<PAGE>

                                 United States
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                   FORM 10-Q
(Mark One)

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

               For the quarterly period ended September 30, 2001
                                       OR
[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

          For the transition period from   __________ to ___________

                       Commission file number 000-29642
                               FILM ROMAN, INC.
              (Exact name of registrant as specified in charter)


               Delaware                                95-4585357
    (State or other jurisdiction                    (I.R.S. Employer
  of incorporation or organization)               Identification Number)

  12020 Chandler Boulevard, Suite 300
     North Hollywood, California                           91607
(Address of principal executive offices)                (Zip Code)
      Registrant's telephone number, including area code:  (818) 761-2544

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 at least the past 90 days. YES [X] NO [_].

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

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

As of October 31, 2001, 8,577,690 shares of common stock, par value $.01 per
share, were issued and outstanding.
<PAGE>

                               TABLE OF CONTENTS


                        PART I.  FINANCIAL INFORMATION
<TABLE>
<CAPTION>

<S>     <C>                                                                                          <C>
Item 1.   Financial Statements.........................................................................   3

             Consolidated Balance Sheets as of December 31, 2000 and September
             30, 2001 (unaudited)......................................................................   3

             Consolidated Statements of Operations for the Three and Nine Months
             Ended September 30,2000 and September 30, 2001 (unaudited)................................   4

             Consolidated Statements of Cash Flows for the Nine Months Ended
             September 30, 2000 and September 30, 2001 (unaudited).....................................   5

             Notes to 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...................................   15

                                          PART II.  OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K.............................................................   16

Signatures.............................................................................................   S-1
</TABLE>

                                       2
<PAGE>

                         PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

                               FILM ROMAN, INC.

                         CONSOLIDATED  BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                              December 31,  2000    September 30, 2001
                                                                              --------------------  -------------------
                                                                                                        (unaudited)
                                         ASSETS
                                         ------

<S>                                                                           <C>                   <C>
Cash and cash equivalents.....................................................       $  4,203,221         $  2,943,531
Accounts receivable...........................................................            249,893              451,345
Film costs, net of accumulated amortization of
$336,568,427 (2000) and $368,514,453 (2001)...................................         24,558,709           23,238,353
Property and equipment, net of accumulated depreciation and
amortization of $2,437,270 (2000) and $2,737,270 (2001).......................            735,552              527,258
Deposits and other assets.....................................................            652,455              680,729
                                                                                     ------------         ------------

Total Assets..................................................................       $ 30,399,830         $ 27,841,216
                                                                                     ============         ============

                                    LIABILITIES AND
                                    ---------------
                          STOCKHOLDERS' EQUITY (DEFICIENCY)
                          ---------------------------------

Accounts payable..............................................................       $  1,672,785         $  1,253,925
Accrued expenses..............................................................          1,826,860            1,484,137
Deferred revenue..............................................................         24,815,940           26,618,498
                                                                                     ------------         ------------
Total liabilities.............................................................         28,315,585           29,356,560


Stockholders' equity (deficiency):

Preferred Stock, $.01 par value, 10,000,000 shares authorized, none issued....                 --                   --

Common stock, $.01 par value, 40,000,000 shares authorized,
8,565,190 shares issued and outstanding in 2000 and
8,577,690 shares issued and outstanding in 2001...............................             85,652               85,777

Additional paid-in capital....................................................         36,370,365           36,379,615

Accumulated deficit...........................................................        (34,371,772)         (37,980,736)
                                                                                     ------------         ------------
Total stockholders' equity (deficiency).......................................          2,084,245           (1,515,344)
                                                                                     ------------         ------------

Total liabilities and stockholders' equity (deficiency).......................       $ 30,399,830         $ 27,841,216
                                                                                     ============         ============
</TABLE>

                             See accompanying notes

                                       3
<PAGE>

                               FILM ROMAN, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                               Three Months ended          Nine Months ended
                                                                 September 30,               September 30,
                                                                 -------------               -------------
                                                               2000          2001          2000          2001
                                                               ----          ----          ----          ----
<S>                                                        <C>           <C>           <C>           <C>
Revenue...................................................  $5,039,889   $ 3,715,109   $25,671,673   $32,314,745
Cost of revenue...........................................   4,651,857     4,405,066    25,196,846    31,946,026
Selling, general and
administrative expenses...................................     833,876     1,342,134     3,012,806     3,681,115
                                                            ----------   -----------   -----------   -----------

