**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


**___________**





**FORM
      10-K/A**




**ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934**





**For
      the fiscal year ended December 31, 2006**





**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 0-21917**


**___________**


**POINT.360**


(Exact
      name of registrant as specified in its charter)





**California**
              (State
                or other jurisdiction ofincorporation
                or organization)
            **95-4272619**
              (I.R.S.
                Employer Identification No.)**2777
                North Ontario Street, Burbank, CA**
              (Address
                of principal executive offices)
            **91504**
              (Zip
                Code)





Registrant's
      telephone number, including area code (818) 565-1400





Securities
      registered pursuant to Section 12(b) of the Act:


Common
      Stock, no par value




Securities
      registered pursuant to Section 12(g) of the Act:


None


___________





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.


Yes
o
      No x





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act.


Yes
o
      No x





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
o




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










Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of *“* accelerated
      filer and large accelerated filer *”* in Rule
      12b-2 of the Exchange Act. (Check one):




Large
      accelerated filer   ̈ Accelerated
      filer   ̈ Non-accelerated
      filer  ý




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes
o
      No x




The
      aggregate market value of the voting common equity held by non-affiliates of
      the
      registrant as of the last business day of the registrant’s most recently
      completed second fiscal quarter (June 30, 2006) was approximately $11 million.
      As of February 14, 2007, there were 9,977,407 shares of Common Stock
      outstanding.




EXPLANATORY
      NOTE





The
      purpose of this amendment is to include the information required by Part III
      of
      Form 10-K, which was omitted from the Company’s Form 10-K as originally filed on
      February 28, 2007.




2





**PART
      III**





**ITEM
      10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**




**Executive
      Officers and Directors**





The
      directors and executive officers of the Company are as follows:




**Name**
            **Age**
            **Position**Haig S. Bagerdjian
            50
            Chairman of the Board of Directors, President
              and Chief Executive OfficerAlan R. Steel
            62
            Executive
                Vice President, Finance and Administration,
              Chief
                Financial Officer and SecretaryRobert A. Baker
            68
            DirectorGreggory J. Hutchins
            45
            DirectorSam P. Bell
            70
            DirectorG. Samuel Oki
            56
            Director






Directors
      are elected at each annual meeting of shareholders, and each executive officer
      serves until his resignation, death, or removal by the Board of
      Directors.





HAIG
      S.
      BAGERDJIAN became Chairman of the Board of the Company in September 2001 and
      was
      appointed President and Chief Executive Officer in October 2002. He was
      Executive Vice President of Syncor International Corporation, a leading provider
      of radiopharmaceuticals, comprehensive nuclear pharmacy services and medical
      imaging services, from 1991 to 2002. From 1987 to 1991, he served in several
      executive level positions at Calmark Holding Corporation. He also was General
      Counsel for American Adventure, Inc., which was a subsidiary of Calmark Holding.
      Mr. Bagerdjian received a J.D. from Harvard Law School and is admitted to the
      State Bar of California. Mr. Bagerdjian is a director of Innodata-Isogen, Inc.





ALAN
      R.
      STEEL became Executive Vice President, Finance and Administration and Chief
      Financial Officer of the Company in November 2000. From 1994 to 2000, Mr. Steel
      was Vice President, Finance and Chief Financial Officer of Advanced Machine
      Vision Corporation, a Nasdaq listed company involved in research, development,
      manufacturing and sales of sophisticated vision sorting and defect removal
      equipment for food, paper, tobacco and other markets. From 1983 to 1994, Mr.
      Steel was Vice President and Chief Financial Officer of DDL Electronics, Inc.,
      a
      New York Stock Exchange listed company in the electronics industry. Mr. Steel
      served as controller of DDL from 1980-1983. Mr. Steel was previously a financial
      manager for Atlantic Richfield Company and a certified public accountant with
      Arthur Andersen & Co.





ROBERT
      A.
      BAKER is the President and Chief Executive Officer of RAB Associates, a Los
      Angeles, California-based firm specializing in financial reorganizations, crisis
      management and equity receiverships, which he founded in 1974. Prior to
      establishing RAB Associates, Mr. Baker was the President and CEO of American
      Management Company, a management consulting firm specializing in computer system
      design and programming.





GREGGORY
      J. HUTCHINS is a tax partner at Holthouse Carlin & Van Trigt, LLP, a public
      accounting firm. Prior to joining Holthouse Carlin & Van Trigt in January
      1993, Mr. Hutchins served as Senior Tax Manager for KPMG Peat Marwick, managing
      corporate and high net worth individual clients from August 1984 until December
      1992.





