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 September 30, 1998
                                       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, including 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

The number of shares  outstanding of each of the registrant's  classes of common
stock,  as of October 1, 1998 was 7,184,172  shares of Common Stock,  $.0001 par
value.
<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                                   3
      Condensed Consolidated Statements of Operations                         4
      Condensed Consolidated Statements of Cash Flows                         5
      Notes to Condensed Consolidated Financial Statements                    6

Item 2. Management's Discussion and Analysis of Financial Condition           9
    and Results of Operations

Part II - Other Information

Item 3.  Submission of Matters to a Vote of Security Holders                 11

Item 4.  Exhibits and Reports on Form 8-K                                    11

      Signatures                                                             12

<PAGE>


                         LASER-PACIFIC MEDIA CORPORATION
                                AND SUBSIDIARIES
                      Condensed Consolidated Balance Sheets

 
                               Audited (Unaudited)
<TABLE>
<S>                                                                              <C>                 <C>
                                                                                  December 31,        September 30
                                                                                      1997                1998
                                                                                 ----------------    ----------------


Assets
Current assets                                                                    $    5,722,821           5,117,534
Net property and equipment                                                            16,194,498          13,665,514
Other assets                                                                             570,472             418,427

                                                                                 ---------------     ----------------
                                                                                      22,487,791          19,201,475
                                                                                 ================    ================

Liabilities and Stockholders' Equity
Current liabilities                                                                    8,054,970           4,428,563
Notes payable to bank and long-term debt, less current installments                    8,139,042           8,259,204
Minority Interest                                                                        521,440                   0

Stockholders' equity:
Common stock, $.0001 par value.  Authorized 25,000,000 shares; issued and
   Outstanding 7,128,172 shares at December 31, 1997 and                                     713                 718
                       7,184,172 shares at September 30, 1998.
Additional paid-in capital                                                            19,772,440          19,784,755
Accumulated deficit                                                                 (14,000,814)        (13,271,765)
                                                                                 ----------------    ----------------
   Net stockholders' equity                                                            5,772,339           6,513,708
                                                                                 ----------------    ----------------
                                                                                   $  22,487,791          19,201,475
                                                                                 ================    ================
</TABLE>






   See accompanying notes to the condensed consolidated financial statements.

<PAGE>


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




<TABLE>
<S>                                                              <C>                <C>                <C>              <C> 
                                                                    Three Months Ended                    Nine Months Ended
                                                                       September 30                         September 30
                                                             ----------------------------------    --------------------------------
                                                                 1997               1998               1997               1998
                                                             --------------    ----------------    --------------     -------------

Revenues                                                 $       6,885,113           6,579,393        19,335,729        21,207,725
Operating costs                                                  5,444,128           5,121,127        16,566,800        16,734,974
                                                             --------------    ----------------    --------------     -------------
      Gross profit                                               1,440,985           1,458,266         2,768,929         4,472,751
Selling, general and administrative
    and other expenses                                           1,125,037           1,064,316         3,349,729         3,575,203
                                                             --------------    ----------------    --------------     -------------
      Income (loss) from operations                                315,948             393,950         (580,800)           897,547

Interest expense                                                   438,412             298,223         1,170,078         1,027,975
Other Income (expense)                                                 ---              23,406            24,955            39,441
Gain on sale of Subsidiary                                                                 ---                             874,578
                                                             --------------    ----------------    --------------     -------------
      Income before income taxes                                 (122,464)             119,133       (1,725,923)           783,591

Provision for income taxes                                             ---                 ---               ---            54,544

                                                             --------------    ----------------    --------------     -------------
      Net income (loss)                                  $       (122,464)             119,133       (1,725,923)           729,047
                                                             ==============    ================    ==============     =============

Net Income (loss) Per Share
       Basic                                                        (0.02)                0.02            (0.24)              0.10
                                                             --------------    ----------------    --------------     -------------

       Diluted                                                      (0.02)                0.02            (0.24)              0.10
                                                             --------------    ----------------    --------------     -------------