Operating loss............................................    (445,844)   (2,032,091)   (2,537,979)   (3,312,396)

Interest income...........................................      71,353        18,961       212,834        67,432
Loss before cumulative effect of a change in
 accounting  principle and provision for income taxes.....    (374,491)   (2,013,130)   (2,325,145)   (3,244,964)

Cumulative effect of a change in accounting
 principle................................................          --            --            --      (364,000)

Provision for income taxes................................          --            --        (1,588)           --
                                                           -----------   -----------   -----------   -----------
Net loss..................................................  $ (374,491)  $(2,013,130)  $(2,326,733)  $(3,608,964)
                                                            ==========   ===========   ===========   ===========
Loss before cumulative effect of a change in
 accounting principle, per common share basic & diluted...  $    (0.04)  $     (0.23)  $     (0.27)  $     (0.38)
                                                            ==========   ===========   ===========   ===========
Net loss per common share basic and diluted...............  $    (0.04)  $     (0.23)  $     (0.27)  $     (0.42)
                                                            ==========   ===========   ===========   ===========
Weighted average number of
shares outstanding basic and diluted......................   8,565,190     8,577,690     8,563,175     8,569,494
                                                            ==========   ===========   ===========   ===========
</TABLE>

                             See accompanying notes

                                       4
<PAGE>

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                                           Nine Months ended
                                                                                              September 30
                                                                                              ------------
<S>                                                                                 <C>             <C>
                                                                                         2000              2001
                                                                                         ----              ----
Operating activities:
   Net loss........................................................................  $ (2,326,733)     $ (3,608,964)
   Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation and amortization.................................................       303,347           300,000
     Amortization of film costs....................................................    25,196,846        31,946,026
     Cumulative effect of a change in accounting principle.........................             -           364,000
   Changes in operating assets and liabilities:
     Accounts receivable...........................................................      (115,979)         (201,452)
     Film costs....................................................................   (34,613,403)      (30,989,670)
     Deposits and other assets.....................................................      (102,789)          (28,274)
     Accounts payable..............................................................      (785,901)         (418,860)
     Accrued expenses..............................................................      (550,440)         (342,723)
     Deferred revenue..............................................................    10,727,808         1,802,558
                                                                                     ------------      ------------
     Net cash used in operating activities.........................................    (2,267,244)       (1,177,359)
Investing activities:
   Additions to property and equipment.............................................      (143,854)          (91,706)
                                                                                     ------------      ------------
     Net cash used in investing activities.........................................      (143,854)          (91,706)
Financing activities:
   Exercise of Stock Options.......................................................        58,938             9,375
                                                                                     ------------      ------------
       Net cash provided by financing activities...................................        58,938             9,375
   Net decrease in cash............................................................    (2,352,160)       (1,259,690)
   Cash and cash equivalents at beginning of period................................     7,557,673         4,203,221
                                                                                     ------------      ------------
   Cash and cash equivalents at end of period......................................  $  5,205,513      $  2,943,531
                                                                                     ============      ============
Supplemental disclosure of cash flow information:
   Cash paid during the period for:
         Income taxes..............................................................  $      8,400      $      6,000
                                                                                     ============      ============
</TABLE>

                             See accompanying notes

                                       5
<PAGE>

                               FILM ROMAN, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) - Basis of Presentation

     Film Roman, Inc., a Delaware corporation (the "Company"), currently
conducts all of its operations through its wholly owned subsidiaries, Film
Roman, Inc., a California corporation; Namor Productions, Inc., a California
corporation; Chalk Line Productions, Inc., a California corporation; Diversion
Entertainment, Inc., a Delaware corporation; Level 13 Entertainment, Inc., a
Delaware corporation, and Special Project Films, Inc., a Delaware corporation.
The accompanying consolidated unaudited financial statements of the Company have
been prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include
all of the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements.  In the opinion
of management, all adjustments consisting only of normal recurring accruals
necessary to present fairly the financial position of the Company as of
September 30, 2001 and the results of its operations for the three and nine
months ended September 30, 2000 and 2001 and the cash flows for the nine months
ended September 30, 2000 and 2001 have been included.  The results of operations
for interim periods are not necessarily indicative of the results which may be
realized for the full year.  For further information, refer to the financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 2000 (the "Form 10-K") filed with the
Securities and Exchange Commission.

