SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

             [ X ] Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934
                  for the Quarterly Period Ended June 30, 2003
                                       OR
             [ ] Transition Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934
        for the Transition Period from ............... to ...............

                         Commission File Number 0-19407

                         LASER-PACIFIC MEDIA CORPORATION
             (Exact Name of Registrant as Specified in Its Charter)

                  Delaware                           95-3824617
     (State or Other Jurisdiction of              (I.R.S. Employer
      Incorporation or Organization)             Identification No.)

                              809 N. Cahuenga Blvd.
                           Hollywood, California 90038
                                 (323) 462-6266
       (Address, including zip code and telephone number, with area code,
                        of principal executive offices)

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 ___

As of July 31, 2003,  7,101,295 shares of the registrant's  Common Stock, $.0001
par value per share, were outstanding.

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Exchange Act Rule 12b-2). Yes ___ No _X_


<PAGE>


                         LASER-PACIFIC MEDIA CORPORATION
                                AND SUBSIDIARIES

                                Table of Contents



                                                                         Page
Part I.   Financial Information                                         -------

Item 1.   Condensed Consolidated Financial Statements                      3

          Condensed Consolidated Balance Sheets (Unaudited)                3
          Condensed Consolidated Statements of Operations (Unaudited)      4
          Condensed Consolidated Statements of Cash Flows (Unaudited)      5
          Notes to Condensed Consolidated Financial Statements             6

Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                        8

Item 3.   Quantitative and Qualitative Disclosures about Market Risk       17

Item 4.   Controls and Procedures                                          17

Part II.  Other Information

Item 4.   Submission of Matters to a Vote of Security Holders              17

Item 6.   Exhibits and Reports on Form 8-K                                 18

          Signatures                                                       19



<PAGE>


Part I.  Financial Information

Item 1.  Condensed Consolidated Financial Statements


                         LASER-PACIFIC MEDIA CORPORATION
                                AND SUBSIDIARIES
                      Condensed Consolidated Balance Sheets
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                                                      June 30,         December 31,
                                                                                        2003               2002
                                                                                   ---------------    ----------------
Assets

Current Assets:
<S>                                                                             <C>                <C>
  Cash and cash equivalents                                                     $       8,225,334  $        6,682,395
  Receivables, net of allowance for doubtful accounts                                   2,726,243           4,835,360
  Other current assets                                                                  1,403,404           1,405,772
                                                                                   ---------------    ----------------

    Total Current Assets                                                               12,354,981          12,923,527

Net property and equipment                                                             20,587,895          21,187,713
Other assets, net                                                                         148,154             188,579
                                                                                   ---------------    ----------------
 Total Assets                                                                   $      33,091,030  $       34,299,819
                                                                                   ===============    ================

Liabilities and Stockholders' Equity

Current Liabilities:
  Current installments of notes payable to bank and long-term debt              $       3,364,695  $        3,528,407
  Other current liabilities                                                             2,761,695           2,718,814
                                                                                   ---------------    ----------------

   Total Current Liabilities                                                            6,126,390           6,247,221

Deferred tax liabilities, net                                                             829,058             829,058
Notes payable to bank and long-term debt, less current installments                     6,765,983           8,415,453

Stockholders' Equity:
   Preferred stock, $.0001 par value.  Authorized 3,500,000 shares; none issued                --                  --
   Common stock, $.0001 par value.  Authorized 25,000,000 shares; issued
   and outstanding 7,101,295                                                                  710                 710
   Additional paid-in capital                                                          18,089,063          18,089,063
   Retained earnings                                                                    1,279,826             718,314
                                                                                   ---------------    ----------------
 Net Stockholders' Equity                                                              19,369,599          18,808,087
                                                                                   ---------------    ----------------

Total Liabilities and Stockholders' Equity                                      $      33,091,030  $       34,299,819
                                                                                   ===============    ================

</TABLE>




   See accompanying notes to the condensed consolidated financial statements.

<PAGE>


                         LASER-PACIFIC MEDIA CORPORATION
                                AND SUBSIDIARIES
                 Condensed Consolidated Statements of Operations
                                   (Unaudited)




<TABLE>
<CAPTION>
                                                                   Three Months Ended                     Six Months Ended
                                                                        June 30,                              June 30,
                                                            ----------------------------------     --------------------------------
                                                                  2003               2002               2003              2002
                                                            ---------------    ---------------     --------------    --------------

<S>                                                      <C>                <C>                <C>                <C>
Revenues                                                 $       7,617,297  $       5,806,282  $      17,412,051  $     13,795,500

Operating costs
     Direct costs                                                4,963,201          4,333,980         10,751,601         9,131,423
     Depreciation and amortization                               1,295,689          1,153,984          2,589,339         2,296,239
                                                            ---------------    ---------------     --------------    --------------
      Total operating costs                                      6,258,890          5,487,964         13,340,940        11,427,662
                                                            ---------------    ---------------     --------------    --------------
      Gross profit                                               1,358,407            318,318          4,071,111         2,367,838
Selling, general and administrative expenses                     1,359,464          1,152,472          2,809,004         2,352,390
                                                            ---------------    ---------------     --------------    --------------
      Income (loss) from operations                                (1,057)          (834,154)          1,262,107            15,448

Interest expense                                                   173,049            206,984            362,915           432,514
Other income                                                        17,380             38,740             37,280            69,728
                                                            ---------------    ---------------     --------------    --------------
      Income (loss) before income tax expense (benefit)          (156,726)        (1,002,398)            936,472         (347,338)

Income tax expense (benefit)                                      (62,505)          (400,774)            374,960         (138,564)
                                                            ---------------    ---------------     --------------    --------------
      Net income (loss)                                  $        (94,221)  $       (601,624)  $         561,512  $      (208,774)
                                                            ===============    ===============     ==============    ==============


Income (loss) per share (basic)                          $          (0.01)  $          (0.08)  $            0.08  $         (0.03)
                                                            ---------------    ---------------     --------------    --------------

Income (loss) per share (diluted)                        $          (0.01)  $          (0.08)  $            0.08  $         (0.03)
                                                            ---------------    ---------------     --------------    --------------

Weighted average shares outstanding (basic)                      7,101,295          7,101,295          7,101,295         7,102,945
                                                            ===============    ===============     ==============    ==============

Weighted average shares outstanding (diluted)                    7,101,295          7,101,295          7,118,253         7,102,945
                                                            ===============    ===============     ==============    ==============
</TABLE>















   See accompanying notes to the condensed consolidated financial statements.