Weighted average shares outstanding (basic)                      7,128,172           7,184,172         7,128,172         7,184,172
                                                             ==============    ================    ==============     =============

Weighted average shares outstanding (diluted)                    7,128,172           7,539,830         7,128,172         7,539,830
                                                             ==============    ================    ==============     =============
</TABLE>


     See accompanying notes to condensed consolidated financial statements.
<PAGE>

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

<TABLE>
<S>                                                                                      <C>                    <C>
                                                                                         Nine Month ended September 30
                                                                                      ------------------------------------
                                                                                           1997                 1998
                                                                                      ---------------      ---------------
      Cash flows from operating activities
        Net income (loss)                                                                (1,725,923)              729,047
        Adjustments to reconcile net loss to net cash
          provided by operating activities:
             Depreciation and amortization                                                 3,180,473            2,399,901
             Gain on sale of subsidiary                                                          ---            (874,578)
             Gain on sale of Property and equipment                                              ---             (63,185)
             Provision for doubtful accounts receivable                                      193,415               79,120
             Other                                                                           (2,409)                  811
             Change in assets and liabilities:
                (Increase) decrease in:
                   Accounts receivable                                                     (142,725)            (585,908)
                   Inventory                                                                  41,624               36,912
                   Prepaid expenses and other current assets                               (119,952)            (137,309)
                   Other assets                                                                9,853             (30,955)
                Increase (decrease) in:
                   Accounts payable and accrued expenses                                   (161,551)              554,090
                                                                                      ---------------      ---------------
                       Net cash provided by operating activities                           1,272,805            2,107,947
                                                                                      ===============      ===============

      Cash flows from investing activities:
             Purchases of property and equipment                                         (2,628,542)          (4,196,002)
             Net proceeds from disposal of property and equipment                             30,995               64,458
             Net effect of sale of subsidiary                                                    ---            3,402,091
                                                                                      ---------------      ---------------
                       Net cash (used in) investing activities                           (2,597,547)            (729,453)
                                                                                      ===============      ===============

      Cash flows from financing activities :
             Proceeds borrowed under notes payable to bank and long-term debt              5,018,600            2,122,844
             Net (repayment) proceeds of notes payable to bank and long- term debt       (3,245,616)          (2,917,273)
             (Repayments) borrowing of notes payable to related parties                          ---            (900,000)
             Proceeds from issuance of common stock                                              ---               12,320
                                                                                      ---------------      ---------------
                       Net cash provided by (used in) financing activities                 1,772,984          (1,682,109)
                                                                                      ===============      ===============

                       Net increase (decrease) in cash                                       448,242            (303,615)
      Cash at beginning of period                                                            283,082              367,363
                                                                                      ---------------      ---------------
      Cash at end of period                                                                  731,324               63,748
                                                                                      ===============      ===============

      Supplementary disclosure of cash flow information:
        Cash paid during the period for interest                                           1,170,000            1,028,000
                                                                                      ===============      ===============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

<PAGE>




                         LASER-PACIFIC MEDIA CORPORATION

              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)


(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
September  30,  1998;  the  results of  operations  for the three and nine month
periods ended  September 30, 1997 and 1998; and the statements of cash flows for
the nine month  periods  ended  September  30,  1997 and 1998.  Included  in the
Condensed  Consolidated  Financial  Statements  is the activity of the Company's
consolidated subsidiary, Pacific Video Canada, Ltd. ("PVC"). On May 15, 1998 the
Company sold all of its investment in PVC.  Accordingly,  revenue and expense of
PVC through May 15, 1998 is included in the results of  operations  for the nine
month  period  ended  September  30, 1998 but are  excluded  from the results of
operations  for the three  months  ended  September  30,  1998.  The  assets and
liabilities of PVC are included in the Condensed  Consolidated Balance Sheets at
December 31, 1997 and excluded from the Condensed Consolidated Balance Sheets at
September  30,  1998.  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 Taxes

     The  provision  for income tax expense for the nine months ended  September
30, 1998 was $54,000,  which  represents the foreign income tax expense relating
to Canadian  income.  Federal income tax expense of $19,700 and state income tax
expense of $5,600 related to the sale of the subsidiary (see Note 6) were offset
against  the gain on the sale of  subsidiary.  Income tax  expense  for the nine
months ended  September 30 1998 was computed  using the estimated  effective tax
rate to apply  for 1998  after  considering  the  impact of net  operating  loss
carry-forwards.  The estimated  effective tax rate is subject to ongoing  review
and evaluation by management.