SAM
      P.
      BELL was President of Los Angeles Business Advisors (LABA) from 1996 to 2004,
      at
      which time, LABA ceased operations. LABA was comprised of 30 chief executive
      officers of major companies in the Los Angeles region and focused on high impact
      projects where their collective resources could be utilized to positively
      influence the economic vitality of the area. Prior to joining LABA, Mr. Bell
      was
      Area Managing Partner of Ernst & Young, certified public accountants, for
      the Pacific Southwest Region, retiring in 1996 after 39 years with the firm.
      Mr.
      Bell currently serves, or has served in the past, in high level positions for
      numerous charitable and educational concerns, and is a current panel member
      for
      the NASDAQ in reviewing filing issues for NASDAQ-listed companies.
      Mr. Bell is currently a board member of TCW Convertible Securities Fund, Inc.,
      TCW Galileo Funds and Broadway National Bank.




3




G.
      SAMUEL
      OKI has served as President of Meta Information Services, Inc., a database
      and
      information management services enterprise, since 1982. Mr. Oki is also active
      as an officer and board member of a number of closely held companies in the
      electronic information management sector. Mr. Oki has a B.S. degree in
      Horticulture from Colorado State University and an M.B.A. from the University
      of
      Southern California.





**Audit
      Committee**





The
      members of the Audit Committee of the Board of Directors are Messrs. Baker,
      Bell, and Oki. The
      Board
      of Directors has determined that Messrs. Baker, Oki and Bell are independent
      within the meaning of Rule 4200(a)(15) of the Nasdaq Stock Market, Inc. and
      Section 10A(m)(3) of the Securities Exchange Act of 1934 and applicable rules
      of
      the Securities and Exchange Commission. The Board has also determined that Messrs..
      Baker, Bell, and Oki are each an “audit committee financial expert” under
      applicable Securities and Exchange Commission rules .





**Code
      of Ethics**





On
      July
      3, 2003, the Company adopted a Code of Ethics (the “Code”) applicable to the
      Company’s Chief Executive Officer, Chief Financial Officer and all other
      employees. Among other provisions, the Code sets forth standards for honest
      and
      ethical conduct, full and fair disclosure in public filings and shareholder
      communications, compliance with laws, rules and regulations, reporting of code
      violations and accountability for adherence to the Code. The text of the Code
      has been posted on the Company’s website ( www.point360.com ).
      A copy
      of the Code can be obtained free-of-charge upon written request to:





Corporate
      Secretary


Point.360


2777
      North Ontario Street


Burbank,
      CA 91504





If
      the
      Company makes any amendment to, or grant any waivers of, a provision of the
      Code
      that applies to our principal executive officer or principal financial officer
      and that requires disclosure under applicable SEC rules, we intend to disclose
      such amendment or waiver and the reasons for the amendment or waiver on our
      website.





**Section
      16(a) Beneficial Ownership Reporting Compliance**





Under
      Section 16(a) of the Securities Exchange Act of 1934 and rules promulgated
      thereunder, the Company’s directors, executive officers, and any person holding
      beneficially more than 10% of the Company’s common stock are required to report
      their ownership of the Company’s securities and any changes in that ownership to
      the Securities and Exchange Commission and to file copies of the reports with
      the Company. Specific due dates for these reports have been established, and
      the
      Company is required to report in this Annual Report on Form 10-K any failures
      to
      file by these dates during the last fiscal year.




Based
      upon a review of filings with the SEC and written representations that no other
      reports were required, the Company believes that all of its directors, executive
      officers and persons owning more than 10% of the Company’s common stock complied
      during the year ended December 31, 2006 with the reporting requirements of
      Section 16(a) of the Exchange Act, except that one report for each of Messrs.
      Bagerdjian, Baker, Bell, Hutchins and Oki were delinquent by no more than six
      days. Each report related to a single grant of stock options.





**ITEM
      11. EXECUTIVE COMPENSATION**




**Compensation
      of Directors**





Each
      director who is not an employee of the Company is paid a cash fee of $3,000
      per
      quarter, $750 for each meeting attended in person and $500 for each meeting
      attended telephonically. Board committee members receive $500 for each meeting
      not held in conjunction with a Board meeting. The chairman of the audit
      committee receives $5,000 per year, and chairmen of other board committees
      receive $2,500 per year. Each director also receives an annual fully-vested
      stock option grant to purchase 7,500 shares at an exercise price equal to the
      fair market value on the date of any annual meeting at which the director is
      reelected to the Board. Members of the Board who are not employees of the
      Company receive options to purchase 15,000 shares of Common Stock upon their
      initial election to the Board. These options vest in 50% increments over the
      two-year period following the date of grant. Directors are also reimbursed
      for
      travel and other reasonable expenses relating to meetings of the
      Board.




4





The
      following table sets forth for each director who is not also a named executive
      in the Summary Compensation Table, compensation for the year ended December
      31,
      2006:





**Director
      Compensation** ****




**Name**
              
              
              **Fees
                  Earned or**
                **Paid
                  in Cash
                  ($)**
              
              
              **Option****(1)**
                **Awards
                  ($)**
              
              
              **Total
                  ($)**Robert
                  A. Baker
              
              $
              19,750
              
              $
              7,650
              
              $
              27,400Greggory
                  J. Hutchins
              
              
              16,750
              
              
              7,650
              
              
              24,400Sam
                  P. Bell
              
              
              22,750
              
              
              7,650
              
              
              30,400G.
                  Samuel Oki
              
              
              18,750
              
              
              7,650
              
              
              26,400




**(1)** Information regarding the assumptions used to value option awards is set forth
      in Note 10 of Notes to Consolidated Financial Statements in the Company’s Form
      10-K for the year ended December 31, 2006 which is incorporated herein by
      reference. The aggregate number of option awards (all fully vested) outstanding
      as of December 31, 2006 were 45,000 each for Messrs. Baker and Hutchins, 40,000
      for Mr. Bell and 35,000 for Mr. Oki.





**Summary
      Compensation Table**





The
      following table sets forth the compensation for the Chief Executive Officer
      (“CEO”) and the Chief Financial Officer. No other executive officer’s total
      compensation for the fiscal year ended December 31, 2006 exceeded
      $100,000.


**Name
                  and Principal****Position**
              
              
              **Year**
              
              
              **Salary
                  ($)**
              
              
              **Option**
                **Awards
                  ($)****(1)**
              
              
              **All
                  Other**
                **Compensation****(2)**
              
              
              **Totals
                  ($)**Haig
                  S. Bagerdjian
              
              
              2006
              
              $
              334,000
              
              $
              100,000
              
              $
              19,000
              
              $
              453,000Chairman,
                  President and
                  Chief
                    Executive OfficerAlan
                  R. Steel
              
              
              2006
              
              $
              222,000
              
              $
              20,000
              
              $
              9,000
              
              $
              251,000Executive
                  Vice President,
                  Finance
                    and Administration,
                    Chief
                      Financial Officer,
                      and
                        Secretary




(1)
            Information
                regarding the assumptions used to value option awards is set forth
                in Note
                10 of Notes to Consolidated Financial Statements in the Company’s Form
                10-K for the year ended December 31, 2006, which is incorporated
                herein by
                reference.





(2)
            Amounts
                consist of annual contributions made to the Company’s 401(k) plan, health
                insurance premiums and automobile expenses paid by the Company for
                the
                benefit of the named executive
                officer.




5




**Stock
      Options Granted in the Last Fiscal Year**





The
      following table sets forth information with respect to non-qualified stock
      options granted to the executive officers named in the Summary Compensation
      Table during the year ended December 31, 2006. The exercise price of each option
      was at the market price of our Common Stock on the option grant
      date.





**Grants
      of Plan - Based Awards**


**Name**
              **Grant**
                **Date**
              **All
                  Other Option
                  Awards:**
                **Number
                  of
                  Securities**
                **Underlying
                  Options
                  (#)**
              **Exercise
                  or Base
                  Price**
                **of
                  Option Awards**
                **($/sh
                  )**
              **Grant
                  Date**
                **Fair
                  Value of
                  Stock**
                ****and
                  Option Awards****Haig
                  S. Bagerdjian
              6/14/06
              100,000
              $2.24
              $100,000Alan
                  R. Steel
              6/14/06
              20,000
              $2.24
              $
                  20,000




The
      following table shows information concerning unexercised stock options as of
      December 31, 2006 for the executive officers named in the Summary Compensation
      Table.