<PAGE>


                         LASER-PACIFIC MEDIA CORPORATION
                                AND SUBSIDIARIES
                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)




<TABLE>
<CAPTION>
                                                                                                 Six Months Ended
                                                                                                     June 30,
                                                                                         ---------------------------------
                                                                                              2003              2002
                                                                                         ---------------    --------------
    Cash flows from operating activities:
    <S>                                                                               <C>                <C>
      Net income (loss)                                                               $         561,512  $      (208,774)
      Adjustments to reconcile net income (loss) to net cash
        provided by operating activities:
           Depreciation and amortization                                                      2,589,339         2,296,239
           Gain on sale of property and equipment                                               (1,185)           (6,623)
           Recovery of doubtful accounts receivable                                           (270,000)          (70,885)
           Change in assets and liabilities:
                   Receivables                                                                2,379,117         2,341,886
                   Other current assets                                                           2,368           171,997
                   Other assets                                                                  40,425             6,530
                   Other current liabilities                                                     42,881         (499,853)
                                                                                         ---------------    --------------
    Net cash provided by operating activities                                                 5,344,457         4,030,517

    Cash flows from investing activities:
           Purchases of property and equipment                                              (2,005,804)       (1,686,820)
           Proceeds from disposal of property and equipment                                      17,468             6,623
                                                                                         ---------------    --------------
                   Net cash used in investing activities                                    (1,988,336)       (1,680,197)

    Cash flows from financing activities:
           Proceeds borrowed under notes payable to bank and long-term debt                          --         1,000,000
           Repayment of notes payable to bank and long-term debt                            (1,813,182)       (1,885,453)
           Purchase of treasury stock                                                                --           (7,788)
                                                                                         ---------------    --------------
                   Net cash used in financing activities                                    (1,813,182)         (893,241)

                   Net increase in cash and cash equivalents                                  1,542,939         1,457,079
    Cash and cash equivalents at beginning of period                                          6,682,395         6,989,781
                                                                                         ---------------    --------------
    Cash and cash equivalents at end of period                                        $       8,225,334  $      8,446,860
                                                                                         ===============    ==============


</TABLE>











   See accompanying notes to the condensed consolidated financial statements.


<PAGE>


                         LASER-PACIFIC MEDIA CORPORATION
                                AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements


(1)      Basis of Presentation

     In  the  opinion  of  management,   the  accompanying  unaudited  condensed
consolidated financial statements contain all adjustments  (consisting of normal
recurring  items)  necessary  to  present  fairly  the  financial   position  of
Laser-Pacific  Media Corporation (the "Company") and its subsidiaries as of June
30, 2003 and December 31, 2002;  the results of operations for the three and six
month periods ended June 30, 2003 and 2002; and the statements of cash flows for
the six month  periods ended June 30, 2003 and 2002.  The Company's  business is
subject  to  the  prime  time   television   industry's   typical   seasonality.
Historically,  revenues and income from  operations have been highest during the
first and fourth quarters, when production of television programs and demand for
the Company's services is at its highest.  The net income or loss of any interim
quarter is seasonally  disproportionate to revenues because selling, general and
administrative   expenses  and  certain  operating  expenses  remain  relatively
constant  during the year.  Therefore,  interim  results are not  indicative  of
results to be expected for the entire fiscal year.

     In accordance with the directives of the Securities and Exchange Commission
under Rule 10-01 of  Regulation  S-X, the  accompanying  consolidated  financial
statements  and  footnotes  have  been  condensed  and  do not  contain  certain
information  included in the Company's annual consolidated  financial statements
and notes thereto.

(2)      Income per Common Share

     The Company  presents basic and diluted  earnings per share ("EPS").  Basic
EPS is computed by  dividing  income  available  to common  stockholders  by the
weighted average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution from securities that are issuable and that could
share in the earnings of the Company.

     The  reconciliation  of basic and  diluted  weighted  average  shares is as
follows:

<TABLE>
<CAPTION>
                                                                      Three Months Ended                  Six Months Ended
                                                                           June 30,                           June 30,
                                                                 ------------------------------    -------------------------------
                                                                     2003             2002             2003              2002
                                                                 -------------     ------------    -------------     -------------

<S>                                                           <C>              <C>              <C>              <C>
Net income (loss)                                             $      (94,221)  $     (601,624)  $       561,512  $      (208,774)
                                                                 =============     ============    =============     =============

Weighted average shares used in basic computation                   7,101,295        7,101,295        7,101,295         7,102,945
Dilutive stock options                                                     --               --           16,958                --
                                                                 -------------     ------------    -------------     -------------
Weighted average shares used in diluted computation                 7,101,295        7,101,295        7,118,253         7,101,295
                                                                 =============     ============    =============     =============

Net income (loss) per common share:
Basic                                                         $        (0.01)  $        (0.08)  $          0.08  $         (0.03)
Diluted                                                       $        (0.01)  $        (0.08)  $          0.08  $         (0.03)

</TABLE>

     Options to purchase  shares of common stock at exercise prices ranging from
$2.13 to $5.25 per share were  outstanding  for the six month  period ended June
30, 2003 in the amount of 437,000 and were not  included in the  computation  of
diluted earnings per share because the exercise price of the options was greater
than the average  market  price of a share of common  stock.  For the six months
ended  June 30,  2002,  options  to  purchase  shares of common  stock at prices
ranging from $0.22 to $5.25 per share were outstanding in the amount of 506,050,
but were not included in the  computation of diluted  earnings per share because
they were anti-dilutive.  Options to purchase shares of common stock at exercise
prices ranging from $0.22 to $5.25 per share were  outstanding  for the quarters
ended June 30, 2003 and 2002,  totaling 473,400 and 506,050,  respectively,  but
were not included in the  computation of diluted  earnings per share because the
options were anti-dilutive.

<page>

(3)      Income Taxes

     For the three  months ended June 30,  2003,  federal  income tax benefit of
$53,000 and state income tax benefit of $9,000 were recorded. For the six months
ended June 30, 2003, federal income tax expense of $318,000 and state income tax
expense of $57,000 were recorded. Income taxes (benefit) were computed using the
estimated  effective  tax rate to apply for all of 2003.  The rate is subject to
ongoing review and evaluation by management.

(4)      Segment Reporting

     In compliance with  disclosure  regarding SFAS No. 131,  Disclosures  about
Segments of an Enterprise  and Related  Information,  the Company has determined
that it has one business segment - post-production services.