(3)   Reporting Comprehensive Income

     In June  1997,  the FASB  issued  SFAS No.  130,  "Reporting  Comprehensive
Income". This statement which establishes standards for reporting and disclosure
of comprehensive  income,  is effective for interim and annual periods beginning
after   December   15,   1997,   although   earlier   adoption   is   permitted.
Reclassification  of financial  information  for earlier  periods  presented for
comparative purposes is required under SFAS 130. As this statement only requires
additional disclosure in the Company's  consolidated  financial statements,  its
adoption  will not have  any  impact  on the  Company's  consolidated  financial
position  or  results  of  operations.  The  Company  has  adopted  SFAS No. 130
effective  January  1,  1998  and its  adoption  has not had any  impact  on the
Company's consolidated financial position or results of operations.

(4)   Disclosures about Segments of an Enterprise

     In June 1997, the FASB issued SFAS No. 131,  "Disclosure  about Segments of
an Enterprise." This statement,  which  establishes  standards for reporting and
disclosures of certain  information about operating segments in complete sets of
financial  statements,  is effective  for interim and annual  periods  beginning
after   December   15,   1997,   although   earlier   adoption   is   permitted.
Reclassifications  of financial  information for earlier  periods  presented for
comparative purposes is required under SFAS No. 131 if it is practical to do so.
The Company has adopted SFAS No. 130 effective  January 1, 1998 and its adoption
has not had any  impact on the  Company's  consolidated  financial  position  or
results of operations.

<PAGE>


                         LASER-PACIFIC MEDIA CORPORATION

        Notes to Condensed Consolidated Financial Statements (continued)
                                   (Unaudited)

(5)      Earnings per share

     In February 1997, the Financial Accounting Standards Board issued Statement
of Financial  Accounting Standards No 128, "Earnings per Share" (SFAS 128). SFAS
128 requires dual  presentation  of basic earnings per share ("EPS") and diluted
EPS on the face of all  statements  of earnings  for all  entities  with complex
capital  structures.  Basic  EPS is  computed  as net  earnings  divided  by the
weighted-average number of common shares outstanding for the period. Diluted EPS
reflects the potential  dilution  that could occur from common  shares  issuable
through stock-based compensation plans including stock options, restricted stock
awards,  warrants and other  convertible  securities  using the  treasury  stock
method. The following summarizes the computation of Basic EPS and Diluted EPS:


<TABLE>
<S>                                                                 <C>              <C>            <C>                 <C>
                                                                      Three Months ended                 Nine Months ended
                                                                      9/30/97          9/30/98          9/30/97           9/30/98
Numerator for basic and diluted per share computations:
  Net income (loss) available to common shareholders          $     (122,464)          119,133      (1,725,923)           729,047
                                                                 =============     ============    =============     =============

Denominator:
  Shares used for basic per share computations
     weighted average shares outstanding                            7,128,172        7,184,172        7,128,172         7,184,172
  Effect of dilutive securities - stock options & warrants                             355,658                            355,658
                                                                   -----------     ------------      -----------     -------------
     Shares used for dilutive per share computations                7,128,172        7,539,830        7,128,172         7,539,830

Net income (loss) per share:
     Basic                                                    $        (0.02)             0.02           (0.24)              0.10
     Diluted                                                           (0.02)             0.02           (0.24)              0.10
</TABLE>


(6)      Sale of Subsidiary

     On May 15, 1998 the Company  sold all of its  investment  in PVC to Command
Post and  Transfer  Corporation.  The Company  realized  cash  consideration  of
$3,810,000 and a gain on sale of $874,000, net of applicable taxes.

