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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2003

or

For the transition period from                        to                       

Commission File Number 0-18299

i3 MOBILE, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code:    (203) 428-3000

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

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i3 MOBILE, INC.

FORM 10-Q QUARTERLY REPORT

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PART I—Financial Information

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i3 MOBILE, INC.

CONSOLIDATED BALANCE SHEET

(IN THOUSANDS, EXCEPT SHARE DATA)

NOTE:    The balance sheet at December 31, 2002 has been derived from the audited consolidated financial statements at that date.

See accompanying notes to consolidated financial statements.

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i3 MOBILE, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

See accompanying notes to consolidated financial statements.

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i3 MOBILE, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(IN THOUSANDS)

See accompanying notes to consolidated financial statements.

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i3 MOBILE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—COMPANY OVERVIEW:

i3 Mobile, Inc., “i3” or the “Company”, was incorporated in Delaware on June 28, 1991. From its inception in June 1991 until 2001, the Company’s business was comprised of distributing customized text-based information to mobile devices under the “Powered by i3 Mobile” product brand. During 2001, the Company evolved into a company that it believed was among the first to create a premium mobile subscription information and communication service for telephones. This service, Pronto, was marketed directly to consumers delivering information and service on demand 24 hours a day, combining the service of a mobile concierge with the simplicity of flat-menu voice recognition technology.

Although the Company undertook substantial efforts to research, develop and market the Pronto product, the Company did not achieve the subscriber levels which had been estimated and were needed to sustain the core business model. Due to the challenges the Company faced in marketing the Pronto product, and its concerns about its cash resources going forward, in October 2002, the Company engaged the services of an investment banker to pursue strategic alternatives, including a potential merger or acquisition of the Company (collectively, a “Transaction”). As a result of that engagement, the Company has entered into discussions with a potential Transaction partner, and to facilitate this or another Transaction, in March 2003 the Company announced the termination of the Pronto service and other cost saving measures in order to manage its cash resources. Although the Company has entered into discussions with a potential strategic partner for a merger transaction and continues to explore alternative potential transactions to maximize shareholder value, the Company has not entered into any definitive binding agreement and there can be no assurance the Company will be able to do so, or to do so on favorable terms. In the event the Company is unable to effect a Transaction in the near term, the Company will be required to implement additional cost reductions or sell the assets of the Company.

The Company has now focused its efforts on locating and consummating a Transaction, if the proper opportunity is presented. At this time, management believes that a Transaction may be the best means available to leverage the Company’s remaining cash resources and to maximize shareholder value.

It is possible the Company’s Board of Directors could determine not to further pursue a Transaction at all, or to consummate a Transaction that may or may not involve the ongoing development, marketing and commercialization of the Pronto platform, which could involve businesses unrelated to its previous business.

Liquidity:

The Company has incurred substantial losses and negative cash flows from operations in every fiscal period since inception. For the three months ended March 31, 2003, the Company incurred a loss from operations of approximately $6.2 million and negative cash flows from operations of approximately $5.5 million. As of March 31, 2003, the Company had an accumulated deficit of approximately $147 million.

Management expects operating losses and negative cash flows to continue for the foreseeable future as the Company incurs ongoing costs and expenses related to facilitating a Transaction. The anticipated cash expenditures for the remainder of 2003 include approximately $1.2 million of non-cancelable commitments, which include, among other things, rent, content and marketing commitments, which management will continue to resolve. During March 2003, the Company took action on a plan approved by the Board of Directors in an effort to continue to reduce recurring operating losses, preserve cash resources and working capital and facilitate a potential Transaction. The Company discontinued revenue producing operations and terminated the Pronto service and initiated cost saving measures including a reduction of 65 employees, approximately 78% of its workforce, the suspension of most of its research and development efforts at its Texas facility, and furthered its ongoing efforts to resolve contractual obligations. The reduction of workforce resulted in a $1.7 million charge in its results of operations during the first quarter of 2003. If the Company fails to enter into a Transaction,

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the ongoing reduction of the Company’s available cash resources over time would have a material adverse effect on the Company’s ability to operate and therefore could result in the Company selling its assets and ceasing operations. However, management believes the Company has adequate cash resources to continue to realize its assets and discharge its liabilities as a company into the second quarter of 2004, in the absence of a change in control related to a Transaction.

NOTE 2—BASIS OF PRESENTATION:

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Certain information and note disclosures normally included in financial statements have been omitted pursuant to Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included in the accompanying unaudited financial statements. Operating results for the three month period ended March 31, 2003 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2003.

For further information, refer to the consolidated financial statements and footnotes thereto included in our annual report on Form 10-K for the year ended December 31, 2002.

Certain reclassifications have been made for consistent presentation.

In June 2002, Statement of Financial Accounting Standards (“SFAS”) No. 146, “Accounting for Exit or Disposal Activities” (“SFAS No. 146”) was issued. SFAS No. 146 addresses the accounting for costs to terminate a contract that is not a capital lease, costs to consolidate facilities and relocate employees, and involuntary termination benefits under one-time benefit arrangements that are not an ongoing benefit program or an individual deferred compensation contract. A liability for contract termination costs should be recognized and measured at fair value either when the contract is terminated or when the entity ceases to use the right conveyed by the contract. A liability for one-time termination benefits should be recognized and measured at fair value at the communication date if the employee would not be retained beyond a minimum retention period (i.e., either a legal notification period or 60 days, if no legal requirement exists). For employees which will be retained beyond the minimum retention period, a liability should be accrued ratably over the future service period. The provisions of the statement will be effective for disposal activities initiated after December 31, 2002. During the first quarter of 2003, the Company adopted SFAS No. 146 and recorded a charge of $1.7 million. Refer to Note 1.

NOTE 3—SIGNIFICANT CUSTOMERS:

During the three months ended March 31, 2003, revenues from the Company’s Pronto product offering and from one wireless network operator customer for its legacy wireless alert product accounted for 39% and 24% of total net revenues, respectively. During the three months ended March 31, 2002, the Company had two wireless network operator customers for its legacy wireless alert product, which combined, accounted for approximately 80% of its total net revenues. In conjunction with the Company’s March 2003 decision to terminate the Pronto service and continue to implement cost saving measures while seeking a Transaction, all revenue producing activities from both the Pronto product offering and from its legacy wireless alert product offerings have now ceased.

NOTE 4—STOCK BASED 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.

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The Company applies SFAS No. 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 No. 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.

If compensation expenses had been recognized based on the fair value of the options at their grant date, in accordance with SFAS No. 123, the Company’s net loss and net loss per share would have been reduced to the pro-forma amounts indicated below for the periods ended March 31: