based information to mobile devices under the "Powered by i3 Mobile"
product brand into a company that we believe is among the first to create a
premium mobile subscription information and communication service for
telephones. This service, Pronto(SM), is being marketed directly to consumers
and delivers information on demand 24 hours a day, combining the service of a
mobile concierge with the simplicity of flat-menu voice recognition technology.
The Jack Myers Report has labeled this combination of live operator concierge
support and technology as the "Wireless Media, a new form of information
service."

In fiscal 2001, we invested significant financial resources developing
Pronto and its supporting technology infrastructure. In addition, we spent
approximately $1 million on independent consumer research to identify specific
consumer needs and preferences in order to develop applications that are most
compelling to telephone users, especially mobile telephones. The Pronto
experience, unlike the experience afforded by the current "wireless Internet,"
leverages the core voice interface functionality of telephones, rather than the
telephone keypad, to create a seamless user experience.

We currently market Pronto directly to subscribers for a monthly fee.
We anticipate introducing tiered pricing for additional premium content and
concierge services later in 2002. We

also anticipate marketing Pronto in cooperation with strategic partners such as
wireless network operators, telephone service providers, retail chains, and with
specific travel-related industries.

Pronto is available twenty-four hours a day, seven days a week,
providing telephone users with information accessible through live operators and
our proprietary, automated flat menu voice recognition system. The live
operators provide subscribers with services such as making restaurant
reservations and providing driving directions. Later in 2002, we anticipate
providing subscribers with the ability to purchase certain products and services
such as movie, concert and airline tickets. Live operators are also available to
answer questions outside the scope of our automated voice recognition system,
and can assist subscribers if the automated voice recognition system cannot
properly answer the request. Our automated licensed content currently features
news, stock quotes, sports, weather, movie reviews and schedules, and leisure
categories such as horoscopes and lottery results. We plan on broadening our
premium automated content offerings in 2002. Content is automatically accessible
in an "ask a question/get an answer" format. Pronto also allows subscribers to
use their voice to send email or text-based messages to up to 50 people at a
time as well as customizable personal information choices.

Pronto was test marketed in the Hartford/New Haven region of
Connecticut in the fourth quarter of 2001. While currently available in a beta
version on a national basis, it is anticipated that a coordinated national
marketing campaign for Pronto will begin during the second quarter of fiscal
2002. We believe we have sufficient funding to implement and sustain through
2002 our planned national rollout for Pronto.

STRATEGY

We believe that the fundamental principles that create economic value
in media remain the aggregation of information and entertainment content and the
distribution of that content to individuals who have a need for it. Just as
advertising-supported print and electronic media have been transitioned to more
targeted subscription-supported media, like cable and satellite television, we
believe that the "free wireless web" will transition to subscription-supported,
personalized services for mobile telephones and other devices.

Our objective is to become the first mobile service provider in North
America delivering on demand information, branded content, communication and
commerce services to consumers by telephone. With the launch of Pronto we
believe that we are now a leading provider of live operator, concierge support
and voice-activated, subscription-based, premium content services to telephones.

Our long-term strategy involves Pronto evolving from an "ask a
question/get an answer" service offering to a more robust branded/diverse
content service with messaging and commerce capabilities. The key elements of
our strategy are to:

o provide compelling products through branded, premium content
offerings in tandem with an enhanced user experience;

o grow our subscriber base through direct-to-consumer marketing and
through strategic partnerships with key distribution partners; and

o continue to advance and refine our technology and product delivery
systems.

PROVIDE COMPELLING PRODUCTS AND SERVICES

We believe that compelling products and services are created by
aggregating and delivering information which is relevant to consumers in a cost
effective manner. Our research shows that subscribers will pay premium-priced
subscription fees to receive these services. This element of our strategy
entails:

Provide Premium Branded Audio Content. Our goal is for Pronto to
deliver a suite of personal and commercial information categories that are
relevant and, wherever practical, unique to the needs of our subscribers. We
believe that the audio capabilities of telephones are the preferred information
delivery mechanism. During 2002, we intend to enhance Pronto's current content
offerings with branded audio feeds from nationally recognizable news, sports and
entertainment organizations. Our strategy is to identify branded, recognizable
content that is relevant and time-sensitive. Based on our market research, we
believe that premium content which is tailored to the mobile subscriber is more
valuable than content configured for the Internet and that telephone users will
pay a premium to have fast access to personalized audio content on an "anytime,
anywhere" basis. As a result, we will put greater emphasis on newer multimedia
content including live and recorded audio and other branded content for our
financial, sports, mobile concierge, travel and entertainment offerings.

Enhance the User Experience. We constantly seek to improve our
subscribers' interaction with our products and services. We believe that quick,
intuitive access to relevant information is essential for successful mobile
content and concierge offerings. The "drill down" menu approach of the World
Wide Web is inefficient in wireless media. We believe that products designed
specifically for use on telephones, offering the user quick access to the
desired information using the fewest navigation commands, will create greater
value for our subscribers. Products designed for use with telephones which are
easily ordered and configured and available anywhere and anytime, without the
need to visit a web site or utilize the telephone's keypad to input data, will
enhance the user experience. We believe that voice communication supplemented by
text messaging is the key interface in mobile data communications and that voice
recognition-based interaction with an automated service, combined with live
operator, concierge support, will continue to enhance the user-friendliness of
our services. We also believe that the Pronto user experience is greatly
enhanced by reducing the time it takes to receive the requested information
through either the automated voice system or, if need be, the live operator
service. Our systems are continually optimized to produce rapid results.
Likewise, the user experience is greatly enhanced through delivering quality
customer service and maintaining control over the subscriber billing functions
for quality assurance purposes. We intend to further increase customer
satisfaction by focusing on the continuing improvement of the quality and
efficiency of our live concierge and customer service operators.

Complete the Transaction. As subscribers come to rely on Pronto as
their preferred source for information services, we believe that the service
becomes even more compelling when Pronto is able to complete a transaction for
them in the manner of a personal mobile assistant. For example, if a subscriber
needs to know the next flight from Boston to Atlanta, Pronto will not only
provide him with the requested information (as it can do now), but in the future
will also be able to arrange ticketing on his behalf. If a subscriber needs to
entertain clients, now he can call Pronto to find the best restaurant in town
and make reservations and, in the future, will be able to purchase tickets for
entertainment events. We intend to incorporate this ticketing and purchasing
functionality into the Pronto offering during 2002.

MARKETING TO GROW OUR SUBSCRIBER BASE

We believe that the most effective means of marketing Pronto to
consumers is through a number of marketing channels. These channels will
include:

o Direct marketing to consumers;

o Internet portals;

o National and independent wireless retailers;

o Wireless network operators; and

o Vertical market distribution channels

Direct Marketing. We believe that a direct-to-consumer market approach
will prove to be a more effective means of quickly growing our subscriber base
than relying primarily on wireless carriers and businesses to distribute our
products and services, particularly so that we can establish our own brand image
with consumers. The direct marketing campaign utilizes both broadcast and
national cable television campaigns, direct mail, e-mail and branded content
partner co-marketing arrangements. Pronto will be positioned to be viewed by
consumers as a standalone service separate and distinct from a specific wireless
network operator much like America Online is not dependent upon any particular
Internet Service Provider. Through our market research, we have identified the
Pronto target customer as a success-driven male or female between the ages of 18
and 54, who has a mainstream education, is a middle-to-upper level professional
and is often on the go. We plan on marketing directly to these consumers through
several advertising channels, including targeted cable networks. We believe that
Pronto will become a valuable wireless service and the Pronto brand will be
known as a leading player in a growing market of wireless content and service
providers. We also believe that establishing our brand through our
direct-to-consumer market strategy enhances our ability to team with
distribution partners to co-market Pronto to their customers as a premium
service.

Distribution Partners. In addition to our direct-to-consumer approach,
we will seek to partner with wireless network operators, independent wireless
retailers, Internet portals, national retail chains, corporate enterprises and
vertical market distribution channels such as hotel chains, rental cars and
similar businesses catering to the mobile executive. In this regard, we have
entered

into agreements with Wireless Zone, the nation's largest independent retailer of
Verizon Wireless services, under which it has distributed Pronto throughout its
Connecticut stores since February 2002, and with Terra Lycos, the largest global
Internet network, to co-market Pronto through its web sites.

We believe Pronto is also attractive to wireless network operators as
they seek enhanced products, including premium data services, to help them
counter declining revenue. In today's marketplace, while consumer minutes of
voice use are increasing, revenue per minute of voice usage is steadily
decreasing as price has become the major competitive engine in the market.
Increased competition has also made customer acquisition and retention key goals
for operators. Based on our market research and the test launch of Pronto in
Hartford, we believe that this market remains open to subscription-based
services since 95% of today's wireless users have not yet opted to subscribe to
any data offering. We believe that Pronto will enable wireless network operators
to generate additional subscription revenue, increasing the number of new
consumer acquisitions and decreasing the number of users who terminate use of
their service the way HBO increases revenue for cable operators and reduces
customer turnover.

We also believe that corporate customers may evolve into a meaningful
distribution channel. With the growth of wireless communications outpacing the
growth of the Internet, businesses are increasingly looking to mobile data
services as a means of enhancing the productivity of their growing base of
mobile employees.

ADVANCE OUR TECHNOLOGY AND PRODUCT DELIVERY SYSTEMS

Advance our Internal Infrastructure and Operation. We will spend a
substantial amount of resources building new infrastructure components to
support our voice recognition services and call center needs. We will also be
investing in enhancing the Pronto service by developing live and recorded audio
services. We will also continue to invest in our www.askPronto.com web site,
where users can learn about and subscribe to our service, as well as customize
their use of Pronto to suit their personal needs.

Enhance Leadership in Product Delivery Systems. We will spend
additional resources to modify our systems to work seamlessly between the voice
recognition system and live operator service. By bypassing the need to send the
call through a public transfers switch, we can reduce the length of our calls
and response time, thereby enhancing the user experience and lowering our costs
in providing the Pronto service.

Enhance Research and Development Function. We will increase investment
in our research and development initiatives. Our primary focus will continue to
be on voice- and audio- driven development. In this regard, we recently entered
into a software license agreement with AT&T Labs to build a customized voice
using AT&T's Natural Voices(TM) Text-to-speech Engine and integrate it into
Pronto's customer service functions.

PRODUCTS AND SERVICES

In 2001 we spent significant resources on rapid prototyping of new
product offerings and on market and focus group testing of these products and
their associated user interfaces. Through

this focus group testing, we learned more about how our potential subscribers
will use Pronto and which features are the most popular. Our goal was to
determine the content most appealing to mobile users and to refine their user
experience in accessing that content. Demand for the "wireless web" had been
minimal in North America and we felt that the growth in use of wireless
telephones is based on their familiar user experience. For the same reason, we
felt that voice interaction would be an important component to our future
products because it was easy to use and familiar to a mobile telephone user.

As a result, we believe that a sophisticated voice interface to our
products that provides simple command-driven access to information would make
our services worthy of premium subscription price points. We believe that suites
of personalized services proven valuable in mobile environments will garner
retail subscription price points in excess of $10.00 per month, and it was our
strategy in 2001 to prove this model with premium product offerings in travel,
finance, entertainment and concierge services, as was done in the Hartford test
market.

Pronto

Pronto is an easy-to-use monthly subscriber service that brings
information and communication tools to telephone users on demand. Pronto's
innovative "ask a question, get an answer" flat-menu approach eliminates lengthy
voice menu "drill downs" and awkward button pushing. We use a customized set of
hardware and software (both internally developed and through third party
licenses), along with proprietary database search engines, to provide Pronto's
content and information services.

A consumer can subscribe to Pronto either by telephone through Pronto's
customer service representatives or through the Pronto web site at
http://www.askPronto.com or through the web site of any on-line affiliated
marketing partner, such as Terra Lycos. The customer service function is
presently provided through a third party. Personal profiling is available to
subscribers in each information category offered by Pronto. The categories for
which a subscriber can set up personal profiles and alerts are stock quotes,
mutual funds, company news, industry news, lottery results, horoscopes, sports
scores and weather.

Pronto is designed to provide a successful user experience every time,
as operators are available 24 hours a day to assist with more complex or
detailed requests that cannot be handled by the voice recognition system. Mobile
concierge operators provide subscribers with driving directions, dinner
reservations, flight information, and the satisfaction of knowing that a real
person is standing by to help. The system provides the operator with the name of
the subscriber and an opportunity to listen to the subscriber's request while
the call is being transferred and before the subscriber is actually connected to
the live operator. In this manner, the operator is able to properly greet the
subscriber and have a head start searching for the requested information. We
believe this handoff personalizes the user experience and shortens the time
needed to get the answer.

Pronto is able to provide subscribers with the following information on
demand via its voice recognition system:

- News - multiple categories of news, including national, business,
technology;

- Weather - 3 day weather brief available for most major North
American cities;

- Finance - Stock and mutual fund quotes and company and industry
news;

- Sports - college and professional sports scores, news, rankings
and statistics; and

- Leisure - movies, horoscopes and lottery results.

We have agreements with over 50 media and information companies,
including, for example, Dow Jones & Company, Inc., Zagat Survey LLC and the
Associated Press, to provide us with high-quality content for our products, and
we plan on establishing relationships with other branded content providers,
which will provide audio content offerings and co-marketing opportunities. We
offer content providers the opportunity to leverage their existing information
in a new medium at little or no incremental cost to them and with significant
co-branding opportunities. While each of our content agreements contains varying
terms, our standard content agreement is non-exclusive, has an initial term of
three years and automatically renews for continuous one-year terms unless one of
the parties provides notice that it does not intend to renew the agreement. The
amount we pay to the content provider is either a flat monthly fee, a monthly
fee based on the number of subscribers using the content or the number of
content messages requested, or a combination of the three.

Pronto also enables subscribers to communicate to other mobile phone
users by using their voice to send customized email and text updates or choose
from a library of commonly used phrases such as: "I'm running (number) minutes
late," "I'll see you at (time)," "I'm stuck in traffic," "The game is
cancelled," or "Plans have changed, (breakfast, lunch, dinner) is at (time)."
Subscribers can create buddy groups on the www.askPronto.com web site or through
customer service representatives allowing them to send text messages to mobile
phones and email accounts. Messages can be sent to one person or to a group of
up to 50 people at a time. For example, a subscriber can tell the voice
recognition system to "Email the committee that I'm running 15 minutes late,"
and Pronto will deliver the email to the entire committee.

A specialized example of this Pronto feature is the Emergency Contact
List. The Emergency Contact List is designed to provide subscribers with an
effective way to contact people who matter, when it matters most. In critical
situations, Pronto will call members of the subscribers' emergency contact list.
The list is set up by our live operators or via the Pronto Web site. When
prompted, our live operators attempt to reach the contacts by calling or sending
email, based upon the subscribers' preferences.

"Powered by i3 Mobile"

Through our "Powered by i3 Mobile" program, we offer wireless alert
products in many different categories for mobile device consumers. Our "Powered
by i3 Mobile" products are sold primarily through relationships with wireless
network operators on a subscription basis. By configuring individual profiles
for our services on our partners' web sites, these carrier subscribers are able
to receive personalized messages throughout the day. For example, a subscriber
who has chosen to receive New York Yankees scores might receive updated scores
from a current game at the end of the fifth inning and as the game ends. In
certain situations, subscribers can also access information on-demand, such as a
request for a real-time stock quote.

Our "Powered by i3 Mobile" line of business provides consumer-oriented
mobile data products that wireless network operators can offer to their
customers. Our relationships with wireless network operators typically involve
more than simply permission-based usage of their networks to distribute our
products and services. Our arrangements generally require that the two parties
work closely together in the planning, development and marketing of the service
offering. Our products are typically marketed under a co-branded arrangement
with the wireless network operator. As of December 31, 2001, our distribution
relationships under the "Powered by i3 Mobile" brand include the following North
American wireless network operators: VoiceStream, Cingular, Rogers AT&T and US
Cellular.

During fiscal 2001, 89% of our revenue was subscription revenue derived
from the "Powered by i3 Mobile" offering with 54% of our total consolidated
revenue coming from Cingular and 21% coming from VoiceStream.

TECHNOLOGY AND SYSTEMS

During 2001, our technology and research and development teams
successfully created the infrastructure and tools necessary to implement and
expand our Pronto service offering. The creation of this infrastructure and
these tools involved:

o Design and implementation of the Pronto systems infrastructure,
and

o Development of our proprietary flat-menu voice recognition
platform, combining telephony, computer technology and live
operator service.

In 2001, we completed the design and implementation of Pronto's
technology infrastructure encompassing new business systems, content warehouse,
and alert and messaging systems. We believe that these new systems, implemented
in Java, provide the scalability, adaptability and reliability for our current
and future products and services offerings. In 2001, we developed a flat menu
voice platform that combines telephony, computers and live operators to provide
information to our subscribers in a fast, convenient method. The system utilizes
third party voice recognition and text-to-speech engines. The system is also
hosted by a third party. Utilizing these new systems and technology, in late
2001, we test marketed Pronto.