     The balance sheet of PVC presented below reflects the amounts  attributable
to PVC,  on a gross  basis,  which are  included in the  condensed  consolidated
financial  statements of the Company, as of December 31, 1997. The Company owned
approx.  77% of the outstanding  shares of PVC as of December 31, 1997 and April
30, 1998.

<PAGE>

                         LASER-PACIFIC MEDIA CORPORATION

        Notes to Condensed Consolidated Financial Statements (continued)
                                   (Unaudited)


(6)   Sale of Subsidiary (cont.)
                           PACIFIC VIDEO CANADA, Ltd.
                             Condensed Balance Sheet

<TABLE>
<S>                                                                              <C>                             <C>  
                                                                        Included as of
                                                                      December 31, 1997              (1) April 30, 1998
          Assets
             Current Assets                                      $               1,496,757                       1,225,429
             Capital Assets                                                      4,020,572                       4,052,391
                                                                    -----------------------        ------------------------
               Total Assets                                                      5,517,329                       5,277,820
                                                                    =======================        ========================

          Liabilities
             Current Liabilities                                                 1,264,224                       1,395,072
             Long Term Debt and other liabilities                                1,985,991                       1,576,666
          Equity
             Share Capital                                                       1,722,072                       1,706,996
             Retained Earnings                                                     545,042                         599,086
                                                                    -----------------------        ------------------------
               Total Liabilities & Equity                        $               5,517,329                       5,277,820
                                                                    =======================        ========================
</TABLE>

     (1) The balance sheet of PVC as of April 30, 1998 is included as it was the
last  interim  balance  sheet  available  prior  to  the  sale,  and  materially
represents the value of the assets underlying the stock of PVC sold.


     The statement of operations  for PVC presented  below  reflects the amounts
attributable to PVC, which are included in the condensed  consolidated financial
statements of the Company, as of the nine month period ended September 30, 1998,
but are not reflected in the quarter ended September 30, 1998.


                           PACIFIC VIDEO CANADA, Ltd.
                        Condensed Statement of Operations

<TABLE>
<S>                                                                                                   <C>           
                                                                                           9 Months ended
                                                                                         September 30, 1998
                                                                                      --------------------------

          Sales                                                                   $                   2,894,972
          Direct expenses                                                                             2,079,822
                                                                                      --------------------------
                   Gross Profit                                                                         815,151

          SG&A expenses                                                                                 606,257
                                                                                      --------------------------
                   Earnings from Operations                                                             208,893

          Interest and Other expenses                                                                    71,166
                                                                                      --------------------------
                   Earnings before income taxes                                                         137,727

          Income taxes                                                                                   54,544
                                                                                      --------------------------
                   Net earnings                                                   $                      83,183
                                                                                      ==========================
</TABLE>

<PAGE>

                         LASER-PACIFIC MEDIA CORPORATION



           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
Results of Operations

     Revenues  for the  nine  months  ended  September  30,  1998  increased  to
$21,208,000  from  $19,336,000  for the same  year-ago  period,  an  increase of
$1,872,000 or 9.7%. The overall  increase in revenues was offset by a decline in
revenues from  International  Operations  which is the result of the sale of our
Canadian  subsidiary  Pacific  Video Canada Ltd.  (PVC) on May 15, 1998.  All of
Laser Pacific's  International  Operations are attributable to PVC. The revenues
for the nine months ended  September 30, 1998 at the Company's  U.S.  facilities
increased  $2,555,000 or 16.0% versus the year-ago  period,  while revenues from
International  Operations  decreased  $683,000 versus the year-ago  period.  The
increase  in  revenues  at  U.S.  facilities  is  comprised  of an  increase  of
$2,648,000  in  Production  Services,  a decrease of $53,000 in Film  Production
Services and a decrease of $40,000 in Post Production Services.  The increase in
revenues at our U.S. Facilities from Post-Production Services is attributable to
an increased  demand for the Company's  services with  significant  increases in
digital compression  services;  including digital video discs, and revenues from
feature film  mastering,  a service the Company began offering in November 1997.
The increase in revenues from  Compression  Services and the additional  revenue
from Film Mastering  amounted to $1,388,000 for the period. The revenue decrease
in Film  Production  Services is the result of the  elimination of positive film
services in 1997.  Negative film services increased $296,000 or 15.3% during the
period.

