<PAGE>   1

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000


                                       OR

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

                          COMMISSION FILE NUMBER: 23346

                             EQUITY MARKETING, INC.
             (Exact name of registrant as specified in its charter.)

            DELAWARE                                             13-3534145
 (State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                              Identification No.)

         6330 SAN VICENTE BLVD.
             LOS ANGELES, CA                                        90048
(Address of principal executive offices)                          (Zip Code)

                                 (323) 932-4300
              (Registrant's telephone number, including area code)

    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 periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X]    No [ ]

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

Common Stock, $.001 Par Value, 6,337,112 shares as of August 9, 2000.


<PAGE>   2

                             EQUITY MARKETING, INC.

                     INDEX TO QUARTERLY REPORT ON FORM 10-Q
                FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
                                  JUNE 30, 2000

<TABLE>
<CAPTION>

                                                                          PAGE
                                                                          ----
<S>      <C>                                                              <C>
PART I.  FINANCIAL INFORMATION

         Item 1.  Financial Statements                                       3

         Item 2.  Management's Discussion and Analysis of Financial
                           Condition and Results of Operations              13

PART II. OTHER INFORMATION

         Item 1.  Legal Proceedings                                         20

         Item 2.  Changes in Securities and Use of Proceeds                 20

         Item 6.  Exhibits and Reports on Form 8-K                          20
</TABLE>


                                       2

<PAGE>   3




PART I. FINANCIAL INFORMATION

         ITEM 1. FINANCIAL STATEMENTS


                             EQUITY MARKETING, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

                                     ASSETS
<TABLE>
<CAPTION>

                                                                        DECEMBER 31,       JUNE 30,
                                                                            1999             2000
                                                                       -------------    -------------
                                                                                          (UNAUDITED)
<S>                                                                    <C>              <C>
CURRENT ASSETS:
  Cash and cash equivalents                                            $       7,131    $      14,461
  Accounts receivable (net of allowances of $5,370 and
    $3,720 as of December 31, 1999 and June 30, 2000, respectively)           37,385           29,878
  Note receivable, current portion                                             5,024            7,957
  Inventory                                                                    8,742            6,682
  Prepaid expenses and other current assets                                    5,696            6,459
                                                                       -------------    -------------
         Total current assets                                                 63,978           65,437
FIXED ASSETS, net                                                              4,907            4,520
INTANGIBLE ASSETS, net                                                        21,846           21,589
NOTE RECEIVABLE, long-term portion                                             5,491            4,254
OTHER ASSETS                                                                   1,022              938
                                                                       -------------    -------------
         Total assets                                                  $      97,244    $      96,738
                                                                       =============    =============
</TABLE>


  The accompanying notes are an integral part of these condensed consolidated
                                balance sheets.


                                       3

<PAGE>   4


                             EQUITY MARKETING, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>

                                                                                   DECEMBER 31,       JUNE 30,
                                                                                      1999              2000
                                                                                  -------------     -------------
                                                                                                      (UNAUDITED)
<S>                                                                               <C>               <C>
CURRENT LIABILITIES:
  Short-term debt                                                                 $      12,500     $          --
  Accounts payable                                                                       21,726            11,304
  Accrued liabilities                                                                    18,707            12,738
                                                                                  -------------     -------------
         Total current liabilities                                                       52,933            24,042
LONG-TERM LIABILITIES                                                                     2,286             2,366
                                                                                  -------------     -------------
         Total liabilities                                                               55,219            26,408
                                                                                  -------------     -------------

COMMITMENTS AND CONTINGENCIES

Mandatory redeemable preferred stock, Series A senior cumulative participating
  convertible, $.001 par value, 25,000 issued and outstanding, stated at
  liquidation preference of $1,000 per share ($25,000), net of issuance costs                --            23,092
                                                                                  -------------     -------------

STOCKHOLDERS' EQUITY:
  Preferred stock, $.001 par value per share; 1,000,000
    shares authorized, 25,000 Series A issued and outstanding                                --                --
  Common stock, par value $.001 per share, 20,000,000
    shares authorized, 6,220,100 and 6,305,612 shares outstanding
    as of December 31, 1999 and June 30, 2000, respectively                                  --                --
  Additional paid-in capital                                                             15,942            16,977
  Retained earnings                                                                      28,477            32,631
                                                                                  -------------     -------------
                                                                                         44,419            49,608
Less--
  Treasury stock, 1,921,299 shares, at cost, as of
    December 31, 1999 and June 30, 2000, respectively                                    (2,129)           (2,129)
  Stock subscription receivable                                                             (21)              (21)
  Unearned compensation                                                                    (244)             (220)
                                                                                  -------------     -------------
         Total stockholders' equity                                                      42,025            47,238
                                                                                  -------------     -------------
         Total liabilities and stockholders' equity                               $      97,244     $      96,738
                                                                                  =============     =============
</TABLE>


  The accompanying notes are an integral part of these condensed consolidated
                                balance sheets.