**Outstanding
      Equity Awards of Fiscal Year-End**




**Number
                of Securities**
              **Underlying
                Unexercised****Options
                (#)****Name**
            **Exercisable**
            **Unexercisable**
            **Option**
              **Exercise**
              **Price
                ($)**
            **Option**
              **Expiration**
              **Date**Haig
                S. Bagerdjian
            15,000
            
            $3.75
            8/15/10100,000
            
            1.75
            6/21/07120,000(1)
            
            3.94
            9/24/08100,000(1)
            
            2.38
            10/12/09100,000(2)
            2.24
            6/14/11Alan
                R. Steel
            250,000
            
            3.75
            12/12/106,300
            
            1.75
            6/21/0720,000(1)
            
            2.62
            7/30/0820,000(1)
            
            2.38
            10/12/0920,000(2)
            2.24
            6/14/11




(1) Options
      are currently vested and exercisable. Once exercised, the shares may be sold
      25%, 50%, 75% and 100% after each of the first four anniversary dates of the
      grants, respectively.





(2) Options
      will become exercisable as follows: 25%, 50%, 75% and 100% on each of the first
      four anniversary dates of the grants, respectively. Vesting may be accelerated
      at the discretion of the plan administrator (currently the Board of Directors)
      upon liquidation or dissolution of the Company, a merger or consolidation of
      the
      Company with or into another entity, the sale of substantially all the assets
      of
      the Company, or a purchase or other acquisition of more than 50% of the
      outstanding capital stock of the Company.




6





**Aggregated
      Option Exercises in Last Fiscal Year**





The
      following table shows the options exercised by each of the Company’s executive
      officers who are named in the Summary Compensation Table during the year ended
      December 31, 2006:







**Option
                Exercises****Name**
            **Number
                of Shares**
              **Acquired**
              **on****Exercise
                (#)**
            **Value
                Realized**
              **on****Exercise****($)****(1)**Haig
                S. Bagerdjian
            305,000
            $122,000Alan
                R. Steel
            33,300
            $18,000





(1) Amounts
      shown represent the difference between the market price of the underlying stock
      on the exercise date and the exercise price.




**Severance
      Agreements**





Effective
      September 30, 2003, the Company entered into severance agreements with Messrs.
      Bagerdjian and Steel. The agreements provide that if Mr. Bagerdjian or Mr.
      Steel
      is terminated following a change in control during the term of the agreements
      other than for cause, disability or without good reason (as defined), then
      Mr.
      Bagerdjian and Mr. Steel shall receive a severance payment equal to 275% and
      200%, respectively, of the sum of (i) base salary and (ii) the higher of (x)
      the
      average bonus earned during the preceding three years or (y) the target annual
      bonus for the year in which the termination occurs. If terminated under the
      severance agreement, Mr. Bagerdjian and Mr. Steel would also receive employee
      benefits for specified periods of time. Furthermore, previously granted stock
      options shall vest fully. Under certain circumstances, amounts paid pursuant
      to
      the severance agreements will be subject to a tax gross-up payment if such
      amounts are subject to an excise tax as contemplated by Section 280G of the
      Internal Revenue Code. For purposes of the severance agreements, a change of
      control shall be deemed to have occurred if (i) a tender offer shall be made
      and
      consummated for the ownership of 35% or more of the outstanding voting
      securities of the Company, (ii) the Company shall be merged or consolidated
      with
      another corporation and as result of such merger or consolidation less than
      50%
      of the outstanding voting securities of the surviving or resulting corporation
      shall be owned in the aggregate by the former shareholders of the Company,
      other
      than affiliates (within the meaning of the Exchange Act) of any party to such
      merger or consolidation, as the same shall have existed immediately prior to
      such merger or consolidation, (iii) the Company shall sell, lease, exchange
      or
      transfer substantially all of its assets to another corporation, entity or
      person which is not a wholly-owned subsidiary, (iv) a person (other than
      Executive), as defined in Sections 13(d) and 14 (d) of the Exchange Act, shall
      acquire 35% or more of the outstanding voting securities of the Company (whether
      directly, indirectly, beneficially or of record, in a single transaction or
      a
      series of related transactions by one person or more than one person acting
      in
      concert), or (v) the shareholders of the Company approve a plan or proposal
      for
      the liquidation or dissolution of the Company.