We use two third parties for our call center needs. Calls related to
subscriber acquisition, customer service and billing are received and handled by
Abacus Communications LLC through

telephone service representatives dedicated to our account. We pay an hourly
rate for the services provided by Abacus' service representatives. Calls from
our subscribers for the use of our mobile concierge service, or in the event
that our automated voice recognition system is unable to answer a question, are
handled by iNetNow, Inc. at its call center in Los Angeles, California. We are
billed for the use of iNetNow's service representatives on a per minute basis.
We are currently funding a substantial portion of iNetNow's overhead and other
expenses. iNetNow is currently in default of certain provisions of its
arrangements with us, and we are considering our possible remedies.

We have entered into a non-exclusive agreement with Voxeo Corporation
to provide us with an isolated network environment to support Pronto. The Voxeo
network hosts Pronto's voice recognition application. We pay Voxeo a monthly fee
for a fixed number of caller minutes, and per minute charge for any minutes used
in excess thereof. The agreement to provide these services terminates on
September 28, 2002, subject to automatic annual renewals unless either of the
parties provides written notice to the other in accordance with the terms of the
agreement. See "Risk Factors." We have entered into a non-exclusive agreement
with Nuance Communications, Inc. to license Nuance's voice recognition software
on a volume basis. The agreement extends through December 2003. Under this
agreement, we pay Nuance a license fee based on the type of software used and
the number of callers who use it, with certain minimum payments due over the
term of the agreement.

As we move forward into 2002, our technology team will continue to
create additional services for Pronto users and to further refine our
technologies and infrastructure to improve the user experience. We anticipate
that these efforts will include:

o Incorporating technology permitting customers to bill transactions
through Pronto to their credit cards, and permitting our customers
and customer service staff to track transaction histories;

o Implementing new features on our web site to allow customers to
more easily personalize their use of Pronto;

o Continuing to enhance and refine Pronto's voice recognition
technology and improving our management of customer needs;

o Developing a customized branded text-to-speech voice for our
recorded voice prompts;

o Designing a system for providing prerecorded and live audio
content on request;

o Monitoring customer use of Pronto in order to reduce costs through
greater efficiency; and

o Establishing a research and development team to further improve
and develop our technological tools and assets.

In 2002, we plan to incorporate a new credit card billing
system that provides high volume transactions and pre-authorizations to support
our Pronto subscription service. The new billing system allows for
subscription-based batch processing and individual charges that may become part
of our commerce strategy. As a further enhancement of our commerce capabilities,
we intend to develop a transaction logging system where our mobile assistants
can enter individual records of each transaction they initiate on behalf of
Pronto subscribers. These log entries will be made available to Pronto
subscribers on our web site as well as through our customer care agents. By
mid-2002, we also intend to modify our web site to become primarily a
"personalization" tool. In addition, we are currently modifying various
infrastructure components to better address easy personalization of the voice
services.

In 2002, we intend to develop a fully integrated voice
response and call center management system. The focus of this endeavor will be
to reduce the transfer time when subscribers need a live assistant, and reduce
our costs by allowing "human assisted Voice Recognition." Longer term
voice-recognition projects currently include various methods of helping users
understand what is included in Pronto and how to access these features. We are
also in the development stages of creating a custom computer voice (text to
speech) that is derived from the same person we use for our recorded prompts.
This is being developed by AT&T Labs exclusively for our use. We believe this
endeavor will provide two major benefits, it provides a single voice to
represent Pronto, and will include special requirements that are specific to
Pronto such as team names, airlines and other special pronunciations resulting
in more natural sounding information.

In mid-2002, we anticipate offering branded audio content such
as news, sports and market updates. Various audio input formats will be
supported while creating a common output format specifically tuned for telephony
applications. Later in the year we plan to provide "live audio" support to
enable our customers to listen to live broadcasts such as sporting games and
special events.

We expect to seek to further reduce our operating costs and
implement other efficiencies by utilizing a complex set of business equations to
build a monitoring tool for Pronto. Our management team will be able to use this
tool to obtain quick access to the data needed to determine our costs. In 2002,
we will also expect to establish a small research and development group that
will focus on core technologies for Pronto, such as voice recognition engines,
voice channel filters and media streaming technologies.

COMPETITION

We expect that the Pronto service will compete primarily on the basis
of functionality, content and user experience. While no one competitor offers
the same functionality as Pronto, we believe that current or potential
competitors may include concierge services, Internet portals such as AOL and
Yahoo, voice recognition portals such as Tell Me, Hey Anita and General Motors'
OnStar, and wireless network operators, any of which may decide to develop
in-house resources to provide similar services themselves or in conjunction with
voice portals, such as AT&T Wireless's #121 service.

INTELLECTUAL PROPERTY RIGHTS

We have filed applications to register in the United States the marks
"Pronto," "The New Mobile Experience," "i3 Mobile," "Powered by i3 Mobile,"
"Mobile Communities," "The Possibilities are Wireless" (Class 42), "Kewlphone"
and "i3 (m)Power Portal." In addition, we have registered the marks "The
Possibilities are Wireless" (Class 38), "Eyes on the Web," "Village Square,"
"News Alert Service," "Sports Alert Service," "Powered by III" and "Intelligent
Information Incorporated" on the Principal Register of the United States Patent
and Trademark Office.

We rely on a combination of copyright, trademark, service mark, trade
secret laws and contractual restrictions to establish and protect certain
proprietary rights in our products and services. We have applied for a patent
covering our Advanced Data Mining Advertising Tagging and Transaction system,
which is a system that matches personal profile and demographic data against
advertising targeting information to attach advertising taglines to the end of
text or voice messages being delivered to users.

See "Products and Services" for a discussion of the various licenses
under which we obtain the content and information we provide to Pronto
subscribers.

GOVERNMENT REGULATION

We are not currently subject to direct federal, state or local
government regulation, other than regulations that apply to businesses
generally. The wireless network operators with which we have contracts are
subject to regulation by the Federal Communications Commission. Therefore,
changes in Federal Communications Commission regulations could affect the
availability of wireless coverage these carriers are willing or able to provide
to us.

Legislative proposals have been made in the United States that, if
enacted, would afford broader protection to owners of databases of information,
such as stock quotes and sports scores. If enacted, this legislation could
result in an increase in the price of services that provide data to wireless
communications devices and could create potential liability for unauthorized use
of this data.

EMPLOYEES

As of December 31, 2001, we had 1 part-time and 113 full-time
employees. We consider our relations with our employees to be good. None of our
employees are represented by a union.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and
other information with the SEC. Our SEC filings are available to the public over
the Internet from our own web site at http://www.i3mobile.com or at the SEC's
web site at http://www.sec.gov. You may also read and copy any material we file
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may obtain information on the operation of the
Public

Reference Room by calling the SEC at 1-800-SEC-0330.

ITEM 2. PROPERTIES

Our principal executive offices are located on the third floor at 181
Harbor Drive, Stamford, Connecticut. We currently operate four facilities under
leases as follows:

APPROXIMATE
APPROXIMATE ANNUAL RENT LEASE
LOCATION SQUARE FOOTAGE IN 2001 EXPIRATION DATE
-------- -------------- ------- ---------------

181 Harbor Drive................................ 28,453 $ 717,000 March 2008
Stamford, CT

One Dock Street................................. 5,047 $ 18,000 March 2002
Stamford, CT

1237 Southridge Court........................... 1,000 $ 26,000 February 2002
Hurst, TX

305 N.E. Loop................................... 10,035 $ 115,000 January 2010
Hurst, TX

We believe that our present space is adequate for current purposes and
offers moderate expansion possibilities.

ITEM 3. LEGAL PROCEEDINGS

None.

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

None.

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS

Our shares have traded on The Nasdaq National Stock Market under the
trading symbol "IIIM" since April 6, 2000. Prior to April 6, 2000 our shares
were not publicly traded. The following table sets forth, for the periods
indicated, the range of high and low closing bid quotations as reported by
Nasdaq for each quarter since our shares began trading. The bid quotations set
forth below reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.

HIGH LOW
------- ------

Fiscal Year Ended December 31, 2001
First Quarter.............................................................. 4.03 0.88
Second Quarter............................................................. 4.20 0.70
Third Quarter.............................................................. 3.25 1.90
Fourth Quarter............................................................. 3.00 1.07

Fiscal Year Ended December 31, 2000
Second Quarter (from April 6, 2000)........................................ 33.06 5.13
Third Quarter.............................................................. 20.06 5.81
Fourth Quarter............................................................. 7.44 1.38

On March 26, 2002, the last reported closing price for our shares was
$1.37 per share, as reported by Nasdaq. At March 18, 2002, we had approximately
73 stockholders of record. We estimate that there are approximately 5,340
beneficial owners of our common stock.

We have never paid cash dividends on our common stock and do not expect
to pay such dividends in the foreseeable future. We currently intend to retain
any future earnings for use in our business. The payment of any future dividends
on our common stock will be determined by our Board in light of the conditions
then existing, including our financial condition and requirements, future
prospects, restrictions in future financing agreements, business conditions and
other relevant factors.

ITEM 6. SELECTED FINANCIAL DATA

The selected consolidated financial data set forth below should be read
along with such consolidated financial statements and the related notes and the
section of this report entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

FISCAL YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
2001 2000 1999 1998 1997
--------- --------- -------- -------- ---------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

STATEMENT OF OPERATIONS DATA:
Net revenue............................................... $ 4,597 $ 4,494 $ 1,734 $ 1,405 $ 825
--------- ---------- -------- --------- ---------

Expenses:.................................................
Operating............................................. 4,198 3,178 1,466 1,081 700
Sales and marketing................................... 7,921 10,929 2,032 584 234
Product development................................... 6,593 2,717 1,095 161 158
General and administrative............................ 17,175 15,024 3,671 2,145 2,100
--------- ---------- -------- --------- ---------
Total expenses........................................ 35,887 31,848 8,264 3,971 3,192
--------- ---------- -------- --------- ---------
Operating loss............................................ (31,290) (27,354) (6,530) (2,566) (2,367)
Interest (income) expense, net............................ (2,825) (4,778) 326 329 81
--------- ----------- -------- --------- ---------
Loss before extraordinary item............................ (28,465) (22,576) (6,856) (2,895) (2,448)
Extraordinary loss on extinguishment of debt.............. -- -- (3,434) -- --
--------- ---------- --------- --------- ---------
Net loss ........................................ $(28,465) $ (22,576) $(10,290) $ (2,895) $ (2,448)
Dividends on and redemptions of preferred stock........... -- (2,829) (26,580) (274) (76)
========= ========== ======== ========== =========
Loss applicable to common stock........................... $ (28,465) $ (25,405) $(36,870) $ (3,169) $ (2,524)
========= ========== ======== ========== =========
Net loss per share--basic and diluted..................... $ (1.25) $ (1.39) $ (6.43) $ (0.42) $ (0.33)
========= ========== ======== ========== =========
Shares used in computing net loss per share............... 22,742 18,314 5,736 7,554 7,554

DECEMBER 31,
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
(IN THOUSANDS)

BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 52,612 $ 84,900 $ 28,241 $ 166 $ 215
Working capital........................................... 50,499 82,412 29,468 (687) (533)
Total assets.............................................. 68,458 99,247 36,241 682 375
Long-term obligations, less current portion............... -- 568 -- 455 573
Mandatorily redeemable preferred stock.................... -- -- 55,338 2,500 1,412
Total stockholders' equity (deficit)...................... 62,700 91,890 (22,696) (3,578) (2,488)

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion of our financial condition and results of
operations should be read together with the financial statements and the related
notes included in another part of this report and which are deemed to be
incorporated into this section.

OVERVIEW

Since our inception in June 1991 until 2001, our business was comprised
of distributing customized text-based information to mobile devices under the
"Powered by i3 Mobile" product brand. During 2001, we evolved from a company
that distributes customized text-based information to mobile devices under the
"Powered by i3 Mobile" product brand into a company that we believe is among the
first to create a premium mobile subscription information and communication
service for telephones. This service, Pronto, is being marketed directly to
consumers and delivers information on demand 24 hours a day, combining the
service of a mobile concierge with the power of leading-edge voice recognition
technology. The results of operations discussed below primarily relate to the
operation of our legacy business, since our Pronto service has not yet generated
significant revenues.

Pronto was test marketed in the Hartford/New Haven region of
Connecticut in the fourth quarter of 2001. While currently available on a
national basis, we anticipate that a coordinated national marketing campaign for
Pronto will begin during the second quarter of 2002.

We anticipate that our financial results in 2002 and during the first
half of 2003 will be principally driven by our ability to properly allocate the
extent and timing of our limited cash resources to the enhancement of the
capacity of the Pronto service call center infrastructure, technology
development and to our national marketing and other customer acquisition
efforts. The application of these resources must be coordinated with and take
into account the projected rate of growth of our Pronto service subscriber base
and the pricing assumptions in our business model. Based on our test marketing
to date, management has made significant estimates regarding the anticipated
growth of our subscriber base, taking into account many variables, certain of
which are outside our control. These variables include customer demand for our
products and services, the efficacy of our marketing efforts (particularly our
national campaign in 2002), and the reliability and speed of our technology
infrastructure and live operator service. We may decide to expand the
capabilities of our existing call center arrangement, acquire a call center
operation, or establish our own call

center. Each of these choices would require significantly different levels of
funding. This decision will be influenced, in part, by the projected and actual
rate of growth in the Pronto service subscriber base and related revenue growth.
Our business model requires expanding and improving the technology and call
center capabilities in order to properly service anticipated increased usage by
a growing subscriber base, and if our subscriber base does not grow at projected
rates, or our pricing assumptions are incorrect, then our up-front expenses,
including our decision regarding call center alternatives, will exceed our
revenues by amounts greater than currently anticipated, accelerating our
projected losses and putting additional pressure on our cash resources.

RESULTS OF OPERATIONS

Years Ended December 31, 2001 and December 31, 2000

Net Revenue. Net revenues increased 2% to $4.6 million for the year
ended December 31, 2001 from $4.5 million for the year ended December 31, 2000.
The increase in 2001 is primarily attributable to an increase in subscription
revenue from our legacy wireless alert product offering to $4.1 million in 2001
from $2.7 million in 2000, offset by a decrease in 2001 development revenue to
$0.5 million from $1.8 million in 2000. We anticipate that revenues from this
legacy product will decrease substantially in the future as we de-emphasize this
product and implement our Pronto service. See "Liquidity and Capital Resources".

Operating Expense. Operating expenses increased by 32% to $4.2 million
for the year ended December 31, 2001 from $3.2 million for the year ended
December 31, 2000. The increase was primarily attributed to the cost of
expanding our live operator, customer service and customer acquisition costs in
connection with the test marketing of Pronto in the fourth quarter of 2001, as
well as an increase in costs associated with the purchase of content and
delivery of information due to the increase in subscription revenues during the
2001 period attributable to our legacy wireless alert product. During 2002, we
will continue to incur substantial operating expenses relating to our various
Pronto related call center requirements.

Sales and Marketing Expense. Sales and marketing expenses decreased by
28% to $7.9 million for the year ended December 31, 2001 from $10.9 million for
the year ended December 31, 2000. The 2000 period included expenses relating to
our launch in print, TV, radio and Internet media of the "Powered by i3"
advertising campaign supporting our legacy wireless alert product offering. This
campaign was not continued in 2001. The expense decrease in 2001 was partially
offset by sales and marketing initiatives in the fourth quarter of 2001
supporting the test marketing of Pronto. Sales and marketing expenses during the
2001 and 2000 periods include non-cash marketing expenses of $1.1 million and
$0.9 million, respectively, associated with certain of our broadcast and online
initiatives. By June 30, 2002, in addition to other sales and marketing expenses
we may incur, we are contractually obligated to purchase approximately $1.3
million in television advertising from the National Broadcasting Company, Inc.,
which advertising may appear on the NBC or CNBC television networks and/or on
NBC's owned and operated television stations.

Product Development Expense. Product development expenses increased by
106% to $5.6 million for the year ended December 31, 2001 from $2.7 million for
the year ended December 31, 2000. The increase was primarily as a result of
labor and related costs from the addition of personnel necessary to support the
design and development of Pronto.

General and Administrative Expense. General and administrative expenses
increased by 14% to $17.2 million for the year ended December 31, 2001 from
$15.0 million for the year ended December 31, 2000. Depreciation expense
increased $3.0 million over the prior year period due to our capital investing
activities, partially offset by a decrease in professional fees in 2001.
Additionally, the 2001 and 2000 expenses include $1.3 million and $1.0 million,
respectively, from reductions in workforce and associated costs.

Interest (Income) Expense, Net. Net interest income was $2.8 million
for the year ended December 31, 2001 as compared to $4.8 million for the year
ended December 31, 2000. The decrease was attributable to a lower amount of
funds invested in 2001 as compared to 2000. Interest income consists of interest
on the investment of the net proceeds from our initial public offering in
short-term, investment grade, interest-bearing instruments.

Years Ended December 31, 2000 and December 31, 1999

Net Revenue. Net revenues increased 159% to $4.5 million for the year
ended December 31, 2000 from $1.7 million for the year ended December 31, 1999.
The increase from the prior year is primarily attributable to development
revenue realized under agreements with Mobile Media Group and other enterprise
customers (approximately $1.8 million) and the growth of our subscriber base
(approximately $1.0 million) primarily with wireless network operators partially
offset by a reduction in average revenue per user.

Operating Expense. Operating expenses increased by 117% to $3.2 million
for the year ended December 31, 2000 from $1.5 million for the year ended
December 31, 1999. The increase was associated with costs directly related to
services provided to Mobile Media Group and other enterprise-related projects,
an increase in costs associated with the acquisition of content and delivery of
information to wireless users and an increase in network operations costs as a
result of increased labor costs to provide operations support.

Sales and Marketing Expense. Sales and marketing expenses increased by
438% to $10.9 million for the year ended December 31, 2000 from $2.0 million for
the year ended December 31, 1999. The increase from the 1999 period is
attributable to the launch of our national and regional advertising campaign
consisting of print, cable television and radio broadcasts, e-mail and online
advertising to increase market awareness of our company and our products and
services and increased compensation expenses, including the hiring of additional
sales and marketing personnel. Sales and marketing expenses during the 2000
period include non-cash marketing expenses of $0.9 million associated with
certain of our broadcast and online initiatives.

Product Development Expense. Product development expenses increased by
148% to $2.7 million for the year ended December 31, 2000 from $1.1 million for
the year ended December 31,

1999. The increase was primarily as a result of labor and related costs from the
addition of personnel necessary to support our wireless alert product offering.

General and Administrative Expense. General and administrative expenses
increased by 309% to $15.0 million for the year ended December 31, 2000 from
$3.7 million for the year ended December 31, 1999. The increase was primarily
due to increased compensation costs from the addition of personnel, increased
fees and expenses associated with being a publicly traded company, rent and
other related infrastructure expenses. General and administrative expenses
include $0.5 million and $0.1 million of non-cash compensation expenses for the
years ended December 31, 2000 and 1999, respectively. Additionally, the increase
in 2000 expenses includes a $1.0 million reduction in workforce and associated
costs.

Interest (Income) Expense, Net. Net interest income was $4.8 million
for the year ended December 31, 2000 as compared to net interest expense of $0.3
million for the year ended December 31, 1999. Interest income consists of
interest on the investment of the net proceeds from our initial public offering
in short-term, investment grade, interest-bearing instruments.

LIQUIDITY AND CAPITAL RESOURCES

Since our inception we have financed our operations primarily
through sales of our common and preferred securities and the issuance of
long-term debt, which has resulted in aggregate cash proceeds of $130.1 million
through December 31, 2001. Our working capital decreased to $50.5 million at
December 31, 2001 from $82.4 million at December 31, 2000 which had increased
from $29.5 million at December 31, 1999. Cash and cash equivalents at March 26,
2002 were $45.7 million.

Net cash used in operating activities was $23.4 million for
the year ended December 31, 2001, $16.8 million for the year ended December 31,
2000 and $4.6 million for the year ended December 31, 1999. The principal use of
cash in each of these periods was to fund our losses from operations.

We believe that our current cash and cash equivalents will be
sufficient to meet our anticipated cash needs for working capital and capital
expenditures for at least the next twelve months. We anticipate utilizing our
cash and cash equivalents to fund expected losses from operations and to invest
in systems development to further refine our content delivery and business
systems support. Specifically, we anticipate such utilization to include
national advertising campaigns and other subscriber acquisition efforts as well
as operating expenses associated with our Pronto product offering, including
call center, live operator and associated expenses, ongoing refinement of our
speech recognition technology, and expanded content acquisition. We anticipate
our overall cash expenditures in 2002 will exceed the total cash used in 2001.
The anticipated cash expenditures in 2002 include approximately $2.9 million of
non-cancellable commitments. In addition, we may incur significant uses of cash
in connection with possible strategic acquisitions. Because we are in the
process of transforming our business model to focus on the direct to consumer
nationwide marketing of the Pronto suite of services, and intend, during 2002,
to de-emphasize our legacy wireless alert product offering, we anticipate that
our historical source of

revenues will diminish, and that we will incur negative operating margins
through most of 2002 and net losses throughout 2002 and early 2003 as we incur
significant marketing, sales and development expenses in connection with Pronto.
While we anticipate that revenues from Pronto will eventually replace and exceed
those from our legacy wireless alert business, there can be no assurance of this
occurrence. In addition, we may not generate revenues at levels sufficient to
cover anticipated expenses, resulting in ongoing net losses and depletion of our
cash resources. In such event, we would need to obtain additional financing;
there can be no assurance we will be able to do so on favorable terms, or at
all. See "Risk Factors."

Cash used in investing activities was $6.9 million for the year ended
December 31, 2001, $7.4 million for the year ended December 31, 2000 and $1.8
million for the year ended December 31, 1999. Cash used in investing activities
relates primarily to purchases of fixed assets.

Net cash used in financing activities was $2.0 million for the year
ended December 31, 2001, as compared to net cash provided by financing
activities of $80.8 million for the year ended December 31, 2000 and $34.5
million provided for the year ended December 31, 1999. Cash used in financing
activities in 2001 was primarily attributed to payments on capital lease
obligations, issuance of notes and treasury stock repurchases. Cash provided by
financing activities in 2000 was primarily attributable to proceeds from sales
of our common stock while cash provided from financing activities in 1999 was
attributable to proceeds received from the sales of our preferred securities,
offset by the repurchase of common and preferred stock and the repayment of
notes.

On April 6, 2000, we completed an initial public offering of 5,100,000
shares of common stock at a price of $16 per share, generating net proceeds of
$72.9 million. In connection with the offering, we granted to the underwriters
an option to purchase up to 765,000 additional common shares at the initial
offering price, less the underwriting discounts and commissions, to cover any
over-allotments. On May 10, 2000 the underwriters exercised this option and
purchased an additional 522,500 shares. After deducting underwriting discounts
and commissions, we received $7.8 million in net proceeds from the sales of
shares issued upon exercise of this option. In conjunction with the offering,
all of our outstanding preferred stock was converted into a total of 11,316,765
shares of common stock.

In February 1999, we repurchased 1,885,000 shares of our common stock
and 3,770 shares of our Series A preferred stock from a stockholder for $8.0
million in cash and notes and issued a warrant to purchase 500,000 shares of our
common stock at an exercise price of $3.00 per share. In connection with this
repurchase, we paid $3.0 million in cash and delivered a $5.0 million promissory
note. This note was converted into Series F mandatorily redeemable preferred
stock in December 1999 and subsequently converted into 631,250 shares of common
stock at an equivalent price per share of common stock of $7.92.

In February 1999, we sold 7,714.56 shares of Series E mandatorily
redeemable convertible preferred stock for $12.0 million to a private investor
group. On November 23, 1999, the same private investor group, in accordance with
its contract with us, purchased an additional 1,928.64 shares of Series E
mandatorily redeemable convertible preferred stock for $3.0 million. The Series
E preferred stock was converted into 4,821,600 shares of common stock at an
equivalent price per share of common stock of $3.11.

On December 22, 1999, we issued 8,248.33 shares of Series F mandatorily
redeemable convertible preferred stock at a price of $3,960.40 per share to
private investor groups. The proceeds included $24.9 million of cash
investments, including $3.0 million from a related party stockholder, the
conversion of a $5.0 million outstanding note payable, the conversion of a $0.3
million five-year convertible note payable and future television advertising
rights. The Series F mandatorily redeemable preferred stock was converted into
4,124,165 shares of common stock at an equivalent price per share of common
stock of $7.92.

At December 31, 2000, we financed a portion of our capital hardware and
software purchases, particularly certain of our billing and data warehouse
system costs, through capital leases with about $1.4 million of capital lease
obligations outstanding. During 2001 and 2000, we made payments on capital lease
obligations of approximately $0.8 million and $0.1 million, respectively. We
believe that our capital lease obligations can be adequately serviced by our
existing cash and cash equivalents.

CRITICAL ACCOUNTING POLICIES

General

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. These estimates include but are not limited to capitalized
computer software costs, long-lived assets, accounts receivable allowances,
deferred advertising and income taxes.

Revenue Recognition and Accounts Receivable

Our principal sources of revenues are derived from providing
subscription-based wireless alert services. Our subscription revenue consists of
fixed monthly usage charges, transactional fees based on the information
delivered, or a combination of the two arrangements.

We recognize revenue when: the price is fixed and determinable,
persuasive evidence of an agreement exists, our service is provided to a
customer and a determination is made that collection is probable. We establish
allowances for doubtful accounts for estimated losses resulting from the
inability of our customers to make required payments. If the financial condition
of our customers were to deteriorate, their ability to make required payments
may become impaired and increases in these allowances may be required. In
addition, a negative impact on sales to those customers may occur.

Long-lived assets

We account for our long-lived assets in accordance with SFAS 121,
Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of. Accordingly, we evaluate the realizability of our long-lived
assets, based on estimates of future non-discounted cash

flows at each balance sheet date and whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. In the event that the
estimated expected future cash flows from a long-lived asset are less than the
carrying value, an impairment loss is calculated. This impairment loss is
calculated as the difference between the fair value of the asset, as defined
above, and the carrying value of the asset.

If market conditions become less favorable, future cash flows, the key
variable in assessing the impairment of these assets, may decrease and as a
result we may be required to recognize impairment charges.

Capitalized Computer Software Costs

We capitalize computer software costs developed or obtained for
internal use. All costs associated with the development of code and purchase or
license of software from external vendors which is used to run our operations
are capitalized and amortized over an estimated useful life of 2.5 years. We
continually evaluate the recoverability of capitalized costs incorporating
technological changes and forward looking company plans. No capitalized computer
software costs were written down for the year ended December 31, 2001.

Product Development Expenses

We expense as incurred all costs associated with new product
development whether performed by employees or outside consultants, including
reengineering, process mapping, feasibility studies, data conversion, and
training and maintenance. Such costs are included in product development in the
statement of operations. In addition, we expense as incurred the costs
associated with maintenance and upgrades of current technologies. Such costs are
included in general and administrative expenses in the statement of operations.

Advertising Costs

In accordance with AICPA Statement of Position 93-7, "Reporting on
Advertising Costs," we account for the cost of advertising by expensing them as
incurred. Deferred advertising represents television advertising rights received
in exchange for our preferred stock. The deferred advertising rights are
amortized to expense as the advertising is used.

Income Taxes

Income taxes are determined in accordance with Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), which requires recognition of
deferred income tax liabilities and assets for the expected future tax
consequences or events that have been included in the financial statements or
tax returns. Under this method, deferred income tax liabilities and assets are
determined based on the difference between financial statements and tax bases of
liabilities and assets using enacted tax rates in effect for the year in which
the differences are expected to reverse. SFAS 109 also provides for the
recognition of deferred tax assets if it is more likely than not that the assets
will be realized in future years. A valuation allowance has been

established for deferred tax assets for which realization is not likely. In
assessing the valuation allowance we have considered future taxable income and
ongoing tax planning strategies. Changes in these circumstances, such as decline
in future taxable income, may result in additional valuation allowance being
required.

RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement No. 141, "Business Combinations" ("SFAS 141"), which is effective for
business combinations initiated after June 30, 2001. SFAS 141 eliminates the
pooling of interest method of accounting for business combinations and requires
that all business combinations occurring on or after July 1, 2001 are accounted
for under the purchase method. We have evaluated the impact of SFAS 141 and
believe that adoption will not have a material impact on our financial
statements.

Also in July 2001, the FASB issued Statement No. 142, "Goodwill and
Other Intangible Assets" ("SFAS 142"), which is effective for fiscal years
beginning after December 15, 2001. SFAS 142 addresses how intangible assets that
are acquired individually or with a group of other assets should be accounted
for in the financial statements upon their acquisition and after they have been
initially recognized in the financial statements. SFAS 142 requires that
goodwill and intangible assets that have indefinite useful lives not be
amortized but rather tested at least annually for impairment, and intangible
assets that have finite useful lives be amortized over their useful lives. The
adoption of SFAS 142 will not have a material impact on our financial
statements.

In August 2001, the FASB issued Statement No. 143, "Accounting for
Asset Retirement Obligations" ("SFAS 143"), which is effective for fiscal years
beginning after June 15, 2002. SFAS 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The adoption of SFAS 143 will
not have a material impact on our financial statements.

In October 2001, the FASB issued Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), which is effective
for fiscal years beginning after December 15, 2001. SFAS 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and
supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets to be Disposed of." The adoption of SFAS 144 will not have a material
impact on our financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have limited exposure to financial market risks, including changes
in interest rates. We do not currently transact significant business in foreign
currencies and, accordingly, are not subject to exposure from adverse movements
in foreign currency exchange rates. Our exposure to market risks for changes in
interest rates relates primarily to investments in corporate debt securities. We
place our investments with high credit quality issuers and, by policy, limit the
amount of the credit exposure to any one issuer. Our general policy is to limit
the risk of principal loss and ensure the

safety of invested funds by limiting market and credit risk. All highly liquid
investments with a maturity of less than three months at the date of purchase
are considered to be cash equivalents.

As of December 31, 2001 we had no debt outstanding. We currently have
no plans to incur debt during the next twelve months. As such, changes in
interest rates will only impact interest income. The impact of potential changes
in hypothetical interest rates on budgeted interest income in 2002 has been
estimated at approximately $0.4 million or approximately 1% of budgeted net loss
for each 1% change in interest rates.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements, including the notes thereto,
together with the report thereon of PricewaterhouseCoopers LLP, is presented
beginning at page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

OTHER RISKS AND UNCERTAINTIES

Before deciding to invest in i3 Mobile or to maintain or increase your
investment, you should carefully consider the risks described below, in addition
to the other information contained in this report and in our other filings with
the SEC, including our subsequent reports on Forms 10-Q and 8-K. Additional
risks and uncertainties not presently known to us may also affect our business
operations. If any of these risks actually occur, our business, financial
condition or results of operations could be seriously harmed. In that event, the
market price of our common stock could decline and you may lose all or part of
your investment.

WE HAVE A NEW PRODUCT AND BUSINESS MODEL, WHICH MAKES PREDICTIONS OF
OUR FUTURE RESULTS OF OPERATIONS DIFFICULT. During 2001 we initiated our current
business model involving offering subscription-based voice-activated premium
wireless content and services, and in the fall of 2001 we launched local
consumer testing of our current "Pronto" service offering. Our formal national
marketing and sales campaign for Pronto will begin in the second quarter of
fiscal year 2002. Due to our new product offering and business model, and
evolving consumer preferences in our industry, it is difficult or impossible to
predict our future results of operations. Investors must consider our business,
industry and prospects in light of the risks and difficulties typically
encountered by companies in rapidly evolving and intensely competitive markets
requiring significant capital expenditures such as those in which we are
engaged.

WE HAVE A HISTORY OF LOSSES AND MAY NOT BE ABLE TO GENERATE SUFFICIENT
NET REVENUE FROM OUR NEW BUSINESS IN THE FUTURE TO ACHIEVE OR SUSTAIN
PROFITABILITY. We have incurred losses since inception and expect that our net
losses and negative cash flow will continue for the foreseeable future as we
seek to implement our business plan, expand our service infrastructure, attract
subscription customers and grow our business. To date, our revenues have come
from our

legacy "Powered by i3 Mobile" SMS alerts distribution arrangements, and it is
anticipated that this revenue stream will decrease as we implement and expand
our new business. We cannot assure you that we will ever generate sufficient net
revenue to achieve or sustain profitability.

A high percentage of our expenses are, and will continue to be, fixed.
We may also incur significant new costs related to possible acquisitions and
the integration of new technologies. We expect to continue to incur increasing
levels of expenses for research and development, sales and marketing, call
center operation, customer support, developing distribution channels and
general and administrative expenses as we seek to increase our product and
service offerings, expand into new markets and launch our national campaign for
our Pronto service. In particular, given our early stage of development, our
significant operating expenses, the rate at which consumers subscribe to
Pronto, and the rate at which competition in our industry is intensifying, we
may not be able to maintain adequate operating margins. Our ability to achieve
and sustain profitability will depend on the accuracy of our expense
projections and revenue growth projections and on our ability to generate and
sustain substantially higher revenue, while maintaining reasonable cost and
expense levels as we seek to increase our product offerings, customer base,
geographic reach and technological advantages. As a result, if we fail to
increase our revenue, or if we experience delays in generating revenue, we
would incur substantial operating losses. We do not anticipate achieving
profitability in fiscal 2002 and may not be able to achieve or sustain
profitability thereafter in the future.