(5)      Stock-based Compensation and Other Option Grants

     Pro Forma Information

     The Company has adopted the disclosure-only  provisions of SFAS No. 123 and
148.  Accordingly,  for the stock options  granted to employees no  compensation
cost has been recognized in the accompanying condensed  consolidated  statements
of operations  because the exercise  price equaled or exceeded the fair value of
the underlying  Common Stock at the date of grant. No stock options were granted
during the six month period ended June 30, 2003. Stock options generally vest at
the date of grant. Had compensation cost for the Company's stock options granted
to  employees  been  determined  based upon the fair value at the grant date for
awards  consistent  with SFAS No. 123, the Company's  recorded and pro forma net
income  (loss)  and income  (loss) per share for the three and six months  ended
June 30, 2003 and 2002 would have been as follows:

<TABLE>
<CAPTION>
                                                              Three Months Ended June 30,          Six Months Ended June 30,
                                                          ----------------------------------    -------------------------------
                                                                2003               2002              2003             2002
                                                          ----------------   ---------------    -------------    --------------
Net income (loss):
<S>                                                    <C>                 <C>               <C>              <C>
    As reported                                        $        (94,221)   $     (601,624)   $        561,512 $       (208,774)
    Less:    compensation   expense   assuming
    fair   value methodology  of  options  for
    all awards  granted,  net of related income
    taxes                                                            --                 --                 --         (468,300)
                                                          ----------------   ---------------    -------------    --------------
           Pro forma                                   $        (94,221)   $     (601,624)   $        561,51$         (677,074)
                                                          ================   ===============    =============    ==============

Basic net income (loss) per share:
    As reported                                        $          (0.01)   $        (0.08)   $           0.08 $          (0.03)
    Pro forma                                                     (0.01)            (0.08)               0.08            (0.10)
                                                          ================   ===============    =============    ==============

Diluted net income (loss) per share:
    As reported                                        $          (0.01)   $        (0.08)   $           0.08 $          (0.03)
    Pro forma                                                     (0.01)            (0.08)               0.08            (0.10)
                                                          ================   ===============    =============    ==============

</TABLE>


     Fair value of Common Stock  options is estimated at the date of grant using
     a Black-Scholes  option-pricing  model with the following  weighted average
     assumptions:

                                                2003                2002
                                          -----------------    ---------------

     Expected life (in years)                       --                   10.00
     Risk-free interest rate                        --                    1.57
     Volatility                                     --                   0.987
     Dividend yield                                 --                   --
     Fair value - grant date                        --                    2.23

<page>

     The  Black-Scholes   option  valuation  model  was  developed  for  use  in
     estimating   the  fair  value  of  traded  options  that  have  no  vesting
     restrictions  and are fully  transferable.  In addition,  option  valuation
     models require the input of highly  subjective  assumptions,  including the
     expected  stock  price  volatility.  Because  the  Company's  options  have
     characteristics  significantly  different from those of traded options, and
     because changes in the subjective input  assumptions can materially  affect
     the fair value estimate, in the opinion of management,  the existing models
     do not  necessarily  provide a reliable single measure of the fair value of
     its options.

(6)      Subsequent Event

     On July 31, 2003, the Company entered into a merger  agreement (the "Merger
Agreement") with Eastman Kodak Company ("Kodak"), a New Jersey corporation,  and
OS Acquisition  Corp., a Delaware  corporation  and  wholly-owned  subsidiary of
Kodak  ("Sub").  Under  the  terms  of  the  Merger  Agreement,   the  Company's
stockholders  are entitled to receive $4.22 per share in Kodak common stock,  or
at Kodak's  option,  in cash. The  transaction is subject to the approval of the
Company's  stockholders  and other  customary  closing  conditions.  The parties
expect the transaction to close in the fourth quarter of 2003.


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

     Statements  included  within  this  document,   other  than  statements  of
historical  facts,  that address  activities,  events or  developments  that the
Company expects or anticipates  will or may occur in the future,  including such
things as business  strategy  and measures to  implement  strategy,  competitive
strengths, goals, expansion and growth of the Company's business and operations,
plans,  references to future success and other such matters, are forward-looking
statements  within the meaning of Section 27A of the  Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Securities Exchange Act of
1934, as amended (the  "Exchange  Act"),  and fall under the safe harbor.  These
forward-looking  statements are usually  preceded by one or a combination of the
following  words:  "believes,"  "anticipates,"  "plans,"  "may," "hopes," "can,"
"will," "expects," "estimates," "continues," "with the intent," and "potential."
However,  if a  forward-looking  statement is not preceded by one of these words
that  does  not  mean  that  it is  not a  forward-looking  statement.  Specific
instances of forward-looking  statements that exist in the below section of this
document  include  the  Company's  expectation  that sales in its  Pacific  Film
Laboratories will continue to decrease and the outcome and risks associated with
the Company's  proposed  merger to Eastman Kodak  Company.  In all cases where a
forward-looking  statement is  identified,  the actual results of operations and
financial  position  could  differ  materially  in scope and  nature  from those
anticipated  in the  forward-looking  statements  as a  result  of a  number  of
factors. Examples of risk factors include: risks relating to the proposed merger
with Kodak,  as more fully set forth below under "Risks  Related to the Proposed
Merger with Kodak"; a change in the television  industry's  attitude towards the
use of film;  the amount and nature of any lawsuit  that could be filed  against
the Company;  the Company's  ability to successfully  expand  capacity;  general
economic,  market, or business  conditions;  the opportunities (or lack thereof)
that may be  presented  to and pursued by the  Company;  competitive  actions by
other   companies;   changes  in  laws  or   regulations;   investments  in  new
technologies;  continuation  of sales levels;  the risks related to the cost and
availability  of capital;  and other factors,  including those disclosed in this
report and the Company's  other reports filed with the  Securities  and Exchange
Commission ("SEC"), many of which are beyond the control of the Company. Readers
are cautioned not to place undue reliance on these  forward-looking  statements,
which speak only as of the date hereof.  The Company undertakes no obligation to
publish revised  forward-looking  statements to reflect events or  circumstances
after the date hereof or to reflect the occurrence of unanticipated events.

Results of Operations

     Revenues for the quarter ended June 30, 2003  increased to $7,617,000  from
$5,806,000 for the same year-ago period, an increase of $1,811,000 or 31.2%. The
increase in revenues is primarily  attributable  to an increase in the number of
feature films for which the company provided services. The Company also believes
that the continued  improvement in the economic environment in the entertainment
production sector was a contributing  factor. The increase in total revenues was
partially offset by a decrease in film processing revenue of $66,000,  discussed
in greater detail below.



<PAGE>


     Film processing revenues for the three months ended June 30, 2003 decreased
to $127,000  from  $193,000 for the same period last year, a decrease of $66,000
or 34.2%.  The  decrease is primarily  due to the  Company's  clients  utilizing
formats that require a lower volume of film processing.  This trend is discussed
in greater detail below in "Matters Affecting Operations."

     Revenues  for the six months ended June 30, 2003  increased to  $17,412,000
from  $13,796,000  for the same  year-ago  period,  an increase of $3,616,000 or
26.2%. The increase in revenues is primarily  attributable to an increase in the
number of feature  films for which the company  provided  services.  The Company
also believes that the continued  improvement in the economic environment in the
entertainment production sector was a contributing factor. The increase in total
revenues  was  partially  offset by a  decrease  in film  processing  revenue of
$218,000, discussed below.

     Film processing  revenues in the Pacific Film Laboratory for the six months
ended June 30, 2003 decreased to $547,000 from $765,000 for the same period last
year,  a decrease of $218,000 or 28.5%.  The  decrease is  primarily  due to the
Company's  clients  utilizing  formats  that  require  a  lower  volume  of film
processing.  This  trend is  discussed  in  greater  detail  below  in  "Matters
Affecting Operations."