Assuming
      that a triggering event occurred on December 31, 2006, severance amounts payable
      would have been $1,388,000 and $628,000 for Messrs. Bagerdjian and Steel,
      respectively, plus life, disability and health insurance benefits for 33 months
      immediately following the date of termination. The value of such benefits is
      estimated to be $14,000 and $20,000 for Messrs. Bagerdjian and Steel,
      respectively, based on the cost of such benefits on December 31,
      2006.




7





**Limitation
      of Liability and Indemnification Matters**





The
      Company’s Restated Articles of Incorporation limit the liability of its
      directors. As permitted by amendments to the California General Corporation
      Law
      enacted in 1987, directors will not be liable to the Company for monetary
      damages arising from a breach of their fiduciary duty as directors in certain
      circumstances. Such limitation does not affect liability for any breach of
      a
      director’s duty to the Company or its shareholders (i) with respect to approval
      by the director of any transaction from which he derives an improper personal
      benefit (ii) with respect to acts or omissions involving an absence of good
      faith, that he believes to be contrary to the best interest of the Company
      or
      its shareholders, that involve intentional misconduct or a knowing and culpable
      violation of law, that constitute an unexcused pattern or inattention that
      amounts to an abdication of his duty to the Company or its shareholders, or
      that
      show a reckless disregard for his duty to the Company or its shareholders in
      circumstances in which he was, or should have been aware, in the ordinary course
      of performing his duties, of a risk of serious injury to the Company or its
      shareholders, or (iii) based on transactions between the Company and its
      directors or another corporation with interrelated directors or on improper
      distributions, loans or guarantees under applicable sections of the California
      General Corporation Law. Such limitation of liability also does not affect
      the
      availability of equitable remedies such as injunctive relief or rescission.
      The
      Company has been informed that in the opinion of the Securities and Exchange
      Commission, indemnification provisions, such as those contained in the Company’s
      Restated Articles of Incorporation, are unenforceable with respect to claims
      arising under federal securities laws and, therefore, do not eliminate monetary
      liability of directors.





**Executive
      Compensation Discussion and Analysis**




**Overview
      of Compensation Program** .
      The
      Compensation Committee (for purposes of this analysis, the “ Committee ”)
      of the
      Board has responsibility for establishing, implementing and continually
      monitoring adherence with the Company’s compensation philosophy. The Committee
      ensures that the total compensation paid to the named executives is fair,
      reasonable and competitive. Generally, the types of compensation and benefits
      provided to the named executives are similar to those provided to other
      executive officers.




Throughout
      this Annual Report on Form 10-K, the individuals who served as the Company’s
      Chief Executive Officer and Chief Financial Officer during fiscal 2006 are
      referred to as the “named executive officers”.




**Compensation
      Philosophy and Objectives.** The
      Committee believes that the most effective executive compensation program is
      one
      that is designed to reward the achievement of specific annual, long-term and
      strategic goals by the Company, and which aligns executives’ interests with
      those of the stockholders by rewarding performance above established goals,
      with
      the ultimate objective of improving stockholder value. The Committee evaluates
      both performance and compensation to ensure that the Company maintains its
      ability to attract and retain superior employees in key positions and that
      compensation provided to key employees remains competitive relative to the
      compensation paid to similarly situated executives of our peer companies. To
      that end, the Committee believes executive compensation packages provided by
      the
      Company to its executives, including the named executive officers, should
      include both cash and stock-based compensation that reward performance as
      measured against established goals.




**Role
      of the Chief Executive Officers in Compensation
      Decisions** .
      The
      Committee makes all compensation decisions for the named executive officers
      and
      approves recommendations regarding equity awards to other executives of the
      Company. Decisions regarding the non-equity compensation of other executives
      are
      made by the Chief Executive Officer in concert with the Committee.




The
      Chief
      Executive Officer reviews the performance of various executives. The conclusions
      reached and recommendations based on these reviews, including with respect
      to
      salary adjustments and annual award amounts, are presented to the Committee.
      The
      Committee can exercise its discretion in modifying any recommended adjustments
      or awards to executives.




**Setting
      Executive Compensation** .
      Based
      on the foregoing objectives, the Committee has structured the Company’s annual
      and long-term incentive-based cash and non-cash executive compensation to
      motivate executives to achieve the business goals set by the Company and reward
      the executives for achieving such goals. In furtherance of this, the Committee
      has periodically engaged Cook & Co., Inc. (“Cook”), an outside global human
      resources consulting firm, to conduct reviews of its total compensation program
      for the Chief Executive Officer as well as for other key executives. Cook
      provides the Committee with relevant market data and alternatives to consider
      when making compensation decisions for the Chief Executive Officer and on the
      recommendations being made by the Company’s management for executives other than
      Chief Executive Officer.