THE ACCURACY OF OUR SUBSCRIBER BASE AND EXPENSE PROJECTIONS ARE
CRITICAL TO OUR PROFITABILITY. We anticipate that our financial results in 2002
and during the first half of 2003 will be principally driven by our ability to
properly allocate the extent and timing of our limited cash resources to the
enhancement of the capacity of the Pronto service call center infrastructure,
technology development and to our national marketing and other customer
acquisition efforts. The application of these resources must be coordinated
with and take into account the projected rate of growth of our Pronto service
subscriber base and the pricing assumptions in our business model. Based on our
test marketing to date, management has made significant estimates regarding the
anticipated growth of our subscriber base, taking into account many variables,
certain of which are outside the Company's control. These variables include
customer demand for our products and services, the efficacy of our marketing
efforts (particularly our national campaign in 2002), and the reliability and
speed of our technology infrastructure and live operator service. We may decide
to expand the capabilities of our existing call center arrangement, acquire a
call center operation, or establish our own call center; each of these choices
would require significantly different levels of funding. This decision will be
influenced, in part, by the projected and actual rate of growth in the Pronto
service subscriber base and related revenue growth. Our business model requires
expanding and improving the technology and call center capabilities in order to
properly service anticipated increased usage by a growing subscriber base, and
if our subscriber base, which as of December 31, 2001 was approximately 100
subscribers, does not grow at projected rates, or our pricing assumptions are
incorrect, then our up front expenses, including our decision regarding call
center alternatives, will exceed our revenues by amounts greater than currently
anticipated, exacerbating our projected losses and putting additional pressure
on our cash resources.

OUR RELIANCE ON CERTAIN SUPPLIERS AND VENDORS COULD ADVERSELY AFFECT
OUR ABILITY TO PROVIDE OUR PRONTO BRAND SERVICES TO OUR SUBSCRIBERS ON A TIMELY
AND COST-EFFICIENT BASIS. We currently rely on iNetNow, Inc. and Abacus
Communications LLC to provide the call center services for our products, and on
Voxeo Corporation to host our voice recognition application. We do not currently
have internal call center capabilities. Our agreement with iNetNow expires on
April 30, 2002 with automatic monthly renewals until October 31, 2002, unless
earlier terminated. Our agreement with Abacus expires on September 20, 2002 with
automatic annual renewals unless earlier terminated. Our agreement with Voxeo
expires on September 30, 2002 with automatic annual renewals unless earlier
terminated. Our reliance on these service providers involves a number of risks,
including the long-term financial viability of these chosen vendors, and the
inability to control quality and timing of delivery of services. If iNetNow,
Inc., Abacus Communications LLC or Voxeo Corporation are unable or unwilling to
continue supporting our products in required volumes and at high quality levels,
or if these agreements are terminated, we will have to identify, qualify and
select acceptable alternative service providers. Significant interruptions may
result as it is possible that an alternate source may not be available to us
when needed or be in a position to satisfy our requirements at acceptable prices
and quality. Although none of iNetNow, Abacus or Voxeo have indicated to us that
they will terminate our agreements, nor do we have reason to believe that they
will, they have the right to do so later in 2002. There can be no assurance we
will be able avoid termination of these agreements. Any significant interruption
in call center, customer phone service or voice recognition operations would
result in us having to reduce our support of our customers, which in turn could
have a material adverse effect on our customer relations, business, financial
condition and results of operations. We may not be able to effectively manage
our relationships with our call center service providers and they may not meet
our future requirements for quality.

THE MARKET FOR WIRELESS CONTENT SERVICES IS NEW, AND OUR BUSINESS WILL
SUFFER IF THE MARKET DOES NOT DEVELOP AS WE EXPECT OR IF THE USAGE OF WIRELESS
CONTENT PRODUCTS DOES NOT CONTINUE TO GROW. The wireless content services market
is new and may not grow or be sustainable. It is possible that our services may
never achieve market acceptance or be well received by consumers. We have a
limited number of customers and we have not yet provided our services on the
scale that is anticipated in the future. We incur operating expenses based
largely on anticipated revenue trends that are difficult to predict given the
recent emergence of the premium wireless content and concierge services market.
If general wireless product usage does not continue to increase, or the market
for premium wireless content service does not develop, or develops more slowly
than we expect, demand for our Pronto services may be limited and our business,
financial condition and operating results could be harmed.

OUR SUCCESS WILL BE DEPENDENT ON INCREASING AWARENESS OF THE PRONTO
BRAND. We expect to incur significant expenditures in order to increase
awareness of our Pronto services and brand name through sales and marketing and
other promotional activities. We believe that continuing to strengthen the
Pronto brand is critical to achieving widespread acceptance of the Pronto
service, particular in light of the competitive nature of our market. Promoting
and positioning this brand will depend largely on the success of our ability to
provide high quality services and our marketing efforts. In order to promote our
brand, we will need to increase our marketing budget and otherwise increase our
financial commitment to create and maintain brand loyalty among users. Further,
there can be no assurance that any new users attracted to the Pronto brand

will maintain an ongoing customer relationship with our products. If we fail to
promote and maintain our brand or incur substantial expenses in an attempt to
promote and maintain our brand or if our existing or future strategic
relationships fail to promote our brand or increase brand awareness, our
business, financial condition and operating results would be materially
adversely affected.

WE WILL INVEST A SIGNIFICANT AMOUNT OF OUR RESOURCES TO DEVELOP,
MARKET, AND SUPPORT OUR PRODUCTS AND SERVICES AND MAY NOT REALIZE ANY RETURN ON
THIS INVESTMENT. We plan to invest a significant amount of our resources to
develop, market and support our products and services, particularly in
connection with the national launch of Pronto beginning in the second quarter of
2002 and continuing throughout the year. Accordingly, our success will depend on
our ability to generate sufficient revenue from sales of these products and
services to offset the expenses associated with developing, marketing and
supporting them, as well as the expenses of establishing our new call center.
There are many risks that we face in doing so. In particular, we will need to
improve the reliability of our voice recognition system to reduce the number of
calls that fail over to the live operator for basic requests of news, sports and
weather. Additionally, the rapidly changing technological environment in which
we operate can require the frequent introduction of new products, resulting in
short product lifecycles. Accordingly, if our products and services do not
quickly achieve market acceptance, they may become obsolete before we have
generated enough revenue from their sales to realize a sufficient return on our
investment.

As a result, we expect to incur significant expenses and losses in 2002
and into 2003. If we incur substantial development, sales and marketing expenses
that we are not able to recover, and we are not able to compensate for such
expenses, our business, financial condition and results of operations would be
materially adversely affected.

IF WE DO NOT HAVE SUFFICIENT CAPITAL TO FUND OUR OPERATIONS, WE MAY BE
FORCED TO DISCONTINUE PRODUCT DEVELOPMENT, REDUCE OUR SALES AND MARKETING
EFFORTS OR FOREGO ATTRACTIVE BUSINESS OPPORTUNITIES. We may not have sufficient
capital to fund our operations and additional capital may not be available on
acceptable terms, if at all. Any of these outcomes could adversely impact our
ability to respond to competitive pressures or could prevent us from conducting
all or a portion of our planned operations. The speed at which we utilize our
available capital is likely to increase substantially as we launch Pronto
nationally on a direct-to-consumer basis. We expect that the cash we receive
through our operations and our currently available cash resources will be
sufficient to meet our working capital and capital expenditure needs for at
least the next 12 months. After that, we may need to raise additional funds, and
additional financing may not be available on acceptable terms, if at all. We
also may require additional capital to acquire or invest in complementary
businesses or products or to obtain the right to use complementary technologies.
If we issue additional equity securities to raise funds, the ownership
percentage of existing shareholders will be reduced. If we incur debt, the debt
will rank senior to our common shares, we will incur debt service costs and we
will likely have to enter into agreements that will restrict our operations in
some respects and our ability to declare dividends to the holders of our common
shares.

IF WE FAIL TO ENHANCE PRONTO TO MEET CHANGING CUSTOMER REQUIREMENTS AND
TECHNOLOGICAL ADVANCES, OUR OPERATIONS WOULD BE MATERIALLY ADVERSELY AFFECTED.
The timely

development of new or enhanced products and services is a complex and uncertain
process and although we believe we currently have the funding to implement our
business plan, we may not have sufficient resources to successfully and
accurately anticipate technological and market trends, or to successfully manage
long development cycles. We may also experience design, marketing and other
difficulties that could delay or prevent our development, introduction or
marketing of our Pronto services, as well as new products and enhancements. We
may also be required to collaborate with third parties to develop our products
and may not be able to do so on a timely and cost-effective basis, if at all. If
we are not able to develop new products or enhancements to existing products on
a timely and cost-effective basis, or if our new products or enhancements fail
to achieve market acceptance, our business, financial condition and results of
operations would be materially adversely affected.

IF WE ARE NOT ABLE TO ESTABLISH RELATIONSHIPS WITH A VARIETY OF
DISTRIBUTION PARTNERS, WE MAY NOT BE ABLE TO INCREASE OUR SALES AND GROW OUR
BUSINESS. We believe that our future success is dependent upon establishing
successful relationships with a variety of distribution partners including
wireless network operators, Internet portals, business enterprises, national
retail chains and selected vertical retail outlets. We cannot be certain that we
will be able to reach agreement with distribution partners on a timely basis or
at all, or that any of our current or future distribution partners will devote
adequate resources to selling our products. If we cannot establish these
relationships, we may not be able to increase our sales and grow our business.

WE RELY ON THIRD-PARTY SOFTWARE AND TECHNOLOGY, THE LOSS OF WHICH COULD
FORCE US TO USE INFERIOR SUBSTITUTE TECHNOLOGY OR TO CEASE OFFERING OUR
PRODUCTS. We rely on third party intellectual property licenses. For example, we
have entered into license agreements with Nuance Communications, Inc. and Voxeo
Corporation for use of their speech recognition technology and voice centers. In
addition, we use, and will use in the future, some third-party software that may
not be available in the future on commercially reasonable terms, or at all. We
could lose our ability to use this software if the agreements are terminated or
if the rights of our suppliers to license it were challenged by individuals or
companies which asserted ownership of these rights. The loss of, or inability to
maintain or obtain, any required intellectual property could require us to use
substitute technology, which could be more expensive or of lower quality or
performance, or force us to develop the technology ourselves or cease offering
our products. Moreover, some of our license agreements from third parties are
non-exclusive and, as a result, our competitors may have access to some of the
technologies used by us. Any significant interruption in the supply of any
licensed software could cause a decline in product sales, unless and until we
are able to replace the functionality provided by this licensed software. We
also depend on these third parties to deliver and support reliable products,
enhance their current products, develop new products on a timely and
cost-effective basis, and respond to emerging industry standards and other
technological changes. The failure of these third parties to meet these criteria
could materially harm our business.

WE DEPEND ON THIRD PARTIES FOR CONTENT, AND THE LOSS OF ACCESS TO THIS
CONTENT COULD HARM OUR BUSINESS. We do not create all of our own content.
Rather, we acquire rights to information from numerous third-party content
providers, and our future success is dependent upon our ability to maintain
relationships with these content providers and enter into new relationships with
other content providers. We typically license content through one or a

combination of the following formats: a revenue-sharing arrangement, a one-time
fee, a periodic fee or a fee for each query from subscribers. If we fail to
enter into and maintain satisfactory arrangements with content providers, our
business will suffer.

WE MAY BE SUBJECT TO LIABILITY FOR OUR USE OR DISTRIBUTION OF
INFORMATION THAT WE RECEIVE FROM THIRD PARTIES. We obtain content and commerce
information from third parties. When we integrate and distribute this
information through Pronto, we may be liable for the data that is contained in
that content. This could subject us to legal liability for such things as
defamation, negligence, intellectual property infringement and product or
service liability. Many of our content agreements do not provide us with
indemnity protection. Even if a given contract does contain indemnity
provisions, these provisions may not cover a particular claim. Our insurance
coverage may be inadequate to cover fully the amounts or types of claims that
might be made against us. Any liability that we incur as a result of content we
receive from third parties could adversely affect our financial results. We also
gather personal information from users in order to provide personalized
services. Gathering and processing this personal information may subject us to
legal liability for negligence, defamation, invasion of privacy, product or
service liability. We may also be subject to laws and regulations, both in the
United States and abroad, regarding user privacy.

WE RELY HEAVILY ON OUR PROPRIETARY TECHNOLOGY, BUT WE MAY BE UNABLE TO
ADEQUATELY PROTECT OR ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS. Our success
depends significantly upon our proprietary technology. To protect our
proprietary rights, we rely on a combination of copyright and trademark laws,
patents, trade secrets, confidentiality agreements with employees and third
parties and protective contractual provisions. Despite our efforts to protect
our proprietary rights, unauthorized parties may copy aspects of our products or
services or obtain and use information that we regard as proprietary. In
addition, others could possibly independently develop substantially equivalent
intellectual property. If we do not effectively protect our intellectual
property our business could suffer. If we cannot adequately protect our
intellectual property, our competitive position may suffer. Companies in the
software industry have frequently resorted to litigation regarding intellectual
property rights. We may have to litigate to enforce our intellectual property
rights, to protect our trade secrets or to determine the validity and scope of
other parties' proprietary rights. Similarly, we cannot ensure that our
employees will comply with the confidentiality agreements that they have entered
into with us, or they will not misappropriate our technology for the benefit of
a third party. If a third party or any employee breaches the confidentiality
provisions in our contracts or misappropriates or infringes on our intellectual
property, we may not have adequate remedies. In addition, third parties may
independently discover or invent competing technologies or reverse engineer our
trade secrets, software or other technology.

OUR PRODUCTS MAY INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS,
AND RESULTING CLAIMS AGAINST US COULD BE COSTLY AND REQUIRE US TO ENTER INTO
DISADVANTAGEOUS LICENSE OR ROYALTY ARRANGEMENTS. The software industry is
characterized by the existence of a large number of patents and frequent
litigation based on allegations of patent infringement and the violation of
intellectual property rights. Although we attempt to avoid infringing known
proprietary rights of third parties, we may be subject to legal proceedings and
claims for alleged infringement by us or as licensees of third-party proprietary
rights, such as patents, trade secrets, trademarks or

copyrights, from time to time in the ordinary course of business. From time to
time, we have received, and we may receive in the future, notice of claims of
infringement of other parties' proprietary rights. Any such claims could be
time-consuming, result in costly litigation, divert management's attention,
cause product or service release delays, require us to redesign our products or
services or require us to enter into royalty or licensing agreements. If a
successful claim of infringement were made against us and we could not develop
non-infringing technology or license the infringed or similar technology on a
timely and cost-effective basis, our business could suffer. Furthermore, former
employers of our employees may assert that these employees have improperly
disclosed confidential or proprietary information to us. Any of these results
could harm our business. We may be increasingly subject to infringement claims
as the number of, and number of features of, our products grow.

OUR FAILURE TO RESPOND TO RAPID CHANGE IN THE MARKET FOR VOICE
INTERFACE SERVICES COULD CAUSE US TO LOSE REVENUE AND HARM OUR BUSINESS. The
voice interface services industry is relatively new and rapidly evolving. Our
success will depend substantially upon our ability to enhance our existing
Pronto product release and to develop and introduce, on a timely and
cost-effective basis, new versions with features that meet changing end-user
requirements and incorporate technological advancements. If we are unable to
develop new enhanced functionalities or technologies to adapt to these changes,
or if we cannot offset a decline in revenue from existing products with revenues
from new products, our business would suffer. Commercial acceptance of our
products and technologies will depend on, among other things, the ability of our
products and technologies to meet and adapt to the needs of our target markets,
and the performance and price of our products and our competitors' products.

IF OUR PRODUCTS CONTAIN DEFECTS, WE COULD BE EXPOSED TO SIGNIFICANT
PRODUCT LIABILITY CLAIMS AND DAMAGE TO OUR REPUTATION. Because our products are
partially designed to provide critical communications services, we may be
subject to significant liability claims. Our agreements with customers typically
contain provisions intended to limit our exposure to certain liability claims,
but may not preclude all potential claims resulting from a defect in one or more
of our products. Although we believe that we maintain adequate product liability
insurance covering certain damages arising from implementation and use of our
products, our insurance may not be sufficient to cover us against all possible
liability. Liability claims could also require us to spend significant time and
money in litigation or to pay significant damages. As a result, any such claims,
whether or not successful, could seriously damage our reputation and have a
material adverse effect on our business, financial condition and results of
operations.

IF WE FAIL TO COMPLY WITH REGULATIONS AND EVOLVING INDUSTRY STANDARDS,
SALES OF OUR EXISTING AND FUTURE PRODUCTS COULD BE ADVERSELY AFFECTED. We are
not currently subject to direct regulation by the Federal Communications
Commission or any other governmental agency, other than laws and regulations
applicable to businesses in general. However, in the future, we may be subject
to regulation by the FCC or another regulatory agency. In addition, the wireless
carriers who supply us airtime are subject to regulation by the FCC and
regulations that affect them could increase our costs or reduce our ability to
continue selling and supporting our services.