     Operating costs for the quarter ended June 30, 2003 were $6,259,000  versus
$5,488,000 for the same year-ago  period,  an increase of $771,000 or 14.0%. The
increase in operating costs was primarily the result of increases in labor costs
of $552,000,  tape stock  expense of  $167,000,  depreciation  and  amortization
expense of $142,000,  and outside services  expense of $80,000.  These increases
were  partially  offset by a decrease in bad debt expense of $320,000  resulting
from a  reduction  in the  allowance  for  doubtful  accounts,  which is further
discussed below under "Valuation of Accounts Receivable." The increases in labor
costs, tape stock expense, and outside services were primarily the result of the
increase in demand for the Company's services.  The increase in depreciation and
amortization  expense is  primarily  due to  equipment  purchases in current and
prior years to maintain and increase the  Company's  service  offerings  and for
other general business expansion. Total operating costs, including depreciation,
as a percentage  of revenues for the three months ended June 30, 2003 were 82.2%
compared with 94.5% for the same year-ago period.

     Operating  costs for the six months  ended June 30,  2003 were  $13,341,000
versus  $11,428,000 for the same year-ago  period,  an increase of $1,913,000 or
16.7%.  The increase in operating  costs is primarily the result of increases in
labor  costs of  $982,000,  tape stock  expense of  $372,000,  depreciation  and
amortization   expense  of  $293,000,   outside  services   expense   (primarily
post-production   services  performed  by  outside  vendors)  of  $154,000,  and
equipment  rental  expense of  $144,000.  The  increase in  operating  costs was
partially  offset by a decrease in net bad debt  expense of  $199,000  resulting
from a  reduction  in the  allowance  for  doubtful  accounts,  which is further
discussed below under "Valuation of Accounts Receivable." The increases in labor
costs, tape stock expense,  outside services and equipment rental were primarily
the result of the increase in demand for the Company's services. The increase in
depreciation and amortization expense is primarily due to equipment purchases in
current and prior years to maintain and increase the Company's service offerings
and for other general  business  expansion.  Total  operating  costs,  including
depreciation and amortization  expense,  as a percentage of revenues for the six
months ended June 30, 2003, were 76.6% compared with 82.8% for the same year-ago
period.

     For the quarter ended June 30, 2003 the Company  recorded a gross profit of
$1,358,000  compared with $318,000 for the same year-ago period,  an increase of
$1,040,000 or 327.0%. The increase in gross profit is the result of the increase
in revenues partially offset by the increase in operating costs explained above.
Revenues  increased  31.2% while  operating costs increased 14.0% as compared to
the same year-ago period.  The Company's gross margin for the three months ended
June 30, 2003 increased to 17.8% from 5.5% in the same year-ago period.

     For the six months ended June 30, 2003, the Company recorded a gross profit
of $4,071,000 compared with $2,368,000 for the same year-ago period, an increase
of  $1,703,000  or 71.9%.  The  increase  in gross  profit is the  result of the
increase  in  revenues  partially  offset by the  increase  in  operating  costs
discussed above.  Revenues increased 26.2% while operating costs increased 16.7%
as compared to the same year-ago period.  The Company's gross margin for the six
months ended June 30, 2003  increased  to 23.4% from 17.2% in the same  year-ago
period.



<PAGE>


     Selling,  general and  administrative  expenses  ("SG&A  expenses") for the
quarter ended June 30, 2003 were  $1,359,000  compared to $1,152,000  during the
same  year-ago  period,  an increase of $207,000 or 18.0%.  The increase in SG&A
expenses was  primarily due to increases in  professional  services of $100,000,
wages and salaries of $59,000, and telephone expense of $17,000. The increase in
professional services is primarily due to consulting fees in connection with new
business,  accounting and legal fees related to the  Sarbanes-Oxley  Act of 2002
and  accounting,  legal and  financial  advisory  fees related to the  Company's
proposed merger with Kodak,  discussed  above,  and attorney fees related to the
unionization  of the  Pacific  Film  Laboratories  employees.  The  unionization
agreement  is  discussed  in further  detail  below.  The  increase in wages and
salaries  is  primarily  due to the  hiring  of  additional  employees  and wage
increases  given to some  existing  employees.  SG&A expenses as a percentage of
revenues for the three months ended June 30, 2003 were 17.8% compared with 19.8%
for the same year-ago period.

     SG&A  expenses  for the six  months  ended  June 30,  2003 were  $2,809,000
compared to $2,352,000  during the same year-ago period, an increase of $457,000
or 19.4%.  The  increase  in SG&A  expenses is  primarily  due to  increases  in
professional  services  of $265,000  and wages and  salaries  of  $111,000.  The
increase  in  professional  services  was  primarily  caused  by the  following;
consulting  fees in  connection  with new  business,  accounting  and legal fees
related to the  Sarbanes-Oxley  Act of 2002 and accounting,  legal and financial
advisory fees related to the  Company's  proposed  merger with Kodak,  discussed
above,  and  attorney  fees  related to the  unionization  of the  Pacific  Film
Laboratories  employees.  The  unionization  agreement  is  discussed in further
detail below.  The increase in wages and salaries is primarily due to the hiring
of additional  employees and wage  increases for some existing  employees.  SG&A
expenses as a percentage of revenues for the six months ended June 30, 2003 were
16.1% compared with 17.0% for the same year-ago period.

     Interest expense for the quarter ended June 30, 2003 was $173,000  compared
to $207,000 for the same year-ago  period,  a decrease of $34,000 or 16.4%.  The
decrease in interest  expense is primarily a result of lower  interest  rates on
borrowings.

     Interest  expense  for the six  months  ended  June 30,  2003 was  $363,000
compared  to $433,000  for the same  year-ago  period,  a decrease of $70,000 or
16.1%.  The  decrease  in  interest  expense  is  primarily  the result of lower
interest rates on borrowings.

     Other  income for the quarter  ended June 30, 2003 was $17,000  compared to
$39,000 for the same  year-ago  period,  a decrease  of $21,000 or 56.4%.  Other
income is primarily interest income. The decrease in other income is principally
due to lower  interest  earned on cash  balances  as well as a  decrease  in the
Company's average cash balance.

     Other income for the six months ended June 30, 2003 was $37,000 compared to
$70,000 for the same  year-ago  period,  a decrease  of $33,000 or 47.1%.  Other
income is primarily interest income. The decrease in other income is principally
due to lower  interest  earned on cash  balances  as well as a  decrease  in the
Company's average cash balance.

     Income tax benefit for the quarter ended June 30, 2003 was $63,000 compared
to a benefit of $401,000  for the same period last year,  a decrease of $338,000
or 84.3%.  The decrease in income tax benefit is principally due to a lower loss
before income tax benefit.  The income tax rate used for the interim  periods is
based on the  estimated  effective  tax rate for the full year and is subject to
ongoing review and  evaluation by management.  The effective tax rate is 40% for
all periods presented.