                                       4
<PAGE>   5


                             EQUITY MARKETING, INC.

                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                         THREE MONTHS ENDED             SIX MONTHS ENDED
                                                              JUNE 30,                      JUNE 30,
                                                     --------------------------    --------------------------
                                                         1999           2000           1999           2000
                                                     -----------     ----------    -----------     ----------
<S>                                                  <C>             <C>           <C>             <C>
REVENUES                                             $    56,011     $   55,314    $    83,468     $   98,791
COST OF SALES                                             42,992         41,487         63,537         74,690
                                                     -----------     ----------    -----------     ----------
         Gross profit                                     13,019         13,827         19,931         24,101
                                                     -----------     ----------    -----------     ----------
OPERATING EXPENSES:
  Salaries, wages and benefits                             3,444          3,746          6,916          7,147
  Selling, general and administrative                      4,986          5,242          8,645         10,061
  Restructuring gain                                        (401)            --           (401)            --
                                                     -----------     ----------    -----------     ----------
         Total operating expenses                          8,029          8,988         15,160         17,208
                                                     -----------     ----------    -----------     ----------
         Income from operations                            4,990          4,839          4,771          6,893
OTHER  INCOME (EXPENSE), net                                (217)           270           (439)           355
                                                     -----------     ----------    -----------     ----------
         Income before provision for income taxes          4,773          5,109          4,332          7,248
PROVISION FOR INCOME TAXES                                 1,909          2,043          1,733          2,888
                                                     -----------     ----------    -----------     ----------
         Net income                                  $     2,864     $    3,066    $     2,599     $    4,360
                                                     ===========     ==========    ===========     ==========

NET INCOME                                           $     2,864     $    3,066    $     2,599     $    4,360
PREFERRED STOCK DIVIDENDS                                     --            201             --            207
                                                     -----------     ----------    -----------     ----------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS                2,864          2,865          2,599          4,153
                                                     ===========     ==========    ===========     ==========

BASIC NET INCOME PER SHARE                           $      0.46     $     0.46    $      0.42     $     0.66
                                                     ===========     ==========    ===========     ==========
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING              6,233,099      6,291,180      6,216,607      6,263,949
                                                     ===========     ==========    ===========     ==========
DILUTED NET INCOME PER SHARE                         $      0.45     $     0.41    $      0.41     $     0.63
                                                     ===========     ==========    ===========     ==========
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING            6,340,969      7,412,498      6,314,557      6,956,283
                                                     ===========     ==========    ===========     ==========
</TABLE>



  The accompanying notes are an integral part of these condensed consolidated
                                  statements.