In
      making
      compensation decisions, the Committee compares each element of total
      compensation against benchmarks prepared by Cook for companies of a similar
      size
      and complexity as Point.360.




The
      Company competes with many larger companies for top executive-level talent.
      As
      such, the Committee generally sets compensation for executives at the
      50 th to
      75 th percentile of compensation paid to similarly situated executives of the
      companies comprising the benchmark group. Variations to this objective may
      occur
      as dictated by the experience level of the individual and market
      factors. These objectives recognize the Committee’s expectation that, over the
      long term, Point.360 will generate stockholder returns in excess of the average
      of its peer group.




8




A
      significant percentage of total compensation is allocated to incentives as
      a
      result of the philosophy mentioned above. There is no pre-established policy
      or
      target for the allocation between either cash and non-cash or short-term and
      long-term incentive compensation. Rather, the Committee reviews information
      provided by Cook to determine the appropriate level and mix of incentive
      compensation. Income from such incentive compensation is realized as a result of
      the performance of the Company or the individual, depending on the type of
      award, compared to established goals.




**2006
      Executive Compensation Components.** **** For
      the
      fiscal year ended December 31, 2006, the principal components of
      compensation for named executive officers were:




·
            base
                salary;




·
            performance-based
                incentive compensation;




·
            long-term
                equity incentive compensation;




·
            other
                personal benefits.




*Base
      Salary*




The
      Company provides named executive officers and other employees with base salary
      to compensate them for services rendered during the fiscal year. Base salary
      ranges for named executive officers are determined for each executive based
      on
      his or her position and responsibility by using market data. Base salary ranges
      are designed so that salary opportunities for a given position will be between
      80% and 125% of the midpoint of the base salary established for each range.




During
      its review of base salaries for executives, the Committee primarily considers:




·
            market
                data provided by our outside
                consultants;




·
            internal
                review of the executive’s compensation, both individually and relative to
                other executive officer; and




·
            individual
                performance of the executive.




Salary
      levels are typically considered annually as part of the Company’s performance
      review process as well as upon a promotion or other change in job
      responsibility. Merit based increases to salaries of named executives officers
      are based on the Committee’s assessment of the individual’s performance.




*Performance
      - Based Incentive Compensation*




The
      Executive Bonus Plan (“EBP”) is an annual cash incentive program for executives
      including the named executives. The EBP provides guidelines for the calculation
      of annual non-equity incentive based compensation, subject to Committee
      oversight and modification. The EBP includes various incentive levels based
      on
      the participant’s accountability and impact on Company operations, with target
      award opportunities that are established as a percentage of base salary. These
      targets range from 10% of base salary to 30% of base salary for the Company’s
      named executive officers.




For
      the
      named executive officers, 70% of the award is based upon achievement of
      corporate financial objectives relating to earnings, and the remaining 30%
      of an
      executive’s EBP award is based upon the accomplishment of individual goals. The
      Committee may also grant discretionary bonuses for outstanding performance.




In
      February of each year, the Committee sets minimum, target and maximum levels
      for
      each component of the corporate financial objective portion of the EBP. Payment
      of awards under the EBP are based upon the achievement of such objectives for
      the current year. Named executive officers participating in the EBP receive:




·
            no
                payment for the corporate financial objective portion of the EBP
                award
                unless the Company achieves the minimum performance level (as computed
                for
                the total corporate financial objective
                portion);




·
            a
                payment of less than 7% of base salary for the corporate financial
                objective portion of the EBP award if the Company achieves or exceeds
                the
                minimum performance level;




·
            a
                payment of at least 7% but less than 14% of base salary for the corporate
                financial objective portion of the EBP award if the Company achieves
                or
                exceeds the target performance level but does not attain the “stretch”
                performance level; and




·
            a
                payment of 21% of base salary for corporate financial objective portion
                of
                the EPB award if the Company achieves or exceeds the maximum performance
                levels; and




·
            a
                payment of remaining portion of the award based on achievement of
                individual goals.




9




For
      executives, other than the named executives the EBP award opportunity is based
      on achievement Company, group and facility financial objectives, in addition
      to
      achievement of individual goals.