(2) - Net Loss per Common Share

     For the three and nine months ended September 30, 2000 and 2001, the per
share data is based on the weighted average number of common shares outstanding
during the period.  Common equivalent shares, consisting of outstanding stock
options, are not included since they are antidilutive.

(3) - Film Costs

     The components of unamortized film costs consist of the following:

<TABLE>
<CAPTION>
                                                   December 31, 2000    September 30, 2001
                                                   -----------------    -------------------
                                                                           (unaudited)
<S>                                              <C>                    <C>
Film productions released, net of amortization         $   678,154          $   619,045
Film productions in process                             22,549,666           20,984,139
Film productions in development                          1,330,889            1,635,169
                                                       -----------          -----------
                                                       $24,558,709          $23,238,353
                                                       ===========          ===========
</TABLE>

                                       6
<PAGE>

(4) - Pentamedia Transaction

     The Company had anticipated the receipt of approximately $10,000,000 to
$15,000,000 in cash from the issuance and sale of common stock to Pentamedia
Graphics, Ltd. ("Pentamedia").  However, after several attempts to restructure
the stock purchase transaction between the two companies, and two closing date
extensions, Pentamedia continued to provide no satisfactory evidence of its
ability to deliver the agreed upon purchase price in the agreed upon manner.
Consequently, on May 18, 2001, Film Roman terminated the transaction between the
two companies and later submitted a demand for arbitration on the grounds that
Pentamedia had breached the agreements between the two companies.  On July 9,
2001, the Company received $350,000 in cash from Pentamedia as a result of the
Settlement Agreement entered into by the two companies.  Additional terms of the
Settlement Agreement included each party's release of the other party from any
past or future claims arising out of the prior agreements between the companies.

(5) - Change in Accounting Principle

     In June 2000, Statement of Position 00-2 "Accounting by Producers or
Distributors of Films"   ("SOP 00-2") was issued.  SOP 00-2 establishes new
financial accounting and reporting standards for producers and distributors of
films, including changes in accounting for advertising, development and overhead
costs.  The Company adopted the provisions of SOP 00-2 as of January 1, 2001.

     SOP 00-2 requires that certain indirect overhead costs and development
costs for abandoned projects be charged directly to expense, instead of those
costs being capitalized to film costs as was required under the previous
accounting model.  In connection with the adoption of SOP 00-2, the Company
recorded a non-cash charge of $364,000 to reduce the carrying value of its film
inventory.  Such amount is primarily due to the expensing of certain indirect
overhead costs and development costs for abandoned projects, which were
previously capitalized.  The non-cash charge is reflected as a cumulative effect
of a change in accounting principle in the accompanying consolidated statement
of operations for the nine months ended September 30, 2001.

                                       7
<PAGE>

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

This Form 10-Q contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended.  The words "expect", "estimate",
"anticipate", "predict", "believe", "plan", "should", "may" and "projects" and
similar expressions and variations thereof are intended to identify forward-
looking statements.  Such forward-looking statements relate to, among other
things, trends affecting the financial condition or results of operations of the
Company; the Company's future production and delivery schedule (including the
number of episodes of programming to be produced and delivered during the 2001-
2002 television season); plans to enter into new business areas beyond the
Company's core business of animation television production; the Company's
objectives, planned or expected activities and anticipated financial performance
and liquidity.  These forward-looking statements are based largely on the
Company's current expectations and are subject to a number of risks and
uncertainties, including without limitation, those described under the caption
"Risks Related to the Business Risk Factors" in the Company's Form 10-K for the
year ended December 31, 2000.  Actual results could differ from these forward-
looking statements.  The Company does not make projections of its future
operating results and undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.

General

     Film Roman, Inc. ("Film Roman" or the "Company") develops, produces and
distributes a broad range of television programming for the television network,
cable television, first-run domestic syndication and international markets. The
Company was founded in 1984 and has grown into one of the leading independent
animation studios in the world.  Film Roman has produced and is producing some
of the world's best known animated series, including The Simpsons, King of the
Hill, The Mask, Bobby's World, The Twisted Tales of Felix the Cat and Garfield &
Friends.  Over the years, the Company has primarily produced animation for
television, both on a fee-for-service and a proprietary basis.  The Company had
pursued a limited amount of live action feature film development, which is now
being phased out so that the Company can concentrate on animated projects.