                                       5

<PAGE>   6



                             EQUITY MARKETING, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                           SIX MONTHS ENDED
                                                                                                JUNE 30,
                                                                                          ---------------------
                                                                                            1999         2000
                                                                                          --------     --------
<S>                                                                                       <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                              $  2,599     $  4,360
  Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
        Depreciation and amortization                                                        1,371        1,316
        Provision for doubtful accounts                                                        179          674
        Loss on asset disposal                                                                  11           --
        Tax benefit from exercise of stock options                                              32          137
        Issuance of treasury stock to 401(k) Tax Deferred Saving Plan                           74           --
        Other                                                                                  (31)          --
        Changes in operating assets and liabilities:
           Increase (decrease) in cash and cash equivalents:
              Accounts receivable                                                           17,011        6,833
              Note receivable                                                                   --       (1,696)
              Inventory                                                                      1,805        2,060
              Prepaid expenses and other current assets                                      1,245         (763)
              Other assets                                                                    (474)          84
              Accounts payable                                                             (11,403)     (10,422)
              Accrued liabilities                                                           (3,796)      (7,179)
              Long-term liabilities                                                             10           80
                                                                                          --------     --------
         Net cash provided by (used in) operating activities                                 8,633       (4,516)
                                                                                          --------     --------
CASH FLOWS FROM INVESTING ACTIVITIES:
       Purchases of fixed assets                                                              (172)        (344)
       Proceeds from sale of fixed assets                                                       10           21
       Payment for purchase of USI                                                              --         (349)
                                                                                          --------     --------
         Net cash used in investing activities                                                (162)        (672)
                                                                                          --------     --------
CASH FLOWS FROM FINANCING ACTIVITIES:
       Repayments on line of credit                                                        (13,300)     (12,500)
       Proceeds from issuance of preferred stock and warrants including $1,004 of
         accrued offering costs not yet paid                                                    --       24,454
       Proceeds from exercise of stock options                                                  20          564
                                                                                          --------     --------
         Net cash (used in) provided by financing activities                               (13,280)      12,518
                                                                                          --------     --------
         Net (decrease) increase in cash and cash equivalents                               (4,809)       7,330
CASH AND CASH EQUIVALENTS, beginning of period                                               7,250        7,131
                                                                                          --------     --------
CASH AND CASH EQUIVALENTS, end of period                                                  $  2,441     $ 14,461
                                                                                          ========     ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  CASH PAID FOR:
    Interest                                                                              $    615     $    415
                                                                                          ========     ========
    Income taxes                                                                          $     --     $  4,949
                                                                                          ========     ========
</TABLE>



  The accompanying notes are an integral part of these condensed consolidated
                                  statements.

                                       6
<PAGE>   7


                             EQUITY MARKETING, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2000
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                   (UNAUDITED)

NOTE 1  --  ORGANIZATION AND BUSINESS

Equity Marketing, Inc., a Delaware corporation (the "Company"), is a leading
marketing services company, providing a wide range of custom promotional
programs that build sales and brand awareness for retailers, restaurant chains
and consumer goods companies such as Burger King Corporation, The Coca-Cola
Company, Exxon Company USA, Sunoco, Inc., CVS/pharmacy and others. The Company
is also a developer and marketer of distinctive, branded consumer products that
complement its core promotions business and are based on trademarks it owns or
classic licensed properties. The Company primarily sells to customers in the
United States.

Equity Marketing Hong Kong, Ltd., a Delaware corporation ("EMHK"), is a 100%
owned subsidiary of the Company. EMHK manages production of the Company's
products by third parties in the Far East and currently is responsible for
performing and/or procuring product sourcing, product engineering, quality
control inspections, independent safety testing and export/import documentation.

In April 1998, the Company purchased 100% of the common stock of Corinthian
Marketing, Inc., a Delaware corporation ("Corinthian"). Corinthian is engaged
principally in the design, manufacture, marketing and distribution of the
Headliners(R) brand of collectible figurines.

In July 1998, the Company acquired substantially all of the assets of Contract
Marketing, Inc. ("CMI"), a Massachusetts corporation, and U.S. Import and
Promotions Co. ("USI"), a Florida corporation, (CMI and USI are collectively
referred to herein as "USI"). USI focuses primarily on promotions for oil and
gas and other retailers. The Company intends to continue to use the acquired
assets for this purpose. The primary operations of USI are located in West
Boylston, Massachusetts and St. Augustine, Florida. In March 2000, the Company
paid $349 to the former stockholders of USI as additional cash consideration
related to the Company's purchase of USI. This amount was allocated to Goodwill.

NOTE 2  --  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

In the opinion of management and subject to year-end audit, the accompanying
unaudited condensed consolidated financial statements 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 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 of normal recurring accruals) considered
necessary for fair presentation have been included. The results of operations
for the interim periods are not necessarily indicative of the results for a full
year. These consolidated financial statements should be read in conjunction with
the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.

Certain reclassifications have been made to the accompanying 1999 financial
statements to conform them to the current period presentation.

NET INCOME PER SHARE

Basic net income per share ("EPS") is computed by dividing net income available
to common stockholders by the weighted average number of common shares
outstanding during each period. Net income available to common stockholders
represent reported net income less preferred stock dividend requirements.

Diluted EPS reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into common
stock. Diluted EPS includes in-the-money options and warrants using the treasury
stock method and also includes the assumed conversion of preferred stock using
the if-converted method. Options and warrants to purchase 608,000 and 1,481,666
shares of common stock, $.001 par value per share (the "Common Stock"), as of
June 30, 1999, and 2000, respectively were excluded from the computation of
diluted EPS as they would have been anti-dilutive.