     Income tax  expense  for the six months  ended June 30,  2003 was  $375,000
compared to an income tax benefit of $139,000 for the same period last year,  an
increase  of  $514,000  or  369.8%.  The  increase  in  income  tax  expense  is
principally due to increased pre-tax earnings.



<PAGE>


Liquidity and Capital Resources

     The Company's  principal  source of funds is cash  generated by operations.
The Company anticipates that existing cash balances, availability under existing
loan agreements and cash generated from operations will be sufficient to service
existing  debt  and to  meet  the  Company's  projected  operating  and  capital
requirements for the next twelve months.  However, should sales decrease due to:
changes  in market  conditions,  changes  in the  industry's  acceptance  of the
Company and the services that it provides,  changes in laws, or other  potential
industry-wide  problems,  the potential  consequences could materially adversely
affect the Company's cash flows and liquidity.  Additionally, should the Company
not comply  with the debt  covenants  related to its  equipment  leases or other
financing agreements, the Company could be forced to reduce its debt obligations
or re-negotiate its existing agreements.

     The Company and its subsidiaries are operating under a credit facility with
Merrill Lynch  Business  Financial  Services Inc. The maximum  credit  available
under the facility is $13.5 million.  The facility provides for borrowings of up
to $6.0 million under a revolving loan and $7.5 million in equipment term loans.
The term note credit agreements contain covenants, including financial covenants
related to leverage and fixed charge ratios.  The Company was in compliance with
these covenants at June 30, 2003. As of June 30, 2003, the outstanding borrowing
under the facility in the form of equipment  term loans was $5.5 million;  there
was no borrowing under the revolving credit facility. The revolving loan expires
on May 31, 2004 and may be renewed  annually.  The Merrill Lynch  equipment term
loans expire from June 2006 through  December 2007. The equipment term loans are
payable monthly.

     In addition to the above,  as of June 30, 2003, the Company had outstanding
capital  lease   obligations   relating  to  the  acquisition  of  equipment  of
approximately  $4.6 million with various lenders.  The obligations are for terms
of up  to 60  months  at  interest  rates  ranging  from  5.25%  to  9.75%.  The
obligations  are  secured  by the  equipment  financed.  The  Company  also  had
obligations under operating leases relating to its facilities of $2.8 million at
June 30, 2003.

     In the third and  fourth  quarters  of 2003,  the  Company  may  assume new
obligations  under debt  agreements  related to the purchase of new equipment to
expand  service  offerings.  For current  service  offerings,  the Company  will
continue to make purchases as necessary.

     Below is a chart detailing the Company's long-term contractual  obligations
by category as of June 30, 2003.

                             Contractual Obligations
                             Payments Due by Period
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                    Less than          1 -             3 -           After 5
                                                      Total           1 year         3 years         5 years          years
<S>                                               <C>             <C>             <C>            <C>
Capital Lease and Term Loan Obligations           $       10,131  $        3,365  $       5,259  $         1,507             --
Operating Leases                                           2,809             907          1,782              120             --
------------------------------------------------- --------------- --------------- -------------- ---------------- --------------
            Total contractual cash obligations    $       12,940  $        4,272  $       7,041  $         1,627             --
------------------------------------------------- --------------- --------------- -------------- ---------------- --------------

</TABLE>

Discussion of Cash Flows

     Net cash  provided by operating  activities in the first six months of 2003
was $5,344,000  compared to $4,031,000 for the same year-ago period, an increase
of  $1,313,000 or 32.6%.  The increase in cash provided by operating  activities
during the first quarter of 2003 was primarily due to increases in net income of
$770,000, depreciation and amortization of $293,000, and a reduction in bad debt
expense  of  $199,000.  The  reduction  in bad debt  expense is the result of an
adjustment  to  the  allowance  for  doubtful  accounts  discussed  below  under
"Valuation of Accounts Receivable."

     Net cash used by investing  activities  in the first six months of 2003 was
$1,988,000  compared to $1,680,000 for the same year-ago period,  an increase of
$308,000  or 18.3%.  The  increase  in cash  used in  investing  activities  was
primarily due to an increase in purchases of property and equipment.

<page>

     Net cash used by financing  activities  in the first six months of 2003 was
$1,813,000  compared to $893,000 for the same  year-ago  period,  an increase of
$920,000  or 103.0%.  The  increase  in cash used in  financing  activities  was
primarily due to additional  borrowing that occurred during the six months ended
June 30, 2002.

     As a result of the above  factors,  the Company  recorded a net increase in
cash and cash equivalents in the first six months of 2003 of $1,543,000 compared
to a net increase of  $1,457,000  for the same year-ago  period,  an increase of
$86,000 or 5.9%.

Matters Affecting Operations

     Some producers of television  programs are  increasingly  choosing to shoot
their  programs  on  videotape.  There  has been an  increase  in the  number of
television  programs  choosing to shoot on videotape in the past two  television
seasons.  The primary reason for this change is the  producers'  desire for cost
savings. The majority of situation comedies are now shot on videotape.  Based on
the  series we so far have  confirmed  for the  2003-2004  television  broadcast
season,  we  anticipate  this trend will  continue.  The  majority  of  dramatic
programs  continue to be shot on film.  Management  believes that producers find
the  attributes of film  preferable to videotape for dramatic  programs.  Due to
this trend,  in the  five-year  period from 1998 through 2002,  film  processing
revenues  have  dropped  from $3.3  million in 1998 to $1.6  million in 2002,  a
decrease of $1.7 million or 51.5%. Film processing  revenues were 10.9% of total
revenues in 1998,  as compared to 4.9% of total  revenues in 2002,  and 5.5% and
3.1% of total revenues for the first six months of 2002 and 2003,  respectively.
A  continuation  and expansion of the trend of shooting  television  programs on
videotape  rather  than film would  result in a further  decrease  in demand for
services offered by Pacific Film Laboratories.

     On January  23,  2003,  eleven of the  Company's  Pacific  Film  Laboratory
employees voted to be represented by I.A.T.S.E.  Local 683 ("Local 683"). In May
2003,  the  employees at the  Company's  Pacific Film  Laboratories  agreed to a
contract  that took  effect on May 18,  2003,  and which will  expire on May 13,
2006.  The  contract is set to  automatically  renew each year  thereafter.  The
unionization  of these  employees  is not  expected  to have a material  adverse
effect on the Company's financial position or results of operations.

     On July 9, 2001,  the  Company  entered  into an  agreement  with its joint
venture partner in Composite Image Systems, LLC ("CIS"), to sell its interest in
CIS to its joint venture partner. Under the terms of the agreement,  the Company
transferred  to its joint venture  partner the Company's 50% interest in CIS and
certain  equipment  previously  leased to CIS in exchange  for a cash payment of
$575,000.   The  Company  has  given  corporate  guarantees  regarding  a  lease
obligation of the joint venture.  CIS and the joint venture  partner have agreed
to indemnify  the Company for up to the amount of the principal  obligation  for
any claims that might arise under the guarantee  should CIS default on the lease
obligation.  The lease  obligation  is also secured by the  equipment  purchased
under the lease.  The Company  estimates  that, as of June 30, 2003, the current
principal  balance   outstanding  on  the  lease  obligation  was  approximately
$114,000.