     Production work on a fee-for-services basis has historically accounted for
the largest and most reliable portion of the Company's revenues.  Fees paid to
the Company for these production services generally range from $300,000 to
$800,000 per episode and typically cover all direct production costs plus a
profit margin.  The Company also produces programming for which it controls some
of the proprietary rights (including, for example, international distribution
and licensing and merchandising rights).  Fees paid to the Company for these
production services typically do not cover all direct production costs.
Generally, the Company seeks to cover a portion of its production costs prior to
production of its proprietary programs and seeks to cover the remaining
production costs through the exploitation of the proprietary rights associated
with these programs.  As a result, the Company may recognize revenue associated
with its proprietary programming over a period of years.

     The Company produces a limited number of animated television series in any
year and is substantially dependent on revenues from licensing these programs to
broadcasters and from fees from producing programs for third parties.  The
Company's future performance will be affected by issues facing all producers of
animated programming, including risks related to the limited number of time
slots allocated to children's and/or animated television programming, the
intense competition for those time slots, the limited access to distribution
channels (particularly for programs produced by independent studios), the
declining license fees paid to producers of programming by broadcasters and the
regulations implemented by the Federal Communications Commission ("FCC")
governing program content.  While the Company seeks to limit its financial risk
associated with its proprietary programming by obtaining commitments from third
parties prior to production to cover a portion of its direct production costs,
there can be no assurance that

                                       8
<PAGE>

the Company will be able to cover the balance of its production costs and
overhead costs relating to production, licensing and distribution through the
exploitation of its proprietary rights. As a result of the foregoing risks,
there can be no assurance that the Company will be able to generate revenues
that exceed its costs.

     The Company's future performance will be affected by unpredictable and
changing factors that influence the success of an individual animated or live
action television program, feature film or direct-to-video release such as
personal taste of the public and critics as well as public awareness of a
production and the successful distribution of a production. Although the Company
intends to attempt to limit the risks involved with television, film and direct-
to-video production, the Company will likely be unable to limit all financial
risk, and the level of marketing, promotional and distribution activities and
expenses necessary for such production cannot be predicted with certainty.  All
production involves many of these risks, which include, but are not limited to,
the risk of strike by actors and film crew, increased union activity, delay in
production, weather and other local conditions, inability to obtain proper
permitting at a desired site, at desired times and/or under desired terms, and
accidents or injury to actors and film crew.  No assurance can be given that the
Company will produce any live action television projects or direct-to-video
productions or that, if produced, such productions will be profitable.

The Company's 2001 Production Schedule

     The Company has historically been a major producer of animated prime time,
first run syndicated, and Saturday morning programming.  The market for these
programs is composed of television networks (ABC, CBS, NBC, FOX, UPN and WB);
syndicators of first run programming that license programming on local stations
nationwide (Columbia-Tristar, Universal, Paramount, King, Fox, MGM and Viacom);
and cable networks and services (USA, Disney Channel, Fox Family, HBO, Showtime
and TNT).  The Company also has produced numerous animated commercials.

     The Company is currently scheduled to produce the following programming for
the 2001-2002 broadcast season:

          The Simpsons.  The Company is producing 22 new episodes of The
     Simpsons for exhibition over the Fox Broadcasting Network.  Entering its
     thirteenth season and now the longest-running prime time animated series in
     television history, The Simpsons has been honored with a number of awards,
     including a Peabody Award, Emmy Awards, Annie Awards, Genesis Awards,
     International Monitor Awards and Environmental Media Awards.  The Simpsons
     has transformed the way the television industry and audiences perceive
     animation and comedy series in general.

          King of the Hill.  The Company is producing 22 new episodes of King of
     the Hill to be exhibited on the Fox Broadcasting Network. King of the Hill
     is the hit half-hour, animated comedy, voted the Best Television Show of
     1997 by TV Guide and Entertainment Weekly, that tells the hilarious stories
     about Hank Hill, his family and their neighbors in the fictional suburb of
     Arlen, Texas, the heartland of America.

          X-Men.  The Company is producing 17 episodes of X-Men to be exhibited
     on the WB Network during the fall of 2001.