The following is a reconciliation of the numerators and denominators of the
basic and diluted EPS computation for "income available to common stockholders"
and other disclosures required by Statement of Financial Accounting Standards
No. 128, "Earnings per Share":

                                       7
<PAGE>   8

<TABLE>
<CAPTION>

                                                                       For the Three Months Ended June 30,
                                                               --------------------------------------------------
                                                               2000                                          1999
------------------------------------------------------------------------------------------------------------------------------------

                                              Income          Shares      Per Share        Income            Share         Per Share
                                           (Numerator)     (Denominator)   Amount        (Numerator)     (Denominator)      Amount
------------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                <C>          <C>           <C>                 <C>          <C>
Basic EPS:
   Income available to common             $        2,865     6,291,180    $      .46    $        2,864      6,223,099    $      .46
     stockholders                                                         ==========                                     ==========
Preferred stock dividends                            201            --                              --             --
Effect of Dilutive Securities:
     Options and warrants                             --       216,941                              --        117,870
Convertible preferred stock                           --       904,377                              --             --
                                          --------------     ---------                  --------------      ---------
Dilutive EPS:
   Income available to common
   stockholders and assumed conversion    $        3,066     7,412,498    $      .41    $        2,864      6,340,969    $      .45
                                          ==============     =========    ==========    ==============      =========    ==========
</TABLE>

<TABLE>
<CAPTION>


                                                                       For the Six Months Ended June 30,
                                                               --------------------------------------------------
                                                               2000                                          1999
------------------------------------------------------------------------------------------------------------------------------------

                                              Income          Shares      Per Share        Income            Share         Per Share
                                           (Numerator)     (Denominator)   Amount        (Numerator)     (Denominator)      Amount
------------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                <C>          <C>           <C>                 <C>          <C>
Basic EPS:
   Income available to common             $   4,153          6,263,949    $     .66     $     2,599         6,216,607    $     .42
     stockholders                                                         =========                                      =========
Preferred stock dividends                       207                 --                           --                --
Effect of Dilutive Securities:
     Options and warrants                        --            226,847                           --            97,950
Convertible preferred stock                      --            465,487                           --                --
                                          ---------          ---------                  -----------         ---------
Dilutive EPS:
   Income available to common
   stockholders and assumed conversion    $   4,360          6,956,283    $     .63     $     2,599         6,314,557    $     .41
                                          =========          =========    =========     ===========         =========    ==========
</TABLE>


INVENTORY

Inventory consists of production-in-process which primarily represents tooling
costs which are deferred and amortized over the life of the products and
purchased finished goods held for sale to customers and purchased finished goods
in transit to customers' distribution centers. Inventory is stated at the lower
of average cost or market. As of December 31, 1999 and June 30, 2000, inventory
consisted of the following:

<TABLE>
<CAPTION>

                         DECEMBER 31,       JUNE 30,
                              1999             2000
                         -------------    -------------
<S>                      <C>              <C>
Production-in-process    $       1,088    $       1,928
Finished goods                   7,654            4,754
                         -------------    -------------
                         $       8,742    $       6,682
                         =============    =============
</TABLE>

NOTE 3  --  SHORT-TERM DEBT

At December 31, 1999 and June 30, 2000, the Company was party to a revolving
credit agreement ("Credit Agreement") with two commercial banks. The agreement,
as amended on July 27, 2000, provides for a line of credit of $25,000 through
June 30, 2001 with borrowing availability determined by a formula based on
qualified assets. Interest on outstanding borrowings is based on either a fixed
rate equivalent to LIBOR plus an applicable spread of between 2.00 and 3.00
percent or a variable rate equivalent to the lead bank's reference rate plus an
applicable spread of between zero and 0.50 percent. The Company is also required
to pay an unused line fee of between zero and 0.50 percent per annum and certain
letter of credit fees. The applicable spread is based on the achievement of
certain financial ratios. The Credit Agreement is secured by substantially all
of the Company's assets. The Credit Agreement requires the Company to comply
with certain restrictions and financial covenants as defined in the agreement.
As of June 30, 2000, the Company was in compliance with these requirements.

As of December 31, 1999, there was $12,500 outstanding under the Credit
Agreement. There were no amounts outstanding under the Credit Agreement at June
30, 2000. Letters of credit outstanding as of December 31, 1999 and June 30,
2000 totaled $401.