Seasonality and Variation of Quarterly Results

     The Company's business is subject to substantial  quarterly variations as a
result of seasonality,  which the Company  believes is typical of the television
post-production  industry.  Since the  majority  of the  Company's  business  is
derived from  programs  aired on primetime  television,  revenues and  operating
results  have  been  highest  during  the first and  fourth  quarters,  when the
production  of  television  programs  and,  consequently,  the  demand  for  the
Company's  services  are at  their  highest.  Revenues  have  historically  been
substantially  lower during the second and third  quarters.  The increase in the
number of feature films for which the Company provides services partially offset
the seasonal  fluctuation in the second quarter of 2003. In 2003, 2002 and 2001,
revenues in the second  quarter  were  22.2%,  27.3% and 23.6% lower than in the
first quarter, respectively. If the Company's feature film business continues to
increase, this seasonality could further decrease.



<PAGE>


Critical Accounting Policies

         The Company's critical accounting policies are as follows:

          - Depreciation and amortization of property and equipment,

          - Valuation of long-lived assets,

          - Valuation of deferred tax assets, and

          - Valuation of accounts receivable.

Depreciation and Amortization of Property and Equipment

     The  Company   depreciates  and  amortizes  property  and  equipment  on  a
straight-line  basis over the  estimated  useful  lives of the  related  assets.
Significant management judgment is required to determine the useful lives of the
assets. The useful lives designated by management to the various types of assets
specified below are as follows:


-------------------------------- --------------------------------------------
      Type of Asset                            Useful Life
-------------------------------- --------------------------------------------
Automobiles                      4 years
-------------------------------- --------------------------------------------
Furniture and fixtures           5 years
-------------------------------- --------------------------------------------
Technical equipment              7 years
-------------------------------- --------------------------------------------
Building improvements            10 years
-------------------------------- --------------------------------------------
Buildings                        30 years
-------------------------------- --------------------------------------------
Leasehold improvements
                                 Remaining life of lease (including option
                                 periods in which the Company will incur a
                                 penalty for non-renewal) or 10 years,
                                 whichever is shorter
-------------------------------- --------------------------------------------

     In  addition,  replacement  parts  costing  in excess of $5,000  related to
technical  equipment  are amortized  over 18 months.  Should the useful lives of
assets be revised,  the impact on the Company's  results of operations  could be
material.

Valuation of Long-Lived Assets

     The Company  periodically  assesses  whether  impairment of its  long-lived
assets has occurred, which requires management to make assumptions and judgments
regarding  the fair  value of these  assets.  The assets  are  considered  to be
impaired if the  Company  determines  that the  carrying  value of  identifiable
assets may not be recoverable  based upon its assessment of the following events
or changes in circumstances:

     - The asset's  ability to continue to generate  income from  operations and
     positive cash flow in future periods;

     - Significant  changes in strategic business  objectives and utilization of
     the assets; and

     - The impact of significant  negative  industry,  technological or economic
     trends.

     If the  assets  are  considered  to be  impaired,  the  impairment  that is
recognized is the amount by which the carrying  value of the assets  exceeds the
fair  value  of  the  assets.   If  a  change  were  to  occur  in  any  of  the
above-mentioned  factors or estimates a material change in the reported  results
could occur.



<PAGE>


Valuation of Deferred Tax Assets

     Valuation  allowances are established,  when necessary,  to reduce deferred
tax assets to the  amount  management  believes  is more  likely  than not to be
realized.  The  likelihood  of a  material  change  in  the  Company's  expected
realization  of these assets depends on future  taxable  income,  the ability to
deduct tax loss carry forwards against future taxable income,  the effectiveness
of the tax planning and strategies among the various tax  jurisdictions in which
the Company  operates,  and any significant  changes in the tax laws. As of June
30, 2003,  the Company  believes that it is more likely than not the benefits of
deferred tax assets of $556,000  will be realized.  Accordingly,  as of June 30,
2003, the Company has not recorded a valuation allowance.

Valuation of Accounts Receivable

     The Company  periodically  assesses  its  accounts  receivable  balance and
records an allowance for bad debts (the  "allowance") for the amount the Company
considers uncollectable. The purpose of this allowance is to reduce the accounts
receivable  balance to the estimated net  realizable  balance.  The value of the
allowance  reflects  management's  best estimate of the amount of  uncollectable
trade  receivables.  The bad  debts  allowance  is  determined  considering  the
following criteria:  delinquency of individual  accounts,  collection history of
specific customers, and the ability of customers to make payments. In the second
quarter  of  2003,  the  Company  received  payment  on some  of its  delinquent
accounts,  and made  further  improvements  to its  collections  process,  which
resulted in a $320,000  reduction to the allowance during the three months ended
June 30, 2003. As of June 30, 2003, the allowance for bad debts totaled $386,000
and trade receivables  totaled $3.0 million.  Changes in the financial condition
of the  Company's  customers,  the Company or other  business  conditions  could
affect the adequacy of the Company's allowance.


Subsequent Event

     On July 31, 2003,  the Company  entered into a Merger  Agreement with Kodak
and Sub. Under the terms of the Merger Agreement, the Company's stockholders are
entitled to receive $4.22 per share in Kodak common stock, or at Kodak's option,
in cash. Additionally,  all option holders at the date of closing will receive a
payment equal to the difference  between the exercise price of their options and
the per share  purchase  price of  $4.22.  The  transaction  is  subject  to the
approval of the Company's  stockholders and other customary closing  conditions.
The parties expect the transaction to close in the fourth quarter of 2003.


Risks Related to the Proposed Merger with Kodak

     The Company's  expectations with respect to the proposed merger transaction
with Kodak are subject to a number of risks and  uncertainties  that could cause
actual  results to differ.  For example,  the Company and Kodak may be unable to
obtain stockholder or any regulatory approvals required for the merger. Problems
may arise in  successfully  integrating  the  Company's  business  with  Kodak's
business,  which  could  affect,  among  other  things,  the  attraction  and/or
retention of the  Company's new and existing  customers and strategic  partners.
The  businesses  of the Company and Kodak may suffer as a result of  uncertainty
surrounding  the merger,  including  any delays in  completing  the merger.  The
merger also may involve unexpected costs.

     Failure to  complete  the merger  with Kodak  could  negatively  impact the
Company's stock price and future business and operations. For example,

     - if the Merger Agreement is terminated, the Company may be required, under
     specific circumstances, to pay a termination fee to Kodak;

     - if the Merger Agreement is terminated,  the diversion of the attention of
     management  in the  process of  combining  the  companies  could  cause the
     disruption  of, or a loss of momentum in, the activities of its business or
     could  cause  the  impairment  of  relationships  with  its  customers  and
     strategic partners; and

     - the  Company  must pay its  expenses  related  to the  merger,  including
     substantial  legal,  financial  advisory and accounting  fees,  even if the
     merger is not  completed.  This  could  affect  the  Company's  results  of
     operations for the period during which the fees are incurred.