          Santa Claus Brothers.  The Company is developing with Nelvana a one
     hour Christmas special using 3D animation that will air on the Disney
     Channel.

          Tara.  The Company has produced a live action direct-to-video two-hour
     film starring Ice T and Isaiah Washington, and directed by Leslie Small.

                                       9
<PAGE>

          Werner.  The Company has completed a digitally animated pilot for a
     series distributed by Platinum Studios both on the Internet and via
     television.

          Hairballs.  The Company and MTV are developing this animated series
     for broadcast.

          John Waters' Patent Leather Dream House.  The Company and MTV are
     developing this animated series for broadcast.

          Tripping the Rift.  The Company and the Sci Fi Channel are developing
     this animated series.

          Johnny Tsunami II.  The Company is in discussion with the Disney
     Channel to do a follow-up to its hit program Johnny Tsunami.

          Capbusters.  The Company is producing a proprietary series for both
     the Internet and television.

Results of Operations

Three Months Ended September 30, 2001 Compared to Three Months Ended September
30, 2000

     Total revenue decreased by 26%, or $1.3 million, to $3.7 million for the
quarter ended September 30, 2001, from $5.0 million for the quarter ended
September 30, 2000.  Total revenue decreased because the Company delivered fewer
prime time fee-for-services episodes offset by more Saturday morning fee-for-
services episodes.  A combination of factors, including the negotiations of the
Screen Actors Guild and Writers Guild, the negotiations with the Simpsons
talent, the disaster of September 11, and the late premier of the network
television season, all contributed to an extremely low number of episodes being
delivered during this quarter.

     The Company delivered 6 fee-for-services episodes during the quarter ended
September 30, 2001 and 2000. Fee-for-services revenue decreased 31%, or $1.5
million, to $3.3 million for the quarter ended September 30, 2001, from $4.8
million in the comparable period in 2000 as a result of the decrease in prime
time episodes delivered offset by an increase in Saturday morning episodes
delivered.

     The Company delivered no "proprietary" episodes for the quarters ended
September 30, 2001 and 2000. "Proprietary revenue" consists of revenue derived
from the U.S. license fees paid upon the initial delivery of a new episode of
proprietary programming to a U.S. broadcaster and from the exploitation of the
proprietary rights (e.g., merchandising, licensing and/or international
distribution rights) associated with the proprietary episodes in the Company's
library that were initially delivered in prior periods.  The Company earned
minimal proprietary revenue during the three months ended September 2001 and
2000.

     Other revenue increased to $0.4 million for the quarter ended September 30,
2001 compared to $0.2 million for the quarter ended September 30, 2000.  The
increase is primarily due to the Company's participation in net profits from
certain of its fee-for-services series.

     Total cost of revenue decreased by 6%, or $0.3 million, to $4.4 million for
the quarter ended September 30, 2001, from $4.7 million for the quarter ended
September 30, 2000.  Total cost of revenue as a percentage of sales increased
25% to 119% for the quarter ended September 30, 2001, from 94% in the comparable
period in 2000 due to lower fee-for-service margins.

                                       10
<PAGE>

     Total selling, general and administrative expenses for the quarter ended
September 30, 2001 increased by $0.5 million to $1.3 million from $0.8 million
for the quarter ended September 30, 2000. Selling, general and administrative
expenses increased as a result of the expensing of excess film overhead costs.
Such costs, which typically are reduced from selling, general and administrative
expenses and allocated to the Company's film inventory, would have overburdened
the inventory due to the slowdown in the production activity of the Company.

     Operating loss was $2.0 million for the quarter ended September 30, 2001,
as compared to a loss of $0.4 million for the quarter ended September 30, 2000.

Nine Months Ended September 30, 2001 Compared to Nine Months Ended September 30,
2000

     Total revenue increased by 26%, or $6.6 million, to $32.3 million for the
nine months ended September 30, 2001, from $25.7 million for the nine months
ended September 30, 2000.  Total revenue increased because the Company delivered
more fee-for-services episodes, a movie-of-the-week special and a live action
direct-to-video two-hour film.

     The Company delivered 53 fee-for-services episodes during the nine months
ended September 30, 2001 compared to 35 episodes in the comparable period in
2000. Fee-for-services revenue increased 5%, or $1.1 million, to $25.1 million
for the nine months ended September 30, 2001, from $24.0 million in the
comparable period in 2000 as a result of the increase in episodes delivered.