                                       8

<PAGE>   9



NOTE 4  --  RESTRUCTURING RESERVE

On December 21, 1998, the Company announced its decision to exit the
event-based-license consumer products business along with its retail pin
business. In connection with this decision, the Company recorded a restructuring
charge of $4,121 in 1998. The restructuring charge includes a provision for
projected minimum royalty guarantee shortfalls associated with long-term
licenses which the Company has decided to discontinue, severance for workforce
reductions of 30 employees, a provision for outstanding inventory purchase
commitments on purchase orders the Company cancelled, and a provision for costs
associated with the planned closure of the Company's warehouse facility. Details
of the restructuring charge are as follows:
<TABLE>
<CAPTION>

                                                                                                       Utilized Six
                                              Original    Utilized    Utilized   Reversed    Charged   Months Ended        To Be
                                               Charge       1998        1999       1999        1999    June 30, 2000      Utilized
------------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>         <C>         <C>         <C>        <C>       <C>                <C>
Provision for projected minimum royalty
     guarantee shortfalls                      $ 2,187     $    --     $  (267)    $(641)    $    --        $(1,062)        $217
Employee severance and termination benefits        738        (127)       (648)       --          37             --           --
Outstanding inventory purchase commitments         800          --        (716)       --          --             --           84
Lease commitment for warehouse facility            396          --         (31)       --          --            (22)         343
------------------------------------------------------------------------------------------------------------------------------------
                                               $ 4,121     $  (127)    $(1,662)    $(641)    $    37        $(1,084)        $644
====================================================================================================================================
</TABLE>

NOTE 5 -  MANDATORY REDEEMABLE PREFERRED STOCK

On March 29, 2000, Crown EMAK Partners, LLC, a Delaware limited liability
company ("Crown"), invested $11,900 in the Company in exchange for preferred
stock and warrants to purchase additional preferred stock. Under the terms of
the investment, Crown acquired 11,900 shares of Series A senior cumulative
participating convertible preferred stock, par value $.001 per share, of the
Company (the "Series A Stock") with a conversion price of $14.75 per share. In
connection with such purchase, the Company granted to Crown five year warrants
(collectively, the "Warrants") to purchase 5,712 shares of Series B senior
cumulative participating convertible preferred stock, par value $.001 per share,
of the Company (the "Series B Stock") at an exercise price of $1,000 per share,
and 1,428 shares of Series C senior cumulative participating convertible
preferred stock, par value $.001 per share, of the Company (the "Series C
Stock") at an exercise price of $1,000 per share. The Warrants are immediately
exercisable. The conversion prices of the Series B Stock and the Series C Stock
are $16.00 and $18.00, respectively. On June 20, 2000, Crown paid an additional
$13,100 to the Company in exchange for an additional 13,100 shares of Series A
Stock with a conversion price of $14.75 per share. In connection with such
purchase, the Company granted to Crown Warrants to purchase an additional 6,288
shares of Series B Stock and an additional 1,572 shares of Series C Stock. Each
share of Series A Stock is convertible into 67.7966 shares of Common Stock,
representing 1,694,915 shares of Common Stock. Each share of Series B Stock and
Series C Stock is convertible into 62.5 and 55.5556 shares of Common Stock,
respectively, representing 916,666 shares of Common Stock in the aggregate. Also
in connection with such purchase, the Company agreed to pay Crown a commitment
fee in the aggregate amount of $1,250, paid in equal quarterly installments of
$62.5 commencing on June 30, 2000 and ending on March 31, 2005. A payment of
$62.5 was made for the quarter ended June 30, 2000.

Upon any voluntary or involuntary liquidation, dissolution or winding-up of the
affairs of the Company, Crown, as holder of the preferred stock, will be
entitled to payment out of the assets of the Company available for distribution
of an amount equal to the greater of (a) the liquidation preference of $1,000
per share (the "Liquidation Preference") plus all accrued and unpaid dividends
or (b) the aggregate amount of payment that the outstanding preferred stock
holder would have received assuming conversion to Common Stock immediately prior
to the date of liquidation of capital stock, before any payment is made to other
stockholders.

The Series A Stock, Series B Stock and Series C Stock are subject to mandatory
redemption at 101% of the aggregate Liquidation Preference plus accrued and
unpaid dividends if a change in control of the Company occurs.