While we believe that our products comply with all current governmental
laws, regulations and standards, we cannot assure you that we will be able to
continue to design our

products to comply with all necessary requirements in the future. In addition,
we may be required to customize our products to comply with various industry or
proprietary standards promoted by our competitors. Our key competitors may
establish proprietary standards, which they do not make available to us. As a
result, we may not be able to achieve interoperability with their products.

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

IF WE FAIL TO MANAGE THE GROWTH OF OUR OPERATIONS, OUR BUSINESS WILL BE
ADVERSELY AFFECTED. In connection with the implementation of our new business
model, we have rapidly and significantly expanded our operations. This expansion
has placed significant new demands on our managerial, operational and financial
resources. In 2001, we added several senior managerial, technical and operations
personnel whom we are in the process of integrating into our new business, and
we expect to add additional key personnel in these areas in the near future as
we implement our business plan and the national launch of our Pronto service. To
manage the expected growth of our operations and personnel, we will be required
to improve existing and implement new operational, financial and management
controls, reporting systems and procedures; hire, train, motivate and manage our
personnel; and effectively manage multiple relationships with our customers,
suppliers and other parties. In addition, our success depends, in part, on our
ability to provide prompt, accurate and complete service to our customers on a
competitive basis, and our ability to purchase and promote products, manage
sales and marketing activities and maintain efficient operations through our
management information systems. A significant disruption in our management
information systems could adversely affect our relations with our customers and
our ability to manage our operations and would have a material adverse effect on
our business, financial condition and operating results. There can be no
assurance that we will successfully manage the integration and expansion of our
new business.

OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO HIRE, RETAIN AND MOTIVATE
HIGHLY QUALIFIED EMPLOYEES. Our future success depends on our ability to
identify, attract, hire, train, retain and motivate highly skilled technical,
managerial, sales and marketing and business development personnel. Our services
and the industries to which we provide our services are relatively new. As a
result, qualified technical personnel with experience relevant to our business
are scarce and competition to recruit them is intense. If we fail to
successfully attract, assimilate and retain a sufficient number of highly
qualified technical, managerial, sales and marketing, business development and
administrative personnel, our business could suffer.

Stock options are an important means by which we compensate employees.
We face a significant challenge in retaining our employees if the value of these
stock options is either not substantial enough or so substantial that the
employees leave after their stock options have

vested. To retain our employees, we expect to continue to grant new options,
subject to vesting, which could be dilutive to our current stockholders. If our
stock price does not increase significantly above the prices of our options, we
may also need to issue new options or grant additional shares of stock in the
future to motivate and retain our employees.

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

INSIDERS OWN A LARGE PERCENTAGE OF OUR STOCK, WHICH COULD DELAY OR
PREVENT A CHANGE IN CONTROL AND MAY NEGATIVELY AFFECT YOUR INVESTMENT. As of
February 28, 2002, our officers, directors and affiliated persons beneficially
owned approximately 42% of our voting securities. J. William Grimes, our
Chairman, beneficially owned approximately 21% of our voting securities as of
that date. These stockholders will be able to exercise significant influence
over all matters requiring stockholder approval, including the election of
directors and approval of significant corporate transactions, which could have
the effect of delaying or preventing a third party from acquiring control over
us and could affect the market price of our common stock. In addition, some of
our executive officers have stock option grants which provide for accelerated
vesting upon a change in control if their employment is actually or
constructively terminated as a result. The interests of those holding this
concentrated ownership may not always coincide with our interests or the
interests of other stockholders, and, accordingly, they could cause us to enter
into transactions or agreements that we would not otherwise consider.

WE HAVE IMPLEMENTED ANTI-TAKEOVER PROVISIONS THAT COULD MAKE IT MORE
DIFFICULT TO ACQUIRE US. Our certificate of incorporation, our bylaws and
Delaware law contain provisions that could make it more difficult for a third
party to acquire us without the consent of our board of directors, even if doing
so would be beneficial to our stockholders. For example, a takeover bid
otherwise favored by a majority of our stockholders might be rejected by our
board of directors. Last year, we changed our charter to include provisions
classifying our board of directors into three groups so that the directors in
each group will serve staggered three-year terms, which would make it difficult
for a potential acquirer to gain control of our board of directors. We are also
afforded the protections of Section 203 of the Delaware General Corporation Law,
which provides certain restrictions against business combinations with
interested stockholders.

OUR STOCK PRICE MAY BE VOLATILE DUE TO FACTORS OUTSIDE OF OUR CONTROL.
Since our initial public offering on April 6, 2000, our stock price has been
extremely volatile. During that time, the stock market in general, and The
Nasdaq National Market and the securities of technology companies in particular,
has experienced extreme price and trading volume fluctuations. These
fluctuations have often been unrelated or disproportionate to the operating
performance of individual companies. The following factors, among others, could
cause our stock price to fluctuate: actual or anticipated variations in
operating results; announcements of operating results and business conditions by
our customers and suppliers; announcements by our competitors relating to new
customers, technological innovation or new services; economic developments in

our industry as a whole; and general market conditions. These broad market
fluctuations may materially adversely affect our stock price, regardless of our
operating results. Our stock price may fluctuate due to variations in our
operating results.

CERTAIN PROVISIONS OF OUR CHARTER DOCUMENTS PROVIDE FOR LIMITED
PERSONAL LIABILITY OF SUBSCRIBERS OF OUR BOARD OF DIRECTORS. Our certificate of
incorporation and by-laws contain certain provisions which reduce the potential
liability of subscribers of our board of directors for certain monetary damages
and provide for indemnity of other persons. We are unaware of any pending or
threatened litigation against us or our directors that would result in any
liability for which any of our directors would seek indemnification or other
protection.

OUR COMMON STOCK MAY BE SUBJECT TO DELISTING FROM THE NATIONAL NASDAQ
MARKET. Our common stock is currently trading on the Nasdaq National Market.
Although we meet the current listing criteria for the Nasdaq National Market, no
assurance can be given as to our ongoing ability to meet the standards of the
Nasdaq National Market maintenance requirements. These standards require, among
other things, that our common stock have a minimum bid price of $1 and state
that a deficiency shall exist if such minimum bid price remains below $1 for a
period of thirty consecutive business days. In addition, if our stock price is
below $5 per share, we must maintain minimum net tangible assets of at least $4
million. If we are unable to demonstrate compliance with the Nasdaq criteria for
maintaining our listing, our common stock could be subject to delisting. If our
common stock were to be delisted from trading on the Nasdaq National Market and
were neither re-listed thereon nor listed for trading on the Nasdaq Small Cap
Market or other recognized securities exchange, trading, if any, in the common
stock may continue to be conducted on the OTC Bulletin Board or in the
non-Nasdaq over-the-counter market. Delisting would result in limited release of
the market price of the common stock and limited news coverage of our company
and services and could restrict investors' interest in our common stock and
materially adversely affect the trading market and prices for our common stock
and our ability to issue additional securities or to secure additional
financing.

INFORMATION THAT WE MAY PROVIDE TO INVESTORS FROM TIME TO TIME IS
ACCURATE ONLY AS OF THE DATE WE DISSEMINATE IT, AND WE UNDERTAKE NO OBLIGATION
TO UPDATE THE INFORMATION. From time to time, we may publicly disseminate
forward-looking information or guidance in compliance with Regulation FD
promulgated by the Securities and Exchange Commission. This information or
guidance represents our outlook only as of the date that we disseminated it, and
we undertake no obligation to provide updates to this information or guidance in
our filings with the Securities and Exchange Commission or otherwise.

IF OUR REVENUE AND OPERATING RESULTS FALL BELOW ANALYSTS' AND
INVESTORS' EXPECTATIONS, OUR STOCK PRICE COULD SIGNIFICANTLY DECLINE. Our
quarterly operating results have fluctuated in the past and are likely to
fluctuate significantly in the future due to a variety of factors, many of which
are outside of our control. If our quarterly or annual operating results do not
meet the expectations of investors and securities analysts, the trading price of
our common stock could significantly decline. As a result of any of these
factors, our quarterly or annual operating results could fall below the
expectations of public market analysts and investors. In this event, the price
of our common stock could significantly decline.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding our directors and executive officers is
incorporated by reference herein to our Proxy Statement for our Annual Meeting
of Stockholders to be held on May 22, 2002.

ITEM 11. EXECUTIVE COMPENSATION

Information regarding compensation of our executive officers is
incorporated by reference herein to our Proxy Statement for our Annual Meeting
of Stockholders to be held on May 22, 2002.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information regarding the beneficial ownership of shares of our common
stock by certain persons is incorporated by reference herein to our Proxy
Statement for our Annual Meeting of Stockholders to be held on May 22, 2002.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information regarding certain relationships and related transactions is
incorporated by reference herein to our Proxy Statement for our Annual Meeting
of Stockholders to be held on May 22, 2002.

PART IV

ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) 1. Financial Statements

Report of Independent Accountants

Consolidated Balance Sheets as of December 31, 2001 and 2000

Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999

Consolidated Statements of Stockholders' Equity (Deficit) for the years ended
December 31, 2001, 2000 and 1999

Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999

Notes to Consolidated Financial Statements

2. Financial Statement Schedules

SCHEDULE
NUMBER DESCRIPTION
- -------- -----------

I Report of Independent Accountants on Financial Statement Schedule
II Valuation and Qualifying Accounts
3. Exhibits

EXHIBIT
NUMBER DESCRIPTION
- -------- -----------

3.1 Restated Certificate of Incorporation filed with the Secretary of State of the State of
Delaware on February 16, 1999(A)
3.2 Certificate of Amendment to Restated Certificate of Incorporation filed with the Secretary
of State of the State of Delaware on December 22, 1999(A)
3.3 Certificate of Designations, Powers, Preferences and Rights of Series F Convertible
Preferred Stock filed with the Secretary of State of the State of Delaware on December 22,
1999(A)
3.4 Certificate of Amendment to Restated Certificate of Incorporation filed with the Secretary
of State of the State of Delaware on December 22, 1999(A)
3.5 Certificate of Amendment to Restated Certificate of Incorporation filed with the Secretary
of State of the State of Delaware on January 4, 2000(A)
3.6 Certificate of Amendment to Restated Certificate of Incorporation of i3 Mobile, Inc. filed
with the Secretary of State of the State of Delaware on May 31, 2001*
3.7 Amended and Restated Bylaws of i3 Mobile (B)
4.1 Amended Form of Common Stock Certificate(B)
4.3 1995 Stock Incentive Plan, as amended (A)
4.4 2000 Stock Incentive Plan, as amended (B)
4.5 General Form of Warrant issued to other warrant holders(A)
10.1 Employment Agreement by and between i3 Mobile and Stephen G. Maloney dated as of January 1,
1999 as amended September 9, 1999(A)
10.1a Amendment to Employment Agreement by and between i3 Mobile and Stephen G. Maloney dated as
of January 1, 1999 as amended November 20, 2000(B)
10.1b Employment Agreement by and between i3 Mobile and Stephen G. Maloney dated as of January 1,
2001(B)
10.1c Letter Agreement by and between i3 Mobile and Stephen G. Maloney dated as
of August 23, 2001*
10.2 Employment Agreement by and between i3 Mobile and Michael P. Neuscheler dated as of
January 10, 2000(A)
10.2a Termination and Release Agreement by and between i3 Mobile and Michael P. Neuscheler dated
as of December 7, 2001*
10.3 Employment Agreement by and between i3 Mobile and John Lack dated as of November 20, 2000(B)

EXHIBIT
NUMBER DESCRIPTION
- -------- -----------

10.4 Employment Agreement by and between i3 Mobile and Wes Trager dated as of December 21, 2000(B)
10.5 Employment Agreement by and between i3 Mobile and John McMenamin dated as of February 21,
2001(B)
10.6 Employment Agreement by and between i3 Mobile and Bryan McCann dated as of April 16, 2001*
10.7 Employment Agreement by and between i3 Mobile and Ed Fletcher dated as of December 10, 2001*
10.8 Agreement of Lease by and between i3 Mobile and Seaboard Property Management, Inc. dated
April 27, 1995, as amended (A)
10.8a Lease Modification Agreement between i3 Mobile and Seaboard Property Management, Inc. dated
February 1997(A)
10.8b Agreement of Sublease by and between i3 Mobile and O'Donnell & Associates dated as of
August 1, 2000(B)
10.9 Ridgewood Square Office Park Commercial Lease by and between i3 Mobile and Ridgewood Square
Ltd. dated February 7, 1997(A)
10.10 Agreement of Sublease by and between i3 Mobile and National Westminster Bank, PLC, dated as
of September 9, 1999(A)
10.10a Amendment No. 1 to Sublease by and between i3 Mobile and National Westminster Bank, PLC
dated as of September 26, 2000(B)
10.10b Settlement Agreement by and between i3 Mobile and National Westminster Bank, PLC dated as of
April 19, 2001*
10.11 Lease Agreement by and between i3 Mobile and Double Creek Capital Corporation dated
November 30, 1999(A)
10.12 Services Agreement by and between i3 Mobile and Southwestern Bell Mobile Systems, Inc. and
Southwestern Bell Wireless Inc. dated June 9, 1998(A)
10.12a Amendment to Services Agreement by and between i3 Mobile and Southwestern Bell Mobile
Systems, Inc. and Southwestern Bell Wireless Inc. dated January 11, 1999(A)
10.12b Amendment to Services Agreement by and between i3 Mobile and Southwestern Bell Mobile
Systems, Inc. and Southwestern Bell Wireless Inc. dated as of October 15, 1999(B)
10.12c Amendment to Services Agreement by and between i3 Mobile and Southwestern Bell Mobile
Systems, Inc. and Southwestern Bell Wireless Inc. dated January 1, 2000(B)
10.13 Letter Agreement by and between i3 Mobile and National Broadcasting Company, Inc. dated
December 24, 1999(A)
10.13a Amendment to Letter Agreement by and between i3 Mobile and National Broadcasting Company,
Inc. dated December 31, 2001 (B)
10.14 Independent Contractor Agreement by and between i3 Mobile and LKM Ventures LLC dated November 27, 2001*
10.15 Note between i3 Mobile and RMU Management LLC dated September 5, 2001*

EXHIBIT
NUMBER DESCRIPTION
- -------- -----------

10.15a Security Agreement between i3 Mobile and RMU Management LLC, dated September 5, 2001*
10.16 Wireless Services Master Agreement by and between i3 Mobile and Voicestream Corporation dated
November 20, 2000(B)
10.17 Agreement by and between i3 Mobile, Inc. and iNetNow, Inc. dated October 1, 2001*(C)
10.17a Amendment Number 1 to Agreement by and between i3 Mobile, Inc. and iNetNow, Inc. dated
November 7, 2001*(C)
10.17b Amendment Number 2 to Agreement by and between i3 Mobile, Inc. and iNetNow, Inc. dated
February 1, 2002*(C)
10.18 Teleservices Agreement between i3 Mobile, Inc. and Abacus Communications LLC dated as of
September 20, 2001*(C)
10.19 Subscriber Services Agreement between i3 Mobile, Inc. and Voxeo Corporation, dated September
28, 2001*(C)
21.1 Subsidiaries of i3 Mobile*
23.1 Consent of PricewaterhouseCoopers LLP*
27.1 Financial Data Schedule*

(A) Incorporated by reference from Registration Statement of the Registrant
on Form S-1, No. 333-94191, declared effective by the Securities and
Exchange Commission on April 6, 2000.

(B) Incorporated by reference from Annual Report on Form 10-K filed by i3
Mobile for the year ended December 31, 2000.

(C) Confidential treatment has been requested with respect to certain
portions of this exhibit, which have been omitted therefrom and have
been separately filed with the Commission.

* Filed herewith

(b) No reports were filed on Form 8-K during the last
quarter of fiscal 2001.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

i3 MOBILE, INC.