     Revenues for the quarter ended  September 30, 1998  decreased to $6,579,000
from  $6,885,000 for the same year-ago  period,  a decrease of $306,000 or 4.4%.
The decline in revenues for the quarter is  attributable  to the  elimination of
the revenue from International Operations which is the result of the sale of our
Canadian  subsidiary Pacific Video Canada Ltd. (PVC) on May 15, 1998. All of the
Laser Pacific's  International  Operations are attributable to PVC. The revenues
for the quarter  ended  September  30,  1998 at the  Company's  U.S.  facilities
increased  $1,058,000 or 18.8% versus the year-ago  period,  while revenues from
International  Operations  decreased  $1,364,000 versus the year-ago period. The
increase  in  revenues  at  U.S.  facilities  is  comprised  of an  increase  of
$1,085,000 in  Production  Services,  an increase of $52,000 in Film  Production
Services and a decrease of $79,000 in Post Production Services.  The increase in
revenues at our U.S. Facilities from Post-Production Services is attributable to
increased  demand for the  Company's  services  with  significant  increases  in
digital compression  services;  including digital video discs, and revenues from
feature film  mastering,  a service the Company began offering in November 1997.
The increase in revenues from  Compression  Services and the additional  revenue
from Film Mastering  amounted to $420,000 for the period.  Although revenue from
Film Production  Services has increased,  this increase was offset by the impact
of the  elimination  of positive film  services in 1997.  Negative film services
increased $165,000 or 21.8% during the period.

     For the nine months ended September 30, 1998, the Company  recorded a gross
profit of $4,473,000  compared with $2,769,000 for the same year ago period,  an
increase of  $1,704,000  or 61.5%.  The gross  profit for the nine months  ended
September  30, 1998 at the Company's  U.S.  facilities  increased  $1,669,000 or
83.9%  versus the  year-ago  period,  while gross  profit from Canada  increased
$35,000  versus  the  year-ago  period.  The  increase  in gross  profit at U.S.
facilities is the result of increased sales volume,  discussed above,  offset by
increased operating costs, as explained below.

     For the quarter  ended  September  30,  1998 the  Company  recorded a gross
profit of $1,458,000  compared to a gross profit of $1,441,000 for the same year
ago  period,  an  increase  of $17,000 or 1.2%.  The over all  increase in gross
profit was offset by a decline in gross  profit  from  International  Operations
which is the result of the sale PVC. The gross profit for the three months ended
September 30, 1998 at the Company's U.S. facilities  increased $371,000 or 34.2%
versus the year-ago period,  while gross profit from Canada  decreased  $354,000
versus the year-ago period.  The increase in gross profit at U.S.  facilities is
the result of  increased  sales  volume,  discussed  above,  offset by increased
operating costs, as explained below.
<PAGE>

     Operating  costs  for  the  nine  months  ended  September  30,  1998  were
$16,735,000  versus $16,567,000 for the year-ago period, an increase of $168,000
or 1.0%.  There was an increase in operating cost at our U.S.  facilities  which
was  partially  offset  by a  decline  in  operating  costs  from  International
Operations,  which is the result of the sale PVC.  The  operating  costs for the
nine months ended September 30, 1998 at the Company's U.S. facilities  increased
$886,000 or 6.4% versus the year-ago  period,  while operating costs from Canada
decreased  $718,000 versus the year-ago period.  The increase in operating costs
from our US operations is  attributable  primarily to an increase in labor costs
of $1,170,000 which is a result of the increased level of sales. These increases
were  partially  offset by a  reduction  in  depreciation  expense of  $258,000.
Operating costs as a percentage of revenues of our U.S.  Operations for the nine
months  ended  September  30, 1998 were 80.0%  compared  with 87.4% for the same
year-ago period.