<page>

     Current and prospective  employees may experience  uncertainty  about their
future role with the combined  company until the combined  company's  strategies
are announced or executed.  This may adversely  affect the Company's  ability to
attract and retain key  management,  research  and  development,  manufacturing,
sales and marketing and other  personnel.  Since the Company's  stockholders may
receive  shares of Kodak common stock in the merger,  the Company  believes that
the price of its common  stock may be  affected by changes in the price of Kodak
common  stock.  The price of Kodak's  common  stock may be  affected  by factors
different from those affecting the price of the Company's common stock.


Recent Accounting Pronouncements

Accounting for Costs Associated with Exit or Disposal Activities

     In  June  2002,  FASB  issued  Statement  No.  146,  Accounting  for  Costs
Associated  with  Exit or  Disposal  Activities.  Statement  No.  146  nullifies
Emerging  Issues Task Force  ("EITF")  issue  94-3,  Liability  Recognition  for
Certain  Employee  Termination  Benefits  and  Other  Costs to Exit an  Activity
(including Certain Costs Incurred in a Restructuring).  Under EITF issue 94-3, a
liability for an exit cost is  recognized at the date of an entity's  commitment
to an exit plan.  Under  Statement No. 146, the  liabilities  associated with an
exit or disposal activity will be measured at fair value and recognized when the
liability  is incurred  and meets the  definition  of a liability  in the FASB's
conceptual  framework.  This  Statement is effective  prospectively  for exit or
disposal activities initiated after December 31, 2002. The adoption of Statement
No. 146 did not have a material impact on the Company's  consolidated  financial
statements.

Accounting for Stock-Based Compensation

     On December 31, 2002, FASB issued SFAS No. 148,  Accounting for Stock-Based
Compensation-Transition  and Disclosure ("SFAS 148"), which amends SFAS No. 123,
Accounting  for  Stock-Based  Compensation  ("SFAS  123").  SFAS 148  amends the
disclosure  requirements  in SFAS 123 for  stock-based  compensation  for annual
periods ending after December 15, 2002 and for interim  periods  beginning after
December 15, 2002. The disclosure requirements apply to all companies, including
those that continue to recognize stock-based  compensation under APB Opinion No.
25, Accounting for Stock Issued to Employees. Effective for financial statements
for fiscal years ending after  December 15, 2002,  SFAS 148 also provides  three
alternative transition methods for companies that choose to adopt the fair value
measurement  provisions of SFAS 123. Management has chosen not to adopt the fair
value  measurement  provisions  of  SFAS  123.  The  Company  has  included  the
disclosure  requirements  in  Note 5 to  the  accompanying  unaudited  condensed
consolidated financial statements.

Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others

     In  November  2002,  the FASB  issued  Interpretation  No. 45,  Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees of Indebtedness of Others ("FIN 45"),  which addresses the disclosure
to be made by a guarantor in its interim and annual  financial  statements about
its obligations under guarantees.  The disclosure requirements are effective for
interim and annual  financial  statements  ending after  December 15, 2002.  The
Company does not have any guarantees that require disclosure under FIN 45 except
for the Company's guarantee associated with CIS.

     FIN 45 also requires the  recognition  of a liability by a guarantor at the
inception of certain  guarantees.  FIN 45 requires the  guarantor to recognize a
liability  for  the  non-contingent  component  of a  guarantee,  which  is  the
obligation  to stand  ready to perform in the event  that  specified  triggering
events or conditions  occur.  The initial  measurement  of this liability is the
fair value of the guarantee at inception.  The  recognition  of the liability is
required even if it is not probable  that  payments  will be required  under the
guarantee or if the guarantee was issued with a premium  payment or as part of a
transaction  with multiple  elements.  The initial  recognition  and measurement
provisions are effective for all guarantees within the scope of FIN 45 issued or
modified after December 31, 2002.

     As noted above the Company has adopted the disclosure  requirements  of FIN
45 and will apply the recognition and measurement  provisions for all guarantees
entered into or modified  after  December 31, 2002. To date, the Company has not
entered into or modified any guarantees requiring the recognition of a liability
pursuant to the provisions of FIN 45.



<PAGE>


Revenue Arrangements with Multiple Deliverables

     In November  2002,  the EITF issued EITF 00-21  Revenue  Arrangements  with
Multiple  Deliverables  ("EITF 00-21").  EITF 00-21 addresses certain aspects of
the accounting by a vendor for arrangements under which it will perform multiple
revenue-generating  activities.   Specifically,  EITF  00-21  addresses  how  to
determine whether an arrangement  involving multiple  deliverables contains more
than one unit of accounting. In applying EITF 00-21, separate contracts with the
same entity or related  parties  that are entered  into at or near the same time
are  presumed to have been  negotiated  as a package and should,  therefore,  be
evaluated as a single  arrangement in considering  whether there are one or more
units of  accounting.  That  presumption  may be overcome if there is sufficient
evidence to the contrary.  EITF 00-21 also addresses how consideration should be
measured and allocated to the separate  units of accounting in the  arrangement.
The guidance in EITF 00-21 is effective for revenue arrangements entered into in
fiscal periods beginning after June 15, 2003. Alternatively, companies may elect
to report the change in accounting as a cumulative-effect adjustment. Management
expects that the  application  of EITF 00-21 will not have a material  effect on
the Company's consolidated financial statements.

Consolidation of Variable Interest Entities

     In January 2003, the FASB issued  Interpretation  No. 46,  Consolidation of
Variable  Interest  Entities ("FIN 46"),  which addressed the  consolidation  by
business  enterprises of variable interest  entities,  which have one or both of
the  following  characteristics:  (1)  the  equity  investment  at  risk  is not
sufficient  to permit the entity to finance its  activities  without  additional
financial  support from other parties,  or (2) the equity  investors lack one or
more of the  following  essential  characteristics  of a  controlling  financial
interest:  (a) the  direct  or  indirect  ability  to make  decisions  about the
entity's  activities  through  voting or similar  rights,  (b) the obligation to
absorb  the  expected  losses of the entity if they  occur,  or (c) the right to
receive the expected  residual  returns of the entity if they occur. FIN 46 will
have a  significant  effect on existing  practice  because it requires  existing
variable  interest  entities  to  be  consolidated  if  those  entities  do  not
effectively disburse risks among parties involved. In addition,  FIN 46 contains
detailed  disclosure  requirements.  FIN  46  applies  immediately  to  variable
interest  entities  created  after  January 31, 2003,  and to variable  interest
entities in which an enterprise  obtains an interest after that date. It applies
in the first fiscal year or interim  period  beginning  after June 15, 2003,  to
variable interest entities in which an enterprise holds a variable interest that
it acquired before February 1, 2003.  Management expects that the application of
this   interpretation   will  not  have  a  material  effect  on  the  Company's
consolidated financial statements.