By: /s/ EDWARD FLETCHER
-------------------------------

Edward Fletcher,
Senior Vice President, Finance

March 27, 2002

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ J. WILLIAM GRIMES Chairman of the Board March 27, 2002
- ----------------------------------------
J. William Grimes

/s/ JOHN A. LACK President, Chief Executive March 27, 2002
- ------------------- Officer and Director (Principal
John A. Lack Executive Officer)

/s/ W. PETER DANIELS Director March 27, 2002
- ----------------------------------------
W. Peter Daniels

/s/ JAMES A. JOHNSON Director March 27, 2002
- ----------------------------------------
James A. Johnson

/s/ STEPHEN G. MALONEY Director March 27, 2002
- ----------------------------------------
Stephen G. Maloney

/s/ MATTHEW J. STOVER Director March 27, 2002
- ----------------------------------------
Matthew J. Stover

i3 MOBILE, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Accountants.................................................................................. F-2
Consolidated Balance Sheets as of December 31, 2001 and 2000....................................................... F-3
Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999......................... F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended
December 31, 2001, 2000 and 1999................................................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999......................... F-6
Notes to Consolidated Financial Statements......................................................................... F-7

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
i3 Mobile, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows present fairly, in all material respects, the financial position of i3
Mobile, Inc. at December 31, 2001 and 2000, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2001, in conformity with accounting principles generally accepted in the
United States of America. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Stamford, Connecticut
January 28, 2002

F-2

i3 MOBILE, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

DECEMBER 31,
2001 2000
---- ----

ASSETS
Current assets:
Cash and cash equivalents....................................................... $ 52,612 $ 84,900
Accounts receivable, net of allowances (Note 2)................................. 651 536
Deferred advertising (Note 11).................................................. 2,245 3,349
Prepaid expenses and other current assets....................................... 749 416
-------------- -------------
Total current assets......................................................... 56,257 89,201
Fixed assets, net (Note 3)...................................................... 11,423 9,217
Deposits and other non-current assets........................................... 778 829
-------------- -------------
Total assets................................................................. $ 68,458 $ 99,247
============== =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................ $ 1,827 $ 2,019
Accrued liabilities (Note 4).................................................... 3,363 3,969
Capital lease obligation, current portion (Note 5).............................. 568 801
-------------- -------------
Total current liabilities.................................................... 5,758 6,789
Capital lease obligation, less current portion (Note 5)............................ -- 568
-------------- -------------
Commitments and contingencies (Notes 6 and 7)...................................... -- --
Total liabilities............................................................ 5,758 7,357
-------------- -------------

Stockholders' equity:
Convertible preferred stock 50,000 shares authorized, none issued (Note 9)...... -- --
Common stock; $.01 par value, 50,000,000 shares authorized,
24,788,740 and 24,706,440 shares issued...................................... 248 247
Additional paid-in capital...................................................... 166,919 168,007
Notes receivable from stockholders.............................................. (500) (4)
Deferred compensation........................................................... (133) (1,724)
Accumulated deficit............................................................. (98,871) (70,406)
Treasury stock at cost, 2,230,800 and 1,885,000 shares.......................... (4,963) (4,230)
-------------- -------------
Stockholders' equity............................................................ 62,700 91,890
-------------- -------------
Total liabilities and stockholders' equity .................................. $ 68,458 $ 99,247
============== =============

See accompanying notes to consolidated financial statements.

F-3

i3 MOBILE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

YEAR ENDED DECEMBER 31,
2001 2000 1999
---- ---- ----

Net revenue........................................................... $ 4,597 $ 4,494 $ 1,734
---------- ---------- ------------

Expenses:
Operating............................................................. 4,198 3,178 1,466
Sales and marketing................................................... 7,921 10,929 2,032
Product development................................................... 6,593 2,717 1,095
General and administrative............................................ 17,175 15,024 3,671
----------- ----------- -------------
Total expenses........................................................ 35,887 31,848 8,264
----------- ----------- -------------
Operating loss........................................................ (31,290) (27,354) (6,530)

Interest (income) expense, net........................................ (2,825) (4,778) 326
----------- ------------ -------------
Loss before extraordinary item........................................ (28,465) (22,576) (6,856)
Extraordinary item--loss on extinguishment of debt.................... -- -- (3,434)
----------- ----------- --------------
Net loss ............................................................. (28,465) (22,576) (10,290)
----------- ------------- -----------

Redemption of preferred stock......................................... -- -- (3,665)
Beneficial conversion feature of preferred stock...................... -- -- (20,504)
Dividends on mandatorily redeemable preferred stock................... -- (2,829) (2,411)
----------- ----------- -------------
Loss applicable to common stock....................................... $ (28,465) $ (25,405) $ (36,870)
=========== =========== =============

Net loss per share--basic and diluted:
Loss before extraordinary item..................................... $ (1.25) $ (1.39) $ (5.83)
Extraordinary item................................................. -- -- (0.60)
----------- ---------- -------------
Net loss........................................................... $ (1.25) $ (1.39) $ (6.43)
=========== ========== =============
Shares used in computing net loss per share........................ 22,742 18,314 5,736
=========== =========== =============

See accompanying notes to consolidated financial statements.

F-4

i3 MOBILE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)

SERIES A SERIES C
PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL
------------------ ----------------- ----------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
------ ------ ------ ------ --------- ------ -----------

Balance at January 1, 1999........................ 3,770 -- 2,194 -- 7,554,000 76 4,530
Repurchase of shares.............................. (3,770) -- -- -- -- -- (105)
Issuance of common stock.......................... -- -- -- -- 101,500 1 174
Repayment of notes receivable from shareholders -- -- -- -- -- --
Issuance of warrants.............................. -- -- -- -- -- -- 1,133
Accretion of preferred stock dividends............ -- -- -- -- -- -- --
Deferred compensation--stock options.............. -- -- -- -- -- -- 1,017
Beneficial conversion feature--Series E........... -- -- -- -- -- -- 3,000
Beneficial conversion feature--Series F........... -- -- -- -- -- -- 17,504
Amortization of deferred compensation............. -- -- -- -- -- -- --
Net loss.......................................... -- -- -- -- -- -- --
----- ---- ----- ----- ---------- ---- ---------
Balance at December 31, 1999...................... -- -- 2,194 -- 7,655,500 77 27,253
Sale of common shares............................. -- -- -- -- 5,622,500 56 80,619
Conversion of mandatorily redeemable preferred -- -- (2,194) -- 11,316,765 113 58,056
Issuance of common shares pursuant to
the exercise of stock options.................. -- -- -- -- 111,675 1 168
Repayment of notes receivable from shareholders -- -- -- -- -- -- --
Amortization of deferred compensation............. -- -- -- -- -- -- 1,641
Accretion of preferred dividends.................. -- -- -- -- -- -- --
Issuance of common stock purchase warrants ....... -- -- -- -- -- 270
Net loss.......................................... -- -- -- -- -- -- --
----- ---- ----- ----- ---------- ---- ---------
Balance at December 31, 2000...................... -- $ -- -- $ -- 24,706,440 $247 $ 168,007
Issuance of common shares pursuant to
the exercise of stock options.................. -- -- -- -- 82,300 1 75
Repayment of notes receivable from shareholders .. -- -- -- -- -- -- --
Issuance of shareholder loan...................... -- -- -- -- -- -- --
Amortization of deferred compensation............. -- -- -- -- -- -- (1,163)
Treasury stock repurchase......................... -- -- -- -- -- -- --
Net loss.......................................... -- -- -- -- -- -- --
----- ---- ----- ----- ---------- ---- ---------
Balance at December 31, 2001...................... -- $ -- -- $ -- 24,788,740 $248 $ 166,919
===== ==== ===== ===== ========== ==== =========

NOTES
RECEIVABLE
FROM DEFERRED ACCUMULATED TREASURY
STOCKHOLDERS COMPENSATION DEFICIT STOCK TOTAL
------------ ------------- ----------- --------- ------------

Balance at January 1, 1999.......................... (53) -- (8,131) -- (3,578)
Repurchase of shares................................ -- -- (3,665) $ (4,230) (8,000)
Issuance of common stock............................ -- -- -- -- 175
Repayment of notes receivable from shareholders..... 22 -- -- -- 22
Issuance of warrants................................ -- -- -- -- 1,133
Accretion of preferred stock dividends.............. -- -- (2,411) -- (2,411)
Deferred compensation--stock options................ -- $(1,017) -- -- --
Beneficial conversion feature--Series E............. -- -- (3,000) -- --
Beneficial conversion feature--Series F............. -- -- (17,504) -- --
Amortization of deferred compensation............... -- 253 -- -- 253
Net loss............................................ -- -- (10,290) -- (10,290)
------ ------- ---------- -------- ---------
Balance at December 31, 1999........................ (31) (764) (45,001) (4,230) (22,696)
Sale of common shares............................... -- -- -- -- 80,675
Conversion of mandatorily redeemable preferred...... -- -- -- -- 58,169
Issuance of common shares pursuant to
the exercise of stock options.................... -- -- -- -- 169
Repayment of notes receivable from sharehholders.... 27 -- -- -- 27
Amortization of deferred compensation............... -- (960) -- -- 681
Accretion of preferred dividends.................... -- -- (2,829) -- (2,829)
Issuance of common stock purchase warrant .......... -- -- -- -- 270
Net loss............................................ -- -- (22,576) -- (22,576)
------ ------- ---------- -------- ---------
Balance at December 31, 2000........................ $ (4) $(1,724) $ (70,406) $ (4,230) $ 91,890
Issuance of common shares pursuant to
the exercise of stock options...................... -- -- -- -- 76
Repayment of notes receivable from shareholders..... 4 -- -- -- 4
Issuance of shareholder loan........................ (500) -- -- -- (500)
Amortization of deferred compensation............... -- 1,591 -- -- 428
Treasury stock repurchase........................... -- -- -- (733) (733)
Net loss............................................ -- -- (28,465) -- (28,465)
------ ------- ---------- -------- ---------
Balance at December 31, 2001........................ $ (500) $ (133) $ (98,871) $ (4,963) $ 62,700
====== ======= ========== ======== =========

See accompanying notes to consolidated financial statements.

F-5

i3 MOBILE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

YEAR ENDED DECEMBER 31,
2001 2000 1999
---- ---- ----

Cash flows from operating activities:
Net loss........................................................... $ (28,465) $ (22,576) $ (10,290)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization................................... 4,740 1,703 139
Non-cash charges from the issuance of common
stock warrants................................................. 127 95 100
Non-cash stock compensation charges............................. 428 681 253
Loss on extinguishment of debt.................................. -- -- 3,434
Interest on extinguished debt................................... -- -- 311
Other........................................................... -- 96 152
Changes in operating assets and liabilities:
Increase in accounts receivable............................... (115) (232) (88)
Decrease in deferred advertising.............................. 1,104 912 --
(Increase) decrease in other current assets and
other assets................................................. (409) 170 (1,217)
(Decrease) increase in accounts payable....................... (192) 1,295 166
(Decrease) increase in accrued liabilities.................... (606) 1,094 2,451
------------ ----------- -------------
Net cash used in operating activities.............................. (23,388) (16,762) (4,589)
----------- ----------- -------------
Cash flows from investing activities:
Purchase of fixed assets, net................................... (6,946) (7,382) (1,800)
----------- ----------- -------------
Net cash used in investing activities.............................. (6,946) (7,382) (1,800)
----------- ----------- -------------
Cash flows from financing activities:
Payments on capital lease obligations........................... (801) (68) --
Proceeds from sales of preferred stock, net..................... -- -- 38,136
Proceeds from the sale of common stock, net..................... -- 80,675 175
Proceeds from the exercise of stock options..................... 76 169 --
Repurchase of common and preferred stock........................ (733) -- (3,000)
Repayments of notes payable..................................... -- -- (869)
Issuance of notes receivable--related parties................... (500) -- (200)
Repayments of notes receivable--related parties................. 4 27 222
----------- ----------- -------------
Net cash (used in) provided by financing activities................ (1,954) 80,803 34,464
------------ ----------- -------------
(Decrease) increase in cash and cash equivalents................... (32,288) 56,659 28,075
Cash and cash equivalents at beginning of period................... 84,900 28,241 166
----------- ----------- -------------
Cash and cash equivalents at end of period......................... $ 52,612 $ 84,900 $ 28,241
=========== =========== =============

Supplemental disclosures of cash flow and non cash activities:
Interest paid in cash........................................... $ 124 $ 36 $ 136
Conversion of debt to mandatorily redeemable
preferred stock................................................. $ -- $ -- $ 5,317
Accretion of mandatorily redeemable
preferred stock dividends....................................... $ -- $ 2,829 $ 2,411

F-6

Common stock warrants issued in Series F
preferred stock offering........................................ $ -- $ -- $ 1,033

See accompanying notes to consolidated financial statements.

F-7

i3 MOBILE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1-- OPERATIONS OF THE COMPANY AND LIQUIDITY:

i3 Mobile, Inc., "i3" or the "Company", was incorporated in
Delaware on June 28, 1991. During 2001, the Company evolved from a company that
distributed customized text-based information to mobile devices under the
"Powered by i3 Mobile" product brand into a company that it believes is among
the first to create a premium mobile subscription information and communication
service for telephones. This service, Pronto, is being marketed directly to
consumers and delivers information on demand 24 hours a day, combining the
service of a mobile concierge with the power of leading-edge voice recognition
technology.

Pronto provides telephone users with information accessible through the
Company's live operators and proprietary, automated flat menu voice recognition
system. The Company's live operators provide its subscribers with services such
as making restaurant reservations and providing driving directions. The
Company's live operators are also available to answer questions outside the
scope of our automated voice recognition system, and can assist subscribers if
the automated voice recognition system cannot properly answer the request. The
Company's automated content currently features news, stock quotes, sports,
weather, movie reviews and schedules and leisure categories such as horoscopes
and lottery results. The Company's content is automatically accessible in an
"ask a question/get an answer" format. The Company provides premium content and
services to users of telephones, especially mobile telephones.

The Company also offers wireless alert products in many different
categories for mobile device consumers. These "Powered by i3 Mobile" products
are sold primarily through relationships with wireless network operators on a
subscription basis.

LIQUIDITY:

The Company has incurred substantial losses and negative cash flows
from operations in every fiscal period since inception. For the year ended
December 31, 2001, the Company incurred a loss from operations of approximately
$31.3 million and negative cash flows from operations of $23.4 million. As of
December 31, 2001, the Company had an accumulated deficit of approximately $98.9
million. Management expects operating losses and negative cash flows to continue
for the foreseeable future as the Company incurs additional costs and expenses
related to brand development, marketing and other promotional activities,
expansion of product offerings and development of relationships with other
businesses. Certain of these costs could be reduced if working capital decreased
significantly. Future failures to generate sufficient revenues, raise additional
capital or reduce certain discretionary spending could have a material adverse
effect on the Company's ability to continue as a going concern and to achieve
its intended business objectives.

F-8

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION:

The consolidated financial statements include the accounts of the
Company and its majority-owned subsidiaries. All significant inter-company
accounts and transactions have been eliminated in consolidation.

USE OF ESTIMATES:

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates. The markets
for the Company's services are characterized by intense competition, rapid
technological development, dependency on brand awareness, regulatory changes,
frequent new service introductions and reliance on suppliers, all of which could
impact the future value of the Company's assets.

CASH AND CASH EQUIVALENTS:

Cash equivalents consist of highly liquid investments purchased with an
initial maturity of three months or less.

FIXED ASSETS:

Fixed assets are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets, which vary
between 2 and 9 years. Maintenance and repairs are charged to expense as
incurred.

COMPUTER SOFTWARE:

The Company follows Statement of Position 98-1, Accounting for the
Costs of Software Developed or Obtained for Internal Use (SOP 98-1). SOP 98-1
requires companies to capitalize costs of computer software developed or
obtained for internal use, provided that such costs are not research and
development. The Company develops new proprietary products and technology
through its internal research and development group and through use of outside
technology developers.

All costs associated with the development of code, and purchase or
license of software from external vendors which is used to run the Company's
operations are capitalized and amortized over the estimated useful life, 2.5
years.

F-9

PRODUCT DEVELOPMENT:

The Company expenses as incurred all costs associated with new product
development whether performed by employees or outside consultants, including
reengineering, process mapping, feasibility studies, data conversion, and
training and maintenance. Such costs are included in product development in the
statement of operations. In addition the Company expenses as incurred the costs
associated with maintenance and upgrades of current technologies. Such costs are
included in general and administrative expenses in the statement of operations.

LONG-LIVED ASSETS:

Statement of Financial Accounting Standards (SFAS) No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of, requires that long-lived assets and certain intangible assets be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. In such an event, the carrying value of
intangible assets is reviewed by management to determine if the value(s) may be
impaired. If this review indicates that the carrying amount(s) will not be
recoverable, as determined based on the estimated expected future cash flows
attributable to such asset(s) over the remaining amortization period, management
will reduce the carrying amount to recognize the impairment and recognize an
impairment loss. The measurement of the impairment losses to be recognized is to
be based on the difference between the fair values and the carrying amounts of
the assets. Fair value is defined as the amount for which the asset could be
bought or sold in a current transaction between willing parties. Where quoted
market prices in active markets are not available, management would estimate
fair value based on the best information available in the circumstances--the
price of similar assets, discounted cash flow analysis or other valuation
techniques.

At each balance sheet date, the Company evaluates the realizability of
its long-lived assets, including goodwill, based on estimates of future
non-discounted cash flows. In the event that the estimated expected future cash
flows from a long-lived asset, including goodwill, are less than the carrying
value, an impairment loss is calculated. This impairment loss is calculated as
the difference between the fair value of the asset, as defined above, and the
carrying value of the asset. In instances where goodwill is identified with
assets that are subject to an impairment loss, the carrying value of the
identified goodwill shall be eliminated before making any reduction of the
carrying amounts of impaired long-lived assets.