     Operating  costs for the quarter ended  September  30, 1998 were  5,121,000
versus $5,444,000 for the year-ago period, a decrease of $323,000 or 5.9%. There
was an increase in operating costs at our U.S.  facilities which was offset by a
decline in operating costs from International  Operations which is the result of
the sale of PVC. The  operating  costs for the three months ended  September 30,
1998 at the Company's  U.S.  facilities  increased  $682,000 or 15.4% versus the
year-ago period,  while operating costs from Canada decreased  $1,005,000 versus
the year-ago  period.  The increase in operating costs from our US operations is
attributable  primarily  to an increase  in labor  costs of $702,000  which is a
result of the increased level of sales. These increases were partially offset by
a reduction in depreciation expense of $66,000. Operating costs, as a percentage
of revenues of our U.S. Operations for the three months ended September 30, 1998
were 77.8% compared with 80.3% for the same year-ago period.
 
     Selling, general and administrative (SG&A), and other expenses for the nine
months ended September 30, 1998 were $3,575,000 as compared to $3,350,000 during
the same year-ago period, an increase of $225,000 or 6.7%. There was an increase
in SG&A of  $272,000  at our U.S.  facilities  while SG&A for our  international
operations  decreased  $47,000 as the result of the sale of PVC discussed above.
The  increase of SG&A in the U.S. is  primarily  attributable  to  increases  in
advertising and promotion, and higher audit, appraisal and loan costs.

     SG&A and other expenses for the three months ended  September 30, 1998 were
$1,064,000 as compared to $1,125,000 during the same year-ago period, a decrease
of  $61,000  or 5.4%.  There was an  increase  in SG&A of  $130,000  at our U.S.
facilities while SG&A for our international operations decreased $191,000 as the
result  of  the  sale  of  PVC  discussed   above.  The  increase  is  primarily
attributable  to increases  in  advertising  and  promotion,  and higher  audit,
appraisal and loan costs.

     Interest  expense  for  the  nine  months  ended  September  30,  1998  was
$1,028,000  compared to $1,170,000 for the same year-ago  period,  a decrease of
$142,000  or 12.1%.  The  decrease  in  interest  expense is the result of lower
borrowing in the U.S. and the  elimination of the related debt at PVC (discussed
above).  Interest  expense  decreased  $100,000 in the U.S.  Total U.S. debt was
reduced significantly after May 15, 1998 with the proceeds from the sale of PVC.

     Interest expense for the three months ended September 30, 1998 was $298,000
compared to $438,000  for the same  year-ago  period,  a decrease of $140,000 or
32.0%.  The decrease in interest expense is the result of lower borrowing in the
U.S. and the elimination of the related debt at PVC (discussed above).  Interest
expense decreased $78,000 in the U.S. Total U.S. debt was reduced  significantly
after May 15, 1998 with the proceeds from the sale of PVC.

     Depreciation  expense  for the nine  months  ended  September  30, 1998 was
2,760,000  compared to $3,158,000  for the same year-ago  period,  a decrease of
$398,000 or 12.6%.  The depreciation  expense  reductions were the result of the
sale of PVC (discussed above), and the Company acquiring less equipment than the
amount of equipment that became fully  depreciated  during the nine months ended
September  30,  1998.  The  decrease  in  depreciation  expense in the U.S.  was
$158,000 for the period.
 
     Depreciation  expense for the three  months  ended  September  30, 1998 was
$836,000  compared to $1,201,000  for the same year-ago  period,  a reduction of
$365,000 or 30.4%.  The depreciation  expense  reductions were the result of the
sale of PVC (discussed above), and the company acquiring less equipment than the
amount of equipment that became fully depreciated  during the three months ended
September 30, 1998. The decrease in depreciation expense in the U.S. was $66,000
for the period.
 