Amendment of Statement 133 on Derivative Instruments and Hedging Activities

     On April 30, 2003, FASB issued SFAS No. 149,  Amendment of Statement 133 on
Derivative  Instruments and Hedging Activities ("SFAS 149"). SFAS 149 amends and
clarifies  accounting for derivative  instruments,  including certain derivative
instruments  embedded in other contracts,  and for hedging activities under SFAS
No. 133.  This  Statement is effective  for  contracts  entered into or modified
after June 30, 2003,  and for hedging  relationships  designated  after June 30,
2003.  Management does not believe the adoption of SFAS 149 will have a material
impact on the Company's consolidated financial statements.

Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity

     In May 2003,  FASB issued SFAS No. 150,  Accounting  for Certain  Financial
Instruments  with  Characteristics  of both Liabilities and Equity ("SFAS 150"),
which  addresses  how an issuer  classifies  and  measures in its  statement  of
financial  position certain financial  instruments with  characteristics of both
liabilities  and  equity.  It  requires  that an  issuer  classify  a  financial
instrument as a liability if it embodies an obligation  for the issuer such as a
mandatorily redeemable financial instrument. SFAS 150 is effective for financial
instruments  entered into or modified after May 31, 2003, and otherwise shall be
effective for the first interim period beginning after June 15, 2003. Management
expects that the  application of SFAS 150 will not have a material effect on the
Company's consolidated financial statements.



<PAGE>


Item 3.  Quantitative and Qualitative Disclosures about Market Risk

     Derivative  Instruments.  The  Company  invests  funds  in  excess  of  its
operational  requirements in a Money Market Fund. The cash invested in this fund
at June 30,  2003 and  December  31,  2002 was $8.0  million  and $6.4  million,
respectively.  The average monthly ending balance for the last twelve months was
$6.5 million.  Over the past twelve months,  the Company has earned $75,000 from
its  investment  in the fund.  The  average  monthly  yield over that period was
1.18%.

     If the average monthly yield were to change by 100 basis points, the income
earned would change by approximately $65,000 over a twelve-month period.

     Market Risk.  The Company's  market risk exposure with respect to financial
instruments is subject to changes in the "30-day dealer  commercial  paper" rate
in the United States of America.  The Company had  borrowings of $3.5 million at
June 30, 2003 under the variable rate equipment term loans (discussed above) and
may borrow up to $6.0 million under a revolving loan. Amounts  outstanding under
the  variable  rate  equipment  term loans bear  interest at the "30-day  dealer
commercial  paper" rate plus 2.20% to 2.65%.  There were no borrowings under the
variable rate revolving loan as of June 30, 2003.

     If, under the  existing  credit  facility,  the "30-day  dealer  commercial
paper" rate were to change by 100 basis points, interest expense would change by
approximately $23,000 over a twelve-month period.


Item 4.  Controls and Procedures

     Evaluation of Disclosure  Controls and Procedures.  The Company's principal
executive  officer (Chief  Executive  Officer) and principal  financial  officer
(Chief Financial Officer) have evaluated the Company's  disclosure  controls and
procedures and have concluded  that, as of the end of the period covered by this
Quarterly  Report on Form 10-Q,  these  controls and  procedures are designed to
ensure  that  information  required  to be  disclosed  by the  Company  in  this
Quarterly  Report on Form 10-Q is recorded,  processed,  summarized and reported
within  the time  periods  specified  in the SEC's  rules and Form  10-Q.  These
disclosure  controls and procedures include,  without  limitation,  controls and
procedures  designed to ensure that information  required to be disclosed by the
Company in the reports that it files or submits  under the  Securities  Exchange
Act of  1934  is  accumulated  and  communicated  to the  Company's  management,
including the principal  executive officer and the principal  financial officer,
as appropriate to allow timely  decisions  regarding  required  disclosure.  The
principal  executive  officer  and the  principal  financial  officer  have also
concluded,   based  upon  their  evaluation,   that  there  are  no  significant
deficiencies or material weaknesses in these disclosure controls and procedures.

     Internal  Control Over  Financial  Reporting.  There were no changes in the
Company's  internal  control over financial  reporting that occurred  during the
period  covered  by this  Quarterly  Report  on Form  10-Q  that has  materially
affected,  or is reasonably likely to materially  affect, the Company's internal
control over financial reporting.

Part II.  Other Information

Item 4.  Submission of Matters to a Vote of Security Holders

     At the Company's Annual Meeting of Stockholders  held on June 25, 2003, the
following individuals were elected to the Company's Board of Directors:

                                         Votes For           Votes Withheld
                                         ---------           --------------
             James R. Parks              6,267,486           159,218
             Emory M. Cohen              6,227,441           199,263
             Thomas D. Gordon            6,416,354           10,350
             Craig A. Jacobson           6,417,954           8,750
             David C. Merritt            6,417,954           8,750




<PAGE>


Item 6.  Exhibits and Reports on Form 8-K

   (a)   Exhibits
         Exhibit 31.1       Certification  of James R. Parks,  Chief  Executive
                            Officer of the  Company,  Pursuant to 18 U.S.C.
                            Section 1350, as adopted pursuant to Section 302 of
                            the Sarbanes-Oxley Act of 2002.

         Exhibit 31.2       Certification  of Robert  McClain,  Chief Financial
                            Officer of the Company,  Pursuant to 18 U.S.C.
                            Section 1350, as adopted pursuant to Section 302 of
                            the Sarbanes-Oxley Act of 2002.

         Exhibit 32.1       Certification  of James R. Parks,  Chief  Executive
                            Officer of the  Company,  Pursuant to 18 U.S.C.
                            Section 1350, as Adopted Pursuant to Section 906 of
                            the Sarbanes-Oxley Act of 2002.

         Exhibit 32.2       Certification  of Robert  McClain,  Chief Financial
                            Officer of the Company,  Pursuant to 18 U.S.C.
                            Section 1350, as Adopted Pursuant to Section 906 of
                            the Sarbanes-Oxley Act of 2002.

   (b)   Reports on Form 8-K

     On May 13, 2003, the Company filed a Current  Report on Form 8-K,  pursuant
to which it furnished its financial results for the quarter ended March 31, 2003
in a press release furnished as Exhibit 99.1 to such report.


<PAGE>


                                   Signatures

     Pursuant to the  requirements  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.


                                                LASER-PACIFIC MEDIA CORPORATION


     Dated:  August 12, 2003                    /s/James R. Parks
                                                -----------------
                                                James R. Parks
                                                Chief Executive Officer





     Dated:  August 12, 2003                    /s/Robert McClain
                                                -----------------
                                                Robert McClain
                                                Chief Financial Officer
                                               (Principal Financial
                                                and Accounting Officer)