REVENUE RECOGNITION:

The majority of the Company's revenues relate to its legacy business of
providing subscription-based wireless alert services provided to individual
users through wireless network operators. The Company's "Pronto" service has not
generated significant subscriber revenues as of December 31, 2001. Subscriber
revenue consists of fixed monthly usage charges, transactional fees based on the
information delivered, or a combination of the two arrangements. The Company
recognizes subscriber revenue when products and services are provided to
subscribers. The products sold by the Company are information service products
provided to the Company's customers. These information products are not
considered tangible products for financial reporting purposes.

F-10

In prior years, the Company offered complimentary services to build
awareness of its "Powered by i3 Mobile" products and services and to generate
revenue. The wireless network operators were responsible for determining the
price, if any, to be charged to their customers for this service. The fees
charged by the Company to the wireless network operators for this service vary
by wireless network operator. Under agreements with reduced pricing terms, the
Company recognizes revenue at the time these services are provided. In the
instance where the Company agreed to provide services directly to the customers
of a wireless network operator at no cost to the customer, no revenue is
recognized.

OPERATING EXPENSES:

Substantially all operating expenses related to the Company's legacy
wireless alert product and consist primarily of direct costs associated with
purchasing content, direct labor and royalty payments. Content providers are
paid either a flat monthly fee, a fee based on the number of users requesting
the content, a fee based on a percentage of the Company's revenues generated
from the content they provide, a fee based on the number of on-demand messages
requested or a combination of these arrangements. In connection with its Pronto
service, the Company expects to incur increased labor costs and significant
costs related to the use of voice recognition technology.

CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS:

Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade accounts receivable.
The Company controls this risk through credit approvals, credit limits and
monitoring procedures. The Company does not require collateral or other forms of
security. The Company can, however, limit the amount of information services
provided to its customers in the event of nonperformance.

During the year ended December 31, 2001, the Company had two wireless
network operator customers for its legacy wireless alert product, which
accounted for approximately 75% of its total net revenues. During the years
ended December 31, 2000 and 1999, the Company had three wireless network
operator customers for its legacy wireless alert product, which accounted for
approximately 68% and 69% of its total net revenues, respectively.

DEFERRED ADVERTISING:

In accordance with AICPA Statement of Position 93-7, Reporting on
Advertising Costs, the Company accounts for the costs of advertising by
expensing them as incurred. Deferred advertising represents television
advertising rights received in exchange for preferred stock of the Company (see
Note 11). The deferred advertising rights are amortized to expense as the
advertising is used by the Company.

ALLOWANCE FOR DOUBTFUL ACCOUNTS:

The Company maintained an allowance for doubtful accounts of $1 million
and $1 million at December 31, 2001 and 2000, respectively.

F-11

INCOME TAXES:

The Company uses the liability method of accounting for income taxes,
as set forth in SFAS 109, Accounting for Income Taxes. Under this method,
deferred tax assets and liabilities are recognized for the expected future tax
consequences of temporary differences between the carrying amounts and the tax
basis of assets and liabilities and net operating loss carryforwards, all
calculated using presently enacted tax rates.

STOCK COMPENSATION:

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

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

EARNINGS (LOSS) PER SHARE:

Basic net loss per share is computed by dividing loss applicable to
common stockholders by the weighted average number of shares of the Company's
common stock outstanding during the period. Diluted net loss per share is
determined in the same manner as basic net loss per share except that the number
of weighted average shares is increased assuming exercise of dilutive stock
options and warrants using the treasury stock method.

For the years ended December 31, 2001, 2000, and 1999, options to
purchase 2,953,783, 2,162,075, and 914,000, shares of common stock,
respectively, and warrants to purchase 874,709, 1,984,084, and 1,929,084 shares
of common stock, respectively, were excluded from the calculation of diluted
earnings per share since their inclusion would be antidilutive for all periods
presented.

RECLASSIFICATIONS:

Certain reclassifications have been made for consistent presentation
and to better reflect the operations of the Company's business. Amounts
previously classified as "costs of revenue" have been

F-12

reclassified as "operating expenses" and certain amounts previously classified
as "general and administrative expenses" have been reclassified as "product
development expenses."

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

In July 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS 141, Business Combinations, which is effective for business combinations
initiated after June 30, 2001. SFAS 141 eliminates the pooling of interest
method of accounting for business combinations and requires that all business
combinations occurring on or after July 1, 2001 are accounted for under the
purchase method. The Company has evaluated the impact of SFAS 141 and believes
that adoption will not have a material impact on its financial statements.

Also in July 2001, the FASB issued SFAS 142, Goodwill and Other
Intangible Assets, which is effective for fiscal years beginning after December
15, 2001. SFAS 142 addresses how intangible assets that are acquired
individually or with a group of other assets should be accounted for in the
financial statements upon their acquisition and after they have been initially
recognized in the financial statements. SFAS 142 requires that goodwill and
intangible assets that have indefinite useful lives not be amortized but rather
tested at least annually for impairment, and intangible assets that have finite
useful lives be amortized over their useful lives. The adoption of SFAS 142 will
not have a material impact on the Company's financial statements.

In August 2001, the FASB issued SFAS 143, Accounting for Asset
Retirement Obligations, which is effective for fiscal years beginning after June
15, 2002. SFAS 143 addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. The Company is assessing the impact of adoption of SFAS
143 and currently believes it will not have a material impact on the Company's
financial statements.

In October 2001, the FASB issued SFAS 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which is effective for fiscal years
beginning after December 15, 2001. SFAS 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and supersedes
FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets to
be Disposed of." The adoption of SFAS 144 will not currently have a material
impact on the Company's financial statements.

NOTE 3--FIXED ASSETS:

DECEMBER 31,
----------------------------
2001 2000
------------ ------------
(IN THOUSANDS)

Furniture and fixtures............................ $ 783 $ 664
Equipment, computers & software................... 15,582 8,701
Leasehold improvements............................ 1,476 1,530
---------- ------------
17,841 10,895
Less--Accumulated depreciation.................... (6,418) (1,678)
---------- ------------
$ 11,423 $ 9,217
========== ============

F-13

Depreciation expense for the years ended December 31, 2001, 2000, and
1999 was $4.7 million, $1.5 million, and $0.1 million, respectively.

NOTE 4--ACCRUED LIABILITIES:

The following table provides the major components of accrued
liabilities:

DECEMBER 31,
------------
2001 2000
---- ----
(IN THOUSANDS)

Professional fees....................................... $ 466 $ 643
Wages and vacation...................................... 489 675
Marketing............................................... 549 595
Severance............................................... 410 769
Other accrued liabilities............................... 1,449 1,287
---------- ------------
$ 3,363 $ 3,969
========== ============

NOTE 5--LEASES:

During December 2000, the Company entered into a capital lease for
certain computer equipment that expires in December 2002. The gross amount of
computer equipment under the capital lease and the related accumulated
depreciation were as follows:

DECEMBER 31,
2001
------------
(IN THOUSANDS)

Computer equipment............................. $ 1,437
Accumulated depreciation....................... (780)
---------
$ 657
=========

The Company leases space in several buildings, which is used for
offices and development facilities as well as various equipment, all subject to
operating leases. As of December 31, 2001, the minimum annual rental payments
under the terms of non-cancelable leases, which expire at various dates through
2010, are as follows:

Capital Operating
-------- ---------
2002................................................................................ $643 $933
2003................................................................................ - 922
2004................................................................................ - 924
2005................................................................................ - 931
2006................................................................................ - 944
Thereafter.......................................................................... - 1,391
------ ------
Total minimum lease payments........................................................ $643 $6,045
======
Less amount representing interest............................................(75)
--

F-14

Present value of net capital lease payments..................................$568
====

Rent expense for the years ended December 31, 2001, 2000, and 1999
amounted to $0.9 million, $0.8 million, and $0.2 million, respectively.

NOTE 6--COMMITMENTS AND CONTINGENCIES:

LITIGATION:

The Company, in the ordinary course of business, is subject to various
legal proceedings. While it is impossible to determine the ultimate outcome of
these matters, it is management's opinion that the resolution of these matters
will not have a material adverse effect on the financial position or results of
operations of the Company.

AGREEMENTS:

The Company has agreements with wireless network operators who act as
resellers of the Company's wireless alert products and services to their
customers. These contracts generally have one to three-year terms and are
nonexclusive.

The Company currently relies on two third party entities to provide the
call center services for Pronto and does not currently have internal call center
capabilities. The Company's reliance on these service providers involves a
number of risks, including the absence of adequate capacity, reduced control
over personnel availability, the ability to fund expanded operations, the
long-term financial viability of these chosen vendors, and the inability to
control quality and timing of delivery of services.

During 2001, the Company entered into a software licensing arrangement
with a third party requiring the Company to (1) license a certain number of
telephony ports capable of speech recognition ("ports") before the end of each
calendar quarter for eight consecutive quarters beginning March 31, 2002 and (2)
license a certain number of cumulative ports by December 31, 2003. If the
Company does not meet these license conditions then it would be obligated to pay
to the software vendor the difference between the fees for the number of ports
actually licensed according to a pre-defined pricing schedule and the actual
fees previously paid for such ports. As of December 31, 2001 the Company's
contingent obligation if such license conditions were not met would approximate
$0.5 million.

The Company maintains agreements with various content providers. The
content agreements generally have one-year terms, are nonexclusive and can be
canceled by either party without notice.

The Company has a commitment with the National Broadcasting Company,
Inc. to purchase additional television advertising for $1.3 million before June
30, 2002 (Note 11).

NOTE 7--RELATED PARTY TRANSACTIONS:

The Company maintains a royalty agreement with two current stockholders
of the Company. The agreements provide for the payment of royalties of 2 1/2% of
gross revenues on a monthly basis, but in no

F-15

event less than $3,000 per month, with a maximum aggregate payment of $6.0
million adjustable up to a maximum of $8.0 million pursuant to the agreement.
Total royalties expensed under the terms of the agreement were $115,000,
$117,000, and $46,000, for the years ended December 31, 2001, 2000 and 1999,
respectively and aggregate $310,000 from the inception of the agreement.

On September 10, 2001, the Company entered into a note agreement with
RMU Management, LLC, ("RMU"), an entity controlled by a then member of the
Company's Board of Directors. Under the terms of the note agreement, the Company
agreed to lend RMU $0.5 million, for a period of one year, at an interest rate
equal to the prime rate plus two percent. The note is secured by 500,000 shares
of the Company's common stock owned by RMU.

NOTE 8--INCOME TAXES:

No provision for federal or state income taxes has been made for the
years ended December 31, 2001, 2000 and 1999 given the Company's loss position
in each year. At December 31, 2001, the Company had net operating loss
carryforwards of $61 million which expire through the year 2021. Net deferred
tax assets at December 31, 2001 and 2000 have been fully reserved due to the
uncertainty of realization.

The Company's gross deferred tax assets at December 31, 2001 and 2000
were comprised of the following:

DECEMBER 31,
2001 2000
---- ----
(IN THOUSANDS)
GROSS DEFERRED TAX ASSET:
Net operating loss carryforwards....... $ 23,499 $ 13,401
Other.................................. 360 302
--------- ---------
23,859 13,703
Valuation allowance.................... (23,859) (13,703)
--------- ---------
Net deferred taxes..................... $ -- $ --
========= =========

Under provisions of the Tax Reform Act of 1986, if certain changes in
the Company's ownership should occur, there would be an annual limitation on the
amount of net operating loss carryforwards which could be utilized. Due to this
potential annual limitation, the net operating loss carryforwards may expire
prior to when otherwise utilizable.

NOTE 9--STOCKHOLDERS' EQUITY:

INITIAL PUBLIC OFFERING:

On April 6, 2000, the Company completed an initial public offering (the
"Offering") of 5,100,000 shares of common stock at a price of $16 per share,
generating net proceeds of $72.9 million. In connection with the Offering, the
Company granted to the underwriters an option to purchase up to 765,000
additional common shares at the initial offering price less the underwriting
discounts and

F-16

commissions, to cover any over-allotments. On May 10, 2000 the underwriters
exercised this option and purchased an additional 522,500 shares. After
deducting underwriting discounts and commissions, the Company received $7.8
million in net proceeds from the exercise of this option. In conjunction with
the Offering, all of the Company's outstanding preferred stock was converted
into a total of 11,316,765 shares of common stock.

PREFERRED STOCK:

SERIES A CONVERTIBLE PREFERRED STOCK:

In February 1999, the Company redeemed all 3,770 shares of its Series A
convertible preferred stock and 1,885,000 shares of its common stock owned by
Intelligent Investment Partners, Inc. The redemption price of the Series A
preferred stock and the common stock of $8.0 million, was payable as follows:
$3.0 million in cash upon closing of the transaction and $5.0 million in a
promissory note having an original maturity of February 12, 2004. The promissory
note was subsequently satisfied through the issuances of the Series E and F
mandatorily redeemable convertible preferred stock in the fourth quarter of
1999. In addition, a warrant to purchase 500,000 shares of the Company's common
stock at a price of $3.00 per share was issued to Intelligent Investment
Partners, Inc. This warrant expires February 11, 2004. This warrant has a fair
value of $0.5 million which has been applied to the value of the common and
preferred stock repurchased. The fair value of the warrant was determined using
the Black-Scholes pricing model utilizing a volatility rate of 40%, a 5-year
expected life, no expected dividends and a risk free rate of return of 5.0%. The
redemption of the preferred stock in 1999 resulted in $4.2 million recorded as
treasury stock, a $3.7 million charge to accumulated deficit that is included in
"loss applicable to common stock" and a $0.1 million charge to additional
paid-in capital.

SERIES B MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:

In August 1996, the Company issued 1,421 shares of Series B mandatorily
redeemable preferred stock to a private investor group for $879.66 per share. In
connection with the issuance of the Series B mandatorily redeemable preferred
stock, the investor group was granted options to purchase an additional 284
shares of Series B mandatorily redeemable preferred stock at a price of $879.66.
The investor group exercised its options to purchase these 284 shares of Series
B mandatorily redeemable preferred stock on February 27, 1997.

The relative fair value of the warrants and options granted in
conjunction with the Series B preferred stock of $0.1 million was recorded as a
discount to the Series B preferred stock value and was being amortized as
preferred stock dividends over the period until the earliest possible redemption
date, which became April 6, 2000 in conjunction with the Offering. The fair
value of the warrant was determined using the Black-Scholes pricing model
utilizing a volatility rate of 40%, a 1-year expected life, no expected
dividends and a risk free rate of return of 6.7%.

These shares were converted into 852,500 shares of common stock on
April 6, 2000, the date of our initial public offering.

F-17

SERIES C CONVERTIBLE PREFERRED STOCK:

From July 1997 through December 1997, the Company sold 476 and 388
shares of Series C convertible preferred stock to private investors at prices of
$879.66 per share and $1,187.00 per share, respectively. During 1998, the
Company changed the number of authorized shares of its Series C convertible
preferred stock to 2,194 and sold an additional 1,330 shares of its Series C
convertible preferred stock to private investors for $1,187.00 per share. In
connection with these issuances, a warrant was issued for the purchase of 74,910
shares of common stock for $3.00 per share. The fair value of the warrants were
determined using the Black-Scholes pricing model utilizing a volatility rate of
40%, a 1-year expected life, no expected dividends and a risk free rate of
return of 5.7%.

In December 1999, the Company's certificate of incorporation was
amended to provide for the mandatory conversion of the Series C preferred stock
into common stock upon a qualified initial public offering. The Board of
Directors and the stockholders, including a majority of the Series C
stockholders, approved this amendment.

These shares were converted into 1,097,000 shares of common stock on
April 6, 2000, the date of our initial public offering.

SERIES D MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:

In August 1998, the Company converted two outstanding notes payable
into Series D preferred stock and sold additional shares of Series D preferred
stock to a private investor group. The notes were issued to the private investor
group in June 1998. The carrying value of the notes of $0.4 million was
converted into Series D preferred stock at $1,187.00 per share. A total of 843
shares of Series D preferred stock were sold at a price of $1,187.00 per share
for total consideration of $1.0 million of cash and converted notes payable.

These shares were converted into 421,500 shares of common stock on
April 6, 2000, the date of our initial public offering.

SERIES E MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:

In February 1999, the Company sold 7,714.56 shares of Series E
mandatorily redeemable convertible preferred stock to a private investor group
at a price of $1,555.50 per share for a total of $12.0 million.

On November 23, 1999, the same private investor group, in accordance
with its contract with the Company, purchased an additional 1,928.64 shares of
Series E mandatorily redeemable convertible preferred stock at a price of
$1,555.50 per share for $3.0 million. A $3.0 million deemed dividend has been
recognized as a charge to additional paid-in capital and an increase to net loss
available to common shareholders for the beneficial conversion feature,
calculated as the difference between the per share conversion price and the
estimated fair value of the common stock into which the preferred stock is
convertible, measured at the commitment date. This beneficial conversion feature
is limited to the amount of the proceeds received, or $3.0 million.