Upon
      completion of the fiscal year, the Committee assesses the performance of the
      Company for the corporate financial objective of the EBP comparing the actual
      fiscal year results to the pre-determined minimum, target, stretch and maximum
      levels. In making the annual determination of the minimum, target, stretch
      and
      maximum levels, the Committee may consider the specific circumstances facing
      the
      Company during the coming year. Targets are set in alignment with the Company’s
      strategic plan and expectations regarding earnings performance.




Over
      the
      past five years, the Company has achieved performance in excess of the target
      level one time. The payout percentage in that year was in accordance with the
      EBP. Additionally, the Committee authorized discretionary bonuses to selected
      executives and the named executives in two of the past five years.




None
      of
      the named executive officers received a bonus for the fiscal year ended
      December 31, 2006.




*Long-term
      Equity Compensation*




Under
      the
      Company’s 2005 Equity Incentive Plan the “2005 Plan”), the Committee may grant
      participants shares of the Company’s common stock, restricted stock, share
      units, stock options, stock appreciation rights and/or performance units. In
      granting these awards, the granted under the 2005 Plan have been non-qualified
      stock options.




All
      awards of stock options under the 2005 Plan are made at the market price at
      the
      time of the award. Awards of stock options to executives are generally made
      annually by the Committee. Newly hired or promoted executives may be granted
      awards of stock options on their hire or promotion date. Grants of stock options
      to newly hired executives are made at the next regularly scheduled Committee
      meeting on or following their hire date.




*Perquisites
      and Other Personal Benefits*




The
      Company provides named executive officers with perquisites and other personal
      benefits that the Company and the Committee believe are reasonable and
      consistent with its overall compensation program to better enable the Company
      to
      attract and retain superior employees for key positions. The Committee
      periodically reviews the levels of perquisites and other personal benefits
      provided to named executive officers.




The
      named
      executive officers are provided either the use of a company automobile or an
      automobile allowance and reimbursement of health insurance costs under the
      health plan available to all Company employees.




Attributed
      costs of the personal benefits described above for the named executive officers
      for the fiscal year ended December 31, 2006 are included in the “Summary
      Compensation Table” on page 3.




The
      Company has entered into Severance Agreements with certain key employees,
      including the named executive officers. The Severance Agreements are designed
      to
      promote stability and continuity of senior management. Information regarding
      applicable payments under such agreements for the named executive officers
      is
      provided under the heading “Severance Agreements” on page 5.




**Compensation
      Committee Report**




The
      Compensation Committee of the Company has reviewed and discussed the
      Compensation Discussion
      and Analysis required by Item 402(b) of Regulation S-K with management and,
      based on such review and discussions, the Compensation Committee recommended
      to
      the Board that the Compensation Discussion and Analysis be included in this
      Annual Report on Form 10-K.




THE
      COMPENSATION COMMITTEE




Robert
      A.
      Baker,


Chairman


Sam
      P.
      Bell


Greggory
      J. Hutchins


G.
      Samuel
      Oki




10





**ITEM
      12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDERS MATTERS**





**Security
      Ownership of Certain Beneficial Owners and Management**





The
      following table sets forth certain information regarding the beneficial
      ownership of Common Stock as of March 28, 2007, by (i) each person who is known
      by the Company to own beneficially more than 5% of the outstanding Common Stock;
      (ii) each of Point.360’s directors and director nominees; (iii) each executive
      officer identified in the Summary Compensation Table; and (iv) all executive
      officers and directors of the Company as a group:





**Name
                and Address**
            **Shares**
              **Owned**
            **Shares
                Acquirable**
              **Pursuant
                to**
              **Stock
                Options****(2)**
            **Total**
            **Approximate**
              **Percent
                of******
              **Ownership**Haig
                S. Bagerdjian(1)
            2,635,234
            335,000
            2,970,234
            29%Julia
                Stefanko(3)
            1,252,568
            -
            1,252,568
            13%DG
                FastChannel, Inc.(4)
            1,612,436
            -
            1,612,436
            17%Robert
                A. Baker(1)
            6,500
            45,000
            51,500
            *Greggory
                J. Hutchins(1)
            15,000
            45,000
            60,000
            *Sam
                P. Bell(1)
            -
            40,000
            40,000
            *G.
                Samuel Oki(1)
            3,600
            35,000
            38,600
            *Alan
                R. Steel(1)
            52,300
            296,300
            353,600
            3%All
                directors andexecutive
                officers
              as
                a group
            2,712,634
            796,300
            3,508,934
            33%





*Less
      than 1%


(1) The
      address of each beneficial owner listed is 2777 N. Ontario Street, Burbank,
      CA
      91504.