Crown has voting rights equivalent to the number of shares of Common Stock into
which their preferred stock is convertible on the relevant record date. Crown is
also entitled to receive a quarterly dividend equal to 6% of the Liquidation
Preference per share outstanding, payable in cash. A cash dividend of $207 was
paid to Crown on June 30, 2000.

Crown currently holds 100% of the outstanding shares of Series A Stock, and
consequently, has designated two individuals to the Board of Directors of the
Company.

The Series A Stock is recorded in the accompanying condensed consolidated
balance sheets at its Liquidation Preference net of issuance costs. The issuance
costs total approximately $1,900 and include an accrual of approximately $1,000
for the present value of the commitment fee discussed above.

                                       9
<PAGE>   10
NOTE 6  -  LEGAL PROCEEDINGS

POKEMON RECALL AND RELATED MATTERS
On January 21, 2000, a purported class action lawsuit entitled Domingo
Quintinilla v. Tex-Best Travel Centers, Inc., Burger King Corporation, and
Equity Marketing, Inc. was filed in the District Court of Hidalgo County, Texas.
The lawsuit was filed by an individual purporting to represent all individuals
in the United States that had received a Pokemon(TM) ball from a Burger King(R)
restaurant. On May 26, 2000, the case was dismissed without prejudice by the
plaintiff.

In addition to the information regarding the Pokemon(TM) recall and related
matters contained in this document, readers are advised to review the Company's
Form 10-K for the year ended December 31, 1999, under the heading "Item 3. Legal
Proceedings." and the Company's Form 10-Q for the quarter ended March 31, 2000,
under the heading "Item 1. Legal Proceedings."

NOTE 7  -  SEGMENTS

The Company has identified two reportable segments through which it conducts its
continuing operations: promotions and consumer products. The factors for
determining the reportable segments were based on the distinct nature of their
operations. They are managed as separate business units because each requires
and is responsible for executing a unique business strategy. The promotions
segment produces promotional products used as free premiums or sold in
conjunction with the purchase of other items at a retailer or quick service
restaurant. Promotional products are used for marketing purposes by both the
companies sponsoring the promotions and the licensors of the entertainment
properties on which the promotional products are based. The consumer products
segment designs and contracts for the manufacture of toys and other consumer
products for sale to major mass market retailers, who in turn sell the products
to consumers.

Earnings of industry segments and geographic areas exclude interest income,
interest expense, depreciation, and other unallocated corporate expenses. Income
taxes are allocated to segments on the basis of operating results. Identified
assets are those assets used in the operations of the segments and include
accounts receivable, note receivable, inventory, goodwill and the Headliners(R)
trademark. Corporate assets consist of cash, certain corporate receivables,
fixed assets, and certain trademarks.

INDUSTRY SEGMENTS

<TABLE>
<CAPTION>

                                                                    AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1999
                                                                    --------------------------------------------------
                                                                                CONSUMER
                                                             PROMOTIONS         PRODUCTS          CORPORATE            TOTAL
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>               <C>                <C>                <C>
              Total revenues                                $     50,774      $      5,237       $         --       $     56,011
================================================================================================================================

              Income (loss) before provision (benefit)
                for income taxes                            $     10,058      $     (1,006)      $     (4,279)      $      4,773
              Provision (benefit) for income taxes                 4,023              (402)            (1,712)             1,909
--------------------------------------------------------------------------------------------------------------------------------
              Net income (loss)                             $      6,035      $       (604)      $     (2,567)      $      2,864
================================================================================================================================

              Fixed asset additions, net                    $         --      $         --       $         69       $         69
================================================================================================================================
              Depreciation and amortization                 $        143      $        173       $        374       $        690
================================================================================================================================
              Total assets                                  $     49,765      $      3,664       $     36,287       $     89,716
================================================================================================================================

</TABLE>

<TABLE>
<CAPTION>

                                                                    AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 2000
                                                                    --------------------------------------------------
                                                                                CONSUMER
                                                             PROMOTIONS         PRODUCTS         CORPORATE            TOTAL
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>               <C>               <C>                <C>
              Total revenues                                $     50,628      $      4,686      $         --       $     55,314
================================================================================================================================

              Income (loss) before provision (benefit)
                for income taxes                            $      8,673      $        510      $     (4,074)      $      5,109
              Provision (benefit) for income taxes                 3,469               204            (1,630)             2,043
-------------------------------------------------------------------------------------------------------------------------------
              Net income (loss)                             $      5,204      $        306      $     (2,444)      $      3,066
================================================================================================================================