F-18

These shares were converted into 4,821,600 shares of common stock on
April 6, 2000, the date of our initial public offering.

SERIES F MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:

On December 22, 1999, the Company issued 8,248.33 shares of Series F
mandatorily redeemable convertible preferred stock at a price of $3,960.40 per
share to private investor groups. The proceeds include $24.9 million of cash
investments, including $3.0 million from a related party stockholder of the
Company, the conversion of a $5.0 million outstanding note payable, the
conversion of a $0.3 million five-year convertible note payable and future
television advertising rights. In connection with this issuance the Company
recorded a beneficial conversion charge of $17.5 million, an extraordinary loss
on the redemption of the two notes payable of $3.4 million and deferred
advertising value of $4.3 million. These charges are calculated as the
difference between the per share value of the conversion feature and the
estimated fair value of the common stock at commitment date multiplied by the
applicable equivalent common shares.

These shares were converted into 4,124,165 shares of common stock on
April 6, 2000, the date of our initial public offering.

COMMON STOCK WARRANTS:

The Company had outstanding stock purchase warrants as follows. In this
table, "Debt financings" refers to warrants issued to noteholders, "Services
related to 1998 capital raising" refers to warrants issued in consideration for
assistance provided to the Company in obtaining debt and preferred stock
financing, while "Strategic partners" refers to warrants issued in consideration
of certain of the Company's executed distribution agreements.

DECEMBER 31,
2001 2000
---- ----

Debt financings................................................................... 195,984 645,984
Series B preferred stock.......................................................... -- 234,465
Series C preferred stock.......................................................... -- 74,910
Services related to 1998 capital raising.......................................... -- 350,000
Series A preferred stock redemption............................................... 500,000 500,000
Series F preferred stock.......................................................... 123,725 123,725
Strategic partners................................................................ 55,000 55,000
--------- ---------
874,709 1,984,084
========= =========
Weighted Average exercise price per share......................................... $4.53 $3.70
===== =====

In December 1997, a warrant was issued to the Series B preferred
stockholders, a related party, for the purchase of 234,465 shares of common
stock of the Company for $3.00 per share. This warrant was issued in
consideration for the Series B stockholder relinquishing its 12% cumulative
dividend. This warrant expired December 31, 2001.

F-19

In connection with the issuance of the Series C convertible preferred
stock in 1997, two warrants were issued for the purchase of an aggregate of
74,910 shares of common stock for $3.00 per share. These warrants expired
December 31, 2001.

In December 1997, in connection with the issuance of a $0.2 million
promissory note, a warrant was issued to the private investor for the purchase
of 100,000 shares of common stock of the Company for $3.00 per share. This
warrant expired December 31, 2001.

In connection with the issuance of the Company's June 1998 notes to
private investors, two warrants were issued in August 1998 to purchase an
aggregate of 195,984 shares of the Company's common stock at a price of $3.00
per share, subject to adjustment. These warrants expire on July 31, 2003. The
fair value of the warrant of $0.1 million was immediately recorded as interest
expense in 1998.

In consideration for assistance provided in raising capital during
1998, a warrant was issued in June 1998 to the holder of the Series B preferred
stock, a related party, for the purchase of 350,000 shares of common stock for
$3.50 per share. This warrant expired December 31, 2001.

In December 1998, a warrant to purchase 150,000 shares of the Company's
common stock at a price of $3.50 per share was issued to a holder of the
Company's notes payable for financing provided to the Company. This warrant
expired December 31, 2001.

In February 1999, as part of the redemption price for its Series A
preferred and common stock, the Company issued a warrant to purchase 500,000
shares of the Company's common stock at a price of $3.00 per share, subject to
adjustment. This warrant expires on February 11, 2004. The value of this warrant
of $0.5 million was included in the valuation of the treasury stock and the loss
on redemption of Series A preferred stock in 1999.

In September 1998 the Company authorized a Loan Incentive Warrant Plan.
This plan has now expired. The plan provided for the issuance of warrants to
purchase common stock of the Company to the holders of notes payable. In March
1999, the Company issued warrants under this plan to purchase 200,000 shares of
the Company's common stock at a price of $3.50 per share. The number of warrants
was determined by a formula based on the amount of the loan. These warrants were
issued to short-term notes payable holders and expired on December 31, 2001. The
related loans were repaid in February 1999. As a result of the issuance, the
Company has recorded the fair value of the warrants of $0.1 million as a charge
to interest expense in 1999.

In conjunction with the Series F mandatorily redeemable preferred stock
offering, the Company issued a warrant to purchase 123,725 shares of common
stock at an exercise price of $7.92 per share, subject to adjustment, and
incurred a liability of $1.6 million to an investment banking firm pursuant to a
binding agreement. This fee was in consideration for acting as placement agent
in connection with the Series F mandatorily redeemable preferred stock offering.
The warrant, which has an exercise price of $7.92 per share, subject to
adjustment, and a five year life, has been valued at $1.0 million using a
Black-Scholes pricing model. Assumptions utilized included a volatility rate of
40%, a 5-year expected life, no expected dividends and a risk free rate of
return of 5.8%. The value of the payment and warrants has been accounted for as
issuance costs against the gross proceeds of the Series F offering in 1999.

F-20

On March 7, 2000 and April 20, 2000, in conjunction with its December
29, 1999 agreement with NBC Interactive Media, Inc. ("NBC"), the Company entered
into two-year distribution agreements with CNBC.com and MSNBC Interactive News
LLC ("MSNBC"), respectively, under which the Company was granted non-exclusive
licenses to distribute specific types of CNBC.com's and MSNBC's content to
designated users and resellers of the Company. In consideration the Company has
granted CNBC.com a warrant to purchase 10,000 shares of the Company's common
stock and MSNBC a warrant to purchase 20,000 shares of the Company's common
stock each at an exercise price of $10.00 per share. The warrants have
three-year terms and are exercisable immediately. As part of the agreement with
CNBC.com, the Company has also agreed to purchase banner advertising from
CNBC.com utilizing its deferred advertising rights described in Note 11. The
fair value of the warrants have been estimated at $0.2 million using a
Black-Scholes option pricing model assuming a volatility of 40%, an expected
term of 3 years, no expected dividends and a risk free rate of return of 5.8%.
The value of the warrants will be amortized over the term of the agreements.

On January 25, 2000, the Company entered into a two-year agreement with
Sony Corporation of America, ("Sony"). This agreement provides the Company with
the right to distribute content from Sony or its affiliates upon execution of
distribution agreements. The Company will issue warrants to Sony to purchase
20,000 common shares at an exercise price of $10.00 per share for each content
distribution agreement Sony or any of its affiliates enters into with the
Company. The aggregate number of shares of common stock issuable under this
contingent warrant agreement is 110,000 shares. These warrants expire three
years after their issuance. The accounting treatment for these contingent
warrants to be issued to Sony is prescribed by EITF 96-18. Under EITF 96-18, the
measurement date for determining the fair value of these warrants would not
occur until such time as an agreement is entered into between i3 Mobile and Sony
or its affiliates. With the signing of a wireless content services agreement
between New Technology Holdings, Inc. (InfoBeat) and the Company in May 2000,
the Company issued warrants to purchase 20,000 shares to New Technology
Holdings, Inc. (InfoBeat) at $10.00 per share and recorded a deferred charge of
$30,000 which will be amortized over the term of the agreement. The fair value
of the warrant was determined through a Black-Scholes pricing model utilizing
the fair value of the Company's common stock as of the measurement date.

COMMON STOCK RESERVED:

The Company has reserved shares of common stock as follows:

DECEMBER 31,
2001 2000
---- ----

Stock options.................... 2,953,783 2,162,075
Stock warrants................... 875,065 1,984,084
--------- ---------
3,828,848 4,146,159
========= =========

NOTE 10--STOCK INCENTIVE PLANS:

The Company's 1995 Stock Incentive Plan provides for the issuance of up
to 1,014,000 shares of common stock outstanding through the granting of stock
options to employees, officers, consultants and

F-21

directors. The board of directors has complete authority to determine awards and
establish the exercise price based on the Board's estimate of fair value
provided that the exercise price of the stock option was no less than the fair
value of a share of common stock on the date of grant, and the exercise price of
a stock option granted to an employee who owns more than 10% of the common stock
will be no less than 110% of the fair value of a share of common stock on the
date of grant. Such option grants vest over a period of four to five years.

On February 9, 2000, the Board of Directors adopted the 2000 Stock
Incentive Plan, certain terms of which were subsequently amended on November 19,
2000 and May 23, 2001. This plan provides for the issuance of up to 2,865,645
shares of common stock through the granting of stock options to employees,
officers, consultants and directors. The option exercise price will be
determined by the Board and may be equal to or greater than the fair market
value of a share of the Company's common stock on the date of grant. The plan
limits the number of options issued to any one employee in one fiscal year to
750,000.

The following table describes the Company's stock option activity:

WEIGHTED AVERAGE
WEIGHTED AVERAGE FAIR VALUE OF
NUMBER OF EXERCISE PRICE OPTIONS GRANTED
OPTIONS PER SHARE PER SHARE
------- --------- ---------

Outstanding at January 1, 1999...................... 385,150 $ 1.59
Granted............................................. 540,500 $ 2.74 $ 5.38
Canceled............................................ (11,650) $ 2.37
---------------
Outstanding at December 31, 1999.................... 914,000 $ 2.71
Granted............................................. 1,620,250 $ 8.17 $ 2.53
Canceled............................................ (260,500) $ 8.24
Exercised........................................... (111,675) $ 1.51
---------------
Outstanding at December 31, 2000.................... 2,162,075 $ 6.27
Granted............................................. 1,753,998 $ 2.96 $ 1.53
Canceled............................................ (879,990) $ 3.29
Exercised........................................... (82,300) $ 1.42
---------------
Outstanding at December 31, 2001.................... 2,953,783 $ 4.60
===============

The following summarizes the outstanding and exercisable options under
the Plan as of December 31, 2001:

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER REMAINING EXERCISE NUMBER EXERCISE
EXERCISE PRICE OUTSTANDING LIFE PRICE OUTSTANDING PRICE
- -------------- ----------- ---- ----- ----------- -----
(IN YEARS)

$0.30-$ 2.37 809,130 8.4 $ 1.78 120,000 $ 2.02
$2.40-$ 4.00 792,375 8.9 $ 2.96 229,875 $ 3.48
$4.25-$ 7.92 949,845 8.9 $ 6.59 381,549 $ 5.87

F-22

$8.00- $18.75 402,433 8.8 $ 10.36 87,068 $ 14.10
------------ ---------------
2,953,783 818,492
============ ===============

For all options granted in 2001 and 2000, the exercise price equaled
the fair value of the common stock on the date of grant. In 1999, options
granted with an exercise price equal to fair value of the common stock had a
weighted-average exercise price of $2.42. Options granted with an exercise price
below the fair value had a weighted average exercise price and weighted-average
fair value of $3.96 and $6.66 per share, respectively.

If compensation expenses had been recognized based on the fair value of
the options at their grant date, in accordance with SFAS 123, pro forma results
of operations would be as follows:

DECEMBER 31,
------------
2001 2000 1999
---- ---- ----

Loss applicable to common stock:
As reported..................................... $ (28,465) $ (25,405) $ (36,870)
Pro forma under FAS 123......................... (33,124) (27,463) (37,062)
Basic and diluted net loss per share:
As reported..................................... $ (1.25) $ (1.39) $ (6.43)
Pro forma under FAS 123......................... $ (1.65) $ (1.50) $ (6.46)

The estimated fair value at date of grant for options granted for the
year ended December 31, 2001 ranged from $0.41 to $2.23. The fair value of each
option is estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted average assumptions:

2001 2000 1999
---- ---- ----

Risk free interest rate............................................... 4.4% 4.9% 5.80%
Expected dividend yield............................................... 0 0 0
Expected life of option (years)....................................... 4.0 4.0 4.33
Expected volatility................................................... 69.8% 63.0% 28.83%

As additional options are expected to be granted in future years and
the options vest over several years, the above pro forma results are not
necessarily indicative of future pro forma results.

The Company applies Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations in
accounting for its plans. Deferred compensation of $1.6 million and $0.8 million
was recorded for the years ended December 31, 2000 and 1999, respectively. This
represents compensation expense that will be recognized over the remaining
vesting period. Compensation expense of $0.4 million, $0.7 million and $0.3
million was recorded for the years ended December 31, 2001, 2000 and 1999,
respectively.

NOTE 11--DEFERRED ADVERTISING:

As part of the Series F mandatorily redeemable convertible preferred
stock offering, the Company entered into an agreement with National Broadcasting
Company, Inc., "NBC". Under the agreement,

F-23

NBC provides television advertising rights to the Company in exchange for 631.25
shares of Series F mandatorily redeemable preferred stock issued to NBC
Interactive Media, Inc. in December 1999 (the preferred stock has since been
converted to 4,124,165 shares of common stock). This advertising can be
broadcast on NBC, NBC's owned and operated television stations or CNBC. The term
of the agreement was two years, effective January 1, 2000 as amended on December
31, 2001. The terms of the amendment provided that NBC extend the timeframe by
which the Company can use the advertising rights to March 31, 2002 in exchange
for the Company's commitment to purchase for cash approximately $1.3 million of
additional television spots before June 30, 2002. The Company has accounted for
these services as deferred advertising at the fair value of the Series F
mandatorily redeemable preferred shares exchanged for the advertising rights of
$4.3 million. These advertising rights are amortized to expense as the
advertising is used by the Company and amounted to $1.1 million and $0.9 million
for the years ended December 31, 2001 and 2000, respectively.

NOTE 12--EMPLOYEE SAVINGS PLAN 401(K):

On January 1, 1999, the Company started a 401(k) savings plan under which it
matches employee contributions at 50% up to the first 6% of their contribution.
Employees may elect to participate in the plan provided they are an employee
at-will. The Company's contribution to the 401(k) plan during the years ended
December 31, 2001 and 2000 was $0.2 million and there was no employee match in
2000.

NOTE 13-- STOCK REPURCHASE PLAN:

On April 16, 2001, the Company announced that its Board of Directors
had authorized a share repurchase program to acquire up to 2.3 million shares of
its common stock. Pursuant to this repurchase program, such purchases will be
made from time to time in the open market and through privately negotiated
transactions, subject to general market and other conditions. The Company will
finance the repurchase program through existing cash resources. Shares acquired
pursuant to this repurchase program will become treasury shares and will be
available for reissuance for general corporate purposes. As of December 31,
2001, 0.3 million shares have been repurchased by the Company at a weighted
average repurchase price of $2.12.

NOTE 14--REDUCTION IN WORKFORCE:

During the fourth quarter of 2000, the Company reduced its workforce by
approximately 20% and recorded a $1.0 million restructuring charge. As of
December 31, 2001, all termination benefits were paid to these employees as a
result of the workforce reduction.

NOTE 15--SUMMARIZED QUARTERLY DATA (UNAUDITED)

The following financial information reflects all normal recurring
adjustments that are, in the opinion of management, necessary for a fair
statement of the results of the interim periods. Summarized quarterly data for
fiscal 2001 and 2000 is as follows (in thousands, except per share data):

F-24

1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ------------- ----------- -----------

2001
Revenue..................................... $ 1,333 $ 1,349 $ 989 $ 927
Net loss.................................... (4,694) (6,471) (7,676) (9,625)
Loss applicable to common stock............. (4,694) (6,471) (7,676) (9,625)
Loss per share--basic and diluted........... $ (0.21) $ (0.28) $ (0.34) $ (0.43)
2000
Revenues.................................... $ 910 $ 1,106 $ 1,448 $ 1,030
Net loss.................................... (3,626) (3,390) (5,823) (9,737)
Loss applicable to common stock............. (6,311) (3,534) (5,823) (9,737)
Loss per share--basic and diluted........... $ (1.09) $ (0.16) $ (0.26) $ (0.43)

F-25

SCHEDULE I

REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Stockholders of
i3 Mobile, Inc.:

Our audits of the consolidated financial statements referred to in our report
dated January 28, 2002 appearing in this Annual Report on the Form 10-K of i3
Mobile, Inc. also included an audit of the financial statement schedule listed
in Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement
schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.

PricewaterhouseCoopers LLP

Stamford, Connecticut
January 28, 2002

SCHEDULE II

i3 MOBILE, INC.

VALUATION AND QUALIFYING ACCOUNTS

Allowance for doubtful accounts:
Balance, January 1, 1999.................................................................... 110,000
Provision................................................................................... 131,000
Charge-offs................................................................................. (98,000)
----------
Balance, December 31, 1999.................................................................. 143,000
Provision................................................................................... 30,000
Charge-offs................................................................................. (64,000)
----------
Balance, December 31, 2000.................................................................. $ 109,000
Provision................................................................................... 135,000
Charge-offs................................................................................. (96,000)
----------
Balance, December 31, 2001.................................................................. $ 148,000
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