     The Company delivered no "proprietary" episodes for the quarters ended
September 30, 2001 and 2000. "Proprietary revenue" consists of revenue derived
from the U.S. license fees paid upon the initial delivery of a new episode of
proprietary programming to a U.S. broadcaster and from the exploitation of the
proprietary rights (e.g., merchandising, licensing and/or international
distribution rights) associated with the proprietary episodes in the Company's
library that were initially delivered in prior periods.  Proprietary revenue
decreased 75% or $0.3 million to $0.1 million for the nine months September 30,
2001 from $0.4 million for the nine months ended September 30, 2000.

     Other revenue increased to $7.1 million for the nine months ended September
30, 2001 compared to $1.3 million for the nine months ended September 30, 2000.
The increase is primarily due to the delivery of a movie-of-the-week special and
a live action direct-to-video two-hour film.

     Total cost of revenue increased by 27%, or $6.7 million, to $31.9 million
for the nine months ended September 30, 2001, from $25.2 million for the nine
months ended September 30, 2000.  Total cost of revenue as a percentage of sales
increased 1% to 99% for the nine months ended September 30, 2001, from 98% in
the comparable period in 2000 due primarily to lower fee-for-service margins.

     Total selling, general and administrative expenses for the nine months
ended September 30, 2001 increased by $0.7 million to $3.7 million from $3.0
million for the nine months ended September 30, 2000.  Selling, general and
administrative expenses primarily increased as a result of the expensing of
excess film overhead costs. Such costs, which typically are reduced from
selling, general and administrative expense and allocated to the Company's film
inventory, would have overburdened the inventory due to the slowdown in the
production activity of the Company.  The increase is also due to one-time costs
incurred in connection with the termination of certain administrative employees
and the phasing out of the live action feature film division, along with the
costs incurred from the Pentamedia transaction.

     Operating loss was $3.3 million for the nine months ended September 30,
2001, as compared to a loss of  $2.5 million for the nine months ended
September 30, 2000.

                                       11
<PAGE>

Liquidity and Capital Resources

     At September 30, 2001, the Company had cash and short-term investments of
approximately $2.9 million compared to $4.2 million at December 31, 2000.  The
Company's cash and short-term investment balances have continued to decline
since December 31, 2000 and the Company expects cash to decline further during
the next quarter of 2001.  Management believes that its existing cash balances
and short-term investments, combined with anticipated cash flow from operations,
will nevertheless be sufficient to meet its cash requirements through the next
12 months.  The Company may need to secure additional equity or debt financing
during fiscal 2002 in order to fulfill its growth strategies. Recent operating
losses, the Company's declining cash balances, trends in the entertainment
industry adversely affecting independent production companies similar to the
Company and the Company's historical stock performance may make it difficult for
the Company to attract equity investments on terms that are deemed to be
favorable to the Company.  In addition, the Company's losses may make it more
difficult for the Company to attract significant debt financing.  As a
consequence, there can be no assurance that the Company will be successful in
arranging for additional equity or debt financing at levels sufficient to meet
its planned needs.  The failure to obtain such financing could have an adverse
effect on the implementation of the Company's growth strategies and its ability
to successfully run its operation.

     For the nine months ended September 30, 2001, net cash used in operating
activities was $1,177,359 due to cash used in connection with film production
activities, offset by an increase in deferred revenue.  For the nine months
ended September 30, 2001, net cash used in investing activities was $91,706 due
to additions to property and equipment.  Net cash provided by financing
activities was $9,375 for the first nine months of 2001.

     The Company recognizes revenues in accordance with the provisions of
Statement of Position 00-2 "Accounting by Producers or Distributors of Films."
Cash collected in advance of revenue recognition is recorded as deferred
revenue.  As of September 30, 2001, the Company had a balance in its deferred
revenue account of $26.6 million. There will be a net cost of $3.5 million to
the Company (future receipts less future expenditures) to finish the programs
for which cash has been collected in advance and included in deferred revenue.

Risk Factors

     The Company's business is subject to numerous risk factors, not all of
which can be known or anticipated and any one of which could adversely impact
the Company or its financial condition.  Some of those risk factors are as
follows:

     Failure to Renew Licenses or Production Agreements.  There can be no
assurance that any of the programs being produced by the Company will be
relicensed for additional broadcast seasons or renewed for production or, if so
relicensed or renewed, that the terms of the license agreements or production
agreements will be as favorable to the Company as those of existing licenses or
production agreements.