(2) Represents
      shares acquirable as of March 28, 2007 and 60 days thereafter.


(3) The
      address of this beneficial owner is 427 Bloomfield Ave., Suite 206, Montclair,
      NJ 07042.


(4) The
      address of this beneficial owner is 750 W. John Carpenter Freeway, Suite 700,
      Irving, TX 75039.




**Equity
      Compensation Plan Information**




The
      following table sets forth information regarding the securities authorized
      for
      issuance under our equity
      compensation plans as of December 31, 2006:


**Plan
                Category**
            **(a)**
              **Number
                of Securities**
              **to
                be Issued upon**
              **Exercise
                of**
              **Outstanding
                Options,**
              **Warrants
                and Rights**
            **(b)**
              **Weighted
                Average Exercise**
              **Price
                of Outstanding**
              **Options,
                Warrants and**
              **Rights******
            **(c)**
              **Number
                of Securities**
              **Remaining
                Available for**
              **Future
                Issuance under**
              **Equity
                Compensation**
              **Plans
                (Excluding**
              **Securities**
              **Reflected
                in Column(a)****)(3)**Equity
                compensation plans approved by shareholders(1)
            1,815,054
            $
                2.62
            1,478,850Equity
                compensation plans not approved by
              shareholders(2)
            627,950
            $
                3.67
            -


(1)
            The
                only plans in this categoryare
                the 1996 and 2005 Plans.(2)
            The
                only plan in this category is the 2000 Plan.(3)
            The
                only plan in this column is the 2005
                Plan.





11




**ITEM
      13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE**





During
      the year ended December 31, 2006, the Company paid $64,000 to Holthouse Carlin
      & Van Trigt LLP (“HCVT”) for preparation of tax returns and other tax
      related services. Mr. Hutchins is a partner in HCVT.





The
      Board
      of Directors has determined that each director other than the Company’s Chief
      Executive Officer, Haig S. Bagerdjian, is “independent”
      within the meaning of Rule 4200(a)(15) of the Nasdaq Stock Market, Inc., and
      that each member of
      the
      Audit Committee, the Nominating and Governance Committee and the Compensation
      Committee is “independent”
      within the meaning of Rule 4200(a)(15).





**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**




Singer
      Lewak Greenbaum & Goldstein LLP (“Singer Lewak”) examined, as independent
      auditors, the financial statements of the Company for the years ended December
      31, 2005 and 2006. The following table shows the fees billed to us by Singer
      Lewak for the audit and other services rendered by Singer Lewak during fiscal
      2005 and 2006. The Audit Committee has determined that the non-audit services
      rendered by Singer Lewak were compatible with maintaining Singer Lewak’s
      independence.





**2005**
            
            **2006**Audit
                Fees (1)
            
            $
            98,200
            
            $
            108,400Audit-Related
                Fees (2)
            
            
            14,000
            
            
            9,600Total
            
            $
            112,200
            
            $
            118,000


(1)
              Audit
                  fees represent fees for professional
                  services provided in connection with the audit of our financial
                  statements
                  and review of our quarterly financial statements and audit services
                  provided in connection with other statutory or regulatory filings.(2)
              Audit-related
                  fees consisted primarily of
                  accounting consultations, and services rendered in connection with
                  a
                  proposed acquisition and implementation of Sarbanes-Oxley Act internal
                  control requirements.




All
      audit
      related and other services rendered by Singer Lewak were pre-approved by the
      Audit Committee. The Audit Committee has adopted a pre-approval policy that
      provides for the pre-approval of all services performed for us by Singer Lewak.
      The policy authorizes the Audit Committee to delegate to one or more of its
      members pre-approval authority with respect to permitted services. Pursuant
      to
      this policy, the Board delegated such authority to the Chairman of the Audit
      Committee. All pre-approval decisions must be reported to the Audit Committee
      at
      its next meeting if not approved in conjunction with an Audit Committee
      Meeting.




12




**SIGNATURES**





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





Dated:
      April 26, 2007


Point.360By:
            /s/
                Alan R. Steel
              Alan
                R. Steel
              Executive
                Vice President,
              Finance
                and Administration,
              Chief
                Financial Officer




13