<PAGE>

Liquidity and Capital Resources

     The Company and its  subsidiaries are operating under a loan agreement with
The CIT Group/Credit  Finance,  which has been amended and extended to August 3,
2001.  The maximum  credit under the  agreement is $9 million.  The amended loan
agreement  provides  for  borrowings  up to $5.4  million  under  the term  loan
(limited to 100% of the appraisal value of eligible  equipment) and $3.6 million
under the revolving loan (limited to 85% of eligible  accounts  receivable).  At
September 30, 1998  $2,907,000 was available under the revolving loan agreement.
The revolving loan had an outstanding balance of $113,000 at September 30, 1998.
It bears interest at the prime rate plus 1 1/2%, which is payable  monthly.  The
outstanding  balance of the term loan was  $2,604,000 at September 30, 1998. The
term loan is payable in monthly installments of $59,000 plus interest at a fixed
annual rate of 10.5% through August 3, 2001. Principal payments are not required
in  June,  July  or  August.  Future  principal  payments  may be  increased  if
additional  amounts are borrowed  under the term  facility.  The loan  agreement
contains  automatic  renewal  provisions for successive terms of two years after
maturity unless terminated as of August 3, 2001, or as of the end of any renewal
period by either party upon at least 60 days written notice.

     The Company has an outstanding  real estate loan with Bank of America.  The
loan is secured by the building where the Company  provides film  processing and
sound services.  The loan agreement  matures December 31, 1998 with an option to
extend the maturity an additional  year upon payment,  to Bank of America,  of a
$25,000 loan  extension  fee prior to December 31, 1998.  The  outstanding  loan
balance  as of  September  30,  1998 was  $1,107,000.  The  Company  anticipates
extending the loan agreement prior to December 31, 1998.

     The $1,000,000 of short-term  Installment (Fixed Rate) Line of Credit Notes
issued to 35 Lake Avenue,  a California  limited  partnership in July 1997, were
paid in full as of May 15, 1998.  James R. Parks,  the Company's Chief Executive
Officer, is a partner in 35 Lake Avenue.

     The Company's  principal  source of funds is cash  generated by operations.
The Company  anticipates  that  existing cash  balances and  availability  under
existing loan  agreements and cash generated from  operations will be sufficient
to service existing debt.

     Forward-looking  statements  and  comments  in this press  release are made
pursuant to the  Safe-Harbor  provisions  of the Private  Securities  Litigation
Reform Act of 1995.  Such  statements  relating  to,  among  other  things,  the
prospect for the Company to continue to achieve growth in sales,  the ability to
reduce  overhead and the ability to achieve  positive  operating  results and to
fund existing debt are necessarily  subject to risks and uncertainties,  some of
which  are  significant  in  scope  and  nature,   including  risks  related  to
competition,  availability of capital and  continuation  of sales levels.  These
risks and  uncertainties  are  significant in scope and nature,  including risks
related to  competition,  continuation  of sales levels and the risks related to
the cost and availability of capital.


Year 2000

     The Company has  reviewed  its  systems  and  communicated  with all of its
significant  suppliers and equipment and software providers.  All of the systems
tested  and the  majority  reviewed  with  third  parties  to date are year 2000
compliant.  Year 2000 costs are not  expected  to have a material  impact on the
Company's operations.  There is no guarantee that the systems of other companies
on which the Company's  systems rely will be timely converted and would not have
an adverse effect on the Company's systems.


Item 3.  Submission of Matters to a Vote of Security Holders

     None

Item 4.  Exhibits and Reports on Form 8-K

     None

<PAGE>

                                  Signatures



                         LASER-PACIFIC MEDIA CORPORATION
 
                                  (Registrant)


          Dated:  October 29, 1998                  /s/James R. Parks
                                                    Chairman of the Board
                                                    and Chief Executive Officer



 

           Dated:  October 29, 1998                 /s/Robert McClain
                                                    Secretary and
                                                    Chief Financial Officer
                                                   (Principal Financial and
                                                    Accounting Officer)