     Dependence on a Limited Number of Television Programs.  The Company's
revenue has historically come from the production of a relatively small number
of animated television programs.  King of the Hill, The Simpsons, The Oblongs
and X-Men accounted for approximately 35%, 35%, 16% and 5% respectively, of the
Company's total revenue for the year ended December 31, 2000.  Film Roman cannot
assure that broadcasters will continue to broadcast the Company's proprietary or
fee-for-services programs or that Film Roman will continue to be engaged to
produce such programs.

     Impact of FCC Regulations.  Certain FCC rules may adversely affect the
number of time slots available for the Company's productions.

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<PAGE>

     Risks of Vertical Integration.  Over the last decade, broadcasters,
distributors and producers of television and motion picture programming have
become increasingly integrated vertically through mergers, acquisitions,
partnerships, joint ventures and other affiliations.  Film Roman has not entered
into any of these relationships.  As a result of this integration, the number of
time slots available for children's and/or animated programming and,
specifically, for animated programming supplied by independent animation
studios, may decrease, making it more difficult to compete successfully for
available time slots.

     Declining Value of License Fee Agreements and Increasing Control of
Proprietary Rights by Broadcasters.  Competition created by the emergence of new
broadcasters (such as UPN, WB, MTV, Nickelodeon and the USA Network) has
provided television audiences with more choices, thereby generally reducing the
number of viewers watching any one program.  As a result, the market share of,
and license fees paid by major networks (FOX, NBC, CBS and ABC) may continue to
decrease and make it difficult for Film Roman to finance certain proprietary
programs.

     Current Programs May Not Sustain Their Popularity and New Programs May Not
Become Popular.  Film Roman derives substantially all of its revenue from the
production and distribution of animated television programs. Each program is an
individual artistic work, and consumer reaction will determine its commercial
success.  Film Roman cannot assure that the Company will be able to continue to
create entertaining episodes for its existing programs or that the Company will
be able to create new programs that are appealing to broadcasters.

     Risks Related to Expansion of Production of Proprietary Programming.  Film
Roman intends to expand its production of programming for which the Company owns
or controls certain licensing and/or distribution rights ("proprietary
programming").  These rights may include domestic and international broadcast
distribution, home video distribution, licensing and merchandising, feature film
and interactive/game development ("proprietary rights").  While Film Roman seeks
to limit the financial risk associated with the development of proprietary
programming by obtaining commitments prior to production to cover a portion of
its direct production costs, the Company cannot be sure that it will be able to
recover the balance of the production and overhead costs through the
exploitation of its remaining rights.

     Risk of Budget and Cost Overruns.  Although Film Roman reviews cost
reports, updates the Company's cost projections regularly and has generally
completed each of the Company's productions within its budget, the Company
cannot assure that the actual production costs for its programming will remain
within budget.

     Risks Related to Overestimation of Revenue or Underestimation of Costs.
Effective January 1, 2001, Film Roman follows Statement of Position 00-2
"Accounting by Producers or Distributors of Films" regarding revenue recognition
and amortization of production costs.  All costs incurred in connection with an
individual program or film, including acquisition, development, production and
allocable production overhead costs and interest, are capitalized as television
and film costs.  These costs are stated at the lower of unamortized cost or fair
value. Film Roman amortizes its estimated total production costs for an
individual program or film in the proportion that revenue realized relates to
management's estimate of the total revenue expected to be received from such
program or film.  As a result, if revenue or cost estimates change with respect
to a program or film, the Company may be required to write-down all or a portion
of its unamortized costs for the program or film.  The Company cannot make
assurances that these write-downs will not have a significant impact on its
results of operations and financial condition.

     Competition.  The creation, development, production and distribution of
television programming, together with the exploitation of the proprietary rights
related to such programming, is a highly competitive business.  Film Roman
competes with producers, distributors, licensors and merchandisers, many of whom

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are larger and have greater financial resources than does the Company.  Although
the number of outlets available to producers of animated programming has
increased with the emergence of new broadcasters, the number of time slots
available to independent producers of children's and animated programming
remains limited.  Moreover, because license fees in the United States have
dropped substantially recently, companies that do not rely on U.S. broadcast
license fees to finance the production of animation programming, particularly
international animation companies that receive governmental subsidies, have
achieved a competitive advantage.  These companies now serve as an additional
source of competition for the limited slots available to independent animation
companies.  As a result of these factors, the Company cannot make assurances
that it will be able to remain competitive.

     Overseas Subcontractors.  Like other producers of animated programming,
Film Roman subcontracts some of the less creative and more labor-intensive
components of its production process to animation studios located in low-cost
labor countries, primarily in the Far East.  As the number of animated feature
films television programs increases, the demand for the services of overseas
studios has increased substantially.  This increased demand may lead overseas
studios to raise their fees, which may result in increased production costs, or
an inability to contract with the Company's preferred overseas studios.

     Technological Changes; Possible Changes in Production of Products.  The
proliferation of new production technologies may change the manner in which the
animation industry creates and distributes programming. Recently, certain
animators have begun to use computer-generated animation, including three-
dimensional digital animation, instead of two-dimensional cell animation, to
create their animated programming. Film Roman cannot be sure that the
introduction and proliferation of three-dimensional digital animation or other
technological changes will not cause the Company's historical methods of
producing animation to become less cost competitive or less appealing to its
audiences.  In addition, the Company cannot be sure that it will be able to
adapt to such changes in a cost-effective manner.

     Dependence upon Key Personnel.  Film Roman's success depends to a
significant extent upon the expertise and services of John Hyde, President and
Chief Executive Officer.  Although the Company has employment agreements with
Mr. Hyde and certain other key management personnel, the loss of services of Mr.
Hyde and/or other key management personnel could have an adverse effect on the
Company's business, results of operations and financial condition.  Film Roman
does not currently carry "key man" life insurance policies on any of the
Company's executives.

     Casualty Risks.  Substantially all of the Company's operations and
personnel are located in its North Hollywood headquarters, resulting in
vulnerability to fire, flood, power loss, telecommunications failure or other
local conditions, including the risk of seismic activity.  In addition, the
Company, its clients, domestic subcontractors and overseas subcontractors are
all subject to the possibility of acts of terror, acts of war, or threat of such
acts.  If a disaster were to occur, the Company's disaster recovery plans may
not be adequate to protect the Company and its business interruption insurance
may not fully compensate the Company for its losses.

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Item 3.  Quantitative and Qualitative Disclosures about Market Risk

    The Company does not utilize market risk sensitive instruments (such as
derivative financial instruments) for trading or other purposes.

    The Company has low exposure to interest rate risk.  The Company currently
does not have any debt (fixed or floating rate) other than trade liabilities and
invests its cash assets in debt instruments with maturities of less than 90
days.  Thus, a decrease (or increase) in future interest rates will directly and
proportionately decrease (or increase, respectively) the Company's future
interest income.  For the nine months ended September 30, 2001, the Company
earned interest income of $67,432.

    The Company is not exposed to significant foreign exchange rate risk.  All
of the Company's contracts with foreign subcontractors are dollar-denominated.
The Company makes limited international sales in foreign currencies, the
aggregate of which the Company estimates to be less than one percent of the
Company's yearly revenue.

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                          PART II. OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits

     None.

(b)  Reports on Form 8-K

The Company filed one report on Form 8-K during the quarter ended September 30,
2001:

     (1) On July 9, 2001, the Company received $350,000 in cash from Pentamedia
         as a result of the Settlement Agreement entered into by the two
         companies as of such date. The settlement followed Film Roman's demand
         for arbitration submitted to Pentamedia on June 5, 2001 based upon Film
         Roman's claim that Pentamedia had breached the Stock Purchase Agreement
         and the Memorandum of Understanding between the two companies.
         Additional terms of the Settlement Agreement included each party's
         release of the other party from any past or future claims arising out
         of the prior agreements between the companies and a mutual agreement to
         refrain from making disparaging statements about each other.

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                                  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.


Dated: November 13, 2001

<TABLE>
<CAPTION>
                            <S>    <C>
                              FILM ROMAN, INC.

                              By:   /s/ John Hyde
                                 ----------------------------
                                    John Hyde
                                    President and Chief Executive Officer and Director

                              By:   /s/ Joan Thompson
                                 ----------------------------
                                    Joan Thompson
                                    Chief Accounting Officer
</TABLE>

                                      S-1