              Fixed asset additions, net                    $         --      $         --      $        207       $        207
================================================================================================================================
              Depreciation and amortization                 $        183      $        119      $        355       $        657
================================================================================================================================
              Total assets                                  $     55,640      $     14,678      $     26,420       $     96,738
================================================================================================================================
</TABLE>

                                       10

<PAGE>   11
<TABLE>
<CAPTION>


                                                                    AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1999
                                                                    ------------------------------------------------
                                                                               CONSUMER
                                                             PROMOTIONS        PRODUCTS           CORPORATE            TOTAL
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>               <C>                <C>                <C>
              Total revenues                                $     75,072      $      8,396       $         --       $     83,468
================================================================================================================================

              Income (loss) before provision (benefit)
                for income taxes                            $     14,355      $     (1,217)      $     (8,806)      $      4,332
              Provision (benefit) for income taxes                 5,742              (487)            (3,522)             1,733
-------------------------------------------------------------------------------------------------------------------------------
              Net income (loss)                             $      8,613      $       (730)      $     (5,284)      $      2,599
================================================================================================================================

              Fixed asset additions, net                    $         --      $         --       $        172       $        172
================================================================================================================================
              Depreciation and amortization                 $        375      $        257       $        739       $      1,371
================================================================================================================================
              Total assets                                  $     49,765      $      3,664       $     36,287       $     89,716
================================================================================================================================
</TABLE>

<TABLE>
<CAPTION>

                                                                     AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 2000
                                                                     ------------------------------------------------
                                                                                CONSUMER
                                                             PROMOTIONS         PRODUCTS         CORPORATE            TOTAL
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>               <C>               <C>                <C>
              Total revenues                                $     90,830      $      7,961      $         --       $     98,791
================================================================================================================================

              Income (loss) before provision (benefit)
                for income taxes                            $     14,336      $        767      $     (7,855)      $      7,248
              Provision (benefit) for income taxes                 5,713               305            (3,130)             2,888
-------------------------------------------------------------------------------------------------------------------------------
              Net income (loss)                             $      8,623      $        462      $     (4,725)      $      4,360
================================================================================================================================

              Fixed asset additions, net                    $         --      $         --      $        344       $        344
================================================================================================================================
              Depreciation and amortization                 $        365      $        237      $        714       $      1,316
================================================================================================================================
              Total assets                                  $     55,640      $     14,678      $     26,420       $     96,738
================================================================================================================================
</TABLE>

NOTE 8 - AMERISERVE BANKRUPTCY

The Company regularly extends credit to several distribution companies in
connection with its business with Burger King. One of these distribution
companies, AmeriServe Food Distribution, Inc. together with certain of its
affiliates (including its affiliates, "AmeriServe") accounted for more than 50
percent of the products purchased from the Company by the Burger King system in
1999. AmeriServe filed a voluntary petition under Chapter 11 of the United
States Bankruptcy Code on January 31, 2000. As of January 31, 2000, AmeriServe
owed the Company approximately $28,800 million in trade receivables. AmeriServe
was able to secure temporary debtor in possession funding to enable it to
continue operating in the short-term post bankruptcy.

Restaurant Services, Inc. ("RSI"), a not-for-profit purchasing cooperative that
has as its members Burger King franchisees and Burger King, is the exclusive
purchasing agent for the Burger King system of franchisee-owned and
company-owned restaurants located in the United States. Subsequent to January
31, 2000, the Company reached an agreement with RSI in which RSI purchased all
pre-petition trade receivables owed to the Company by AmeriServe in exchange for
a two-year non-interest-bearing note valued at approximately $16,000 and the
satisfaction of certain contractual obligations owed by the Company to RSI. This
agreement resulted in a net pre-tax charge of approximately $1,000 for the year
ended December 31, 1999. A note receivable of approximately $10,500 has been
recorded on the accompanying condensed consolidated balance sheet as of December
31, 1999. Approximately $6,600 of the $28,800 pre-petition trade receivables
relate to sales made in January 2000. Accordingly, the remaining $5,500 portion
of the note receivable was recorded in January 2000, and resulted in a net
pre-tax charge of approximately $500 for the quarter ended March 31, 2000. This
charge was partially offset by approximately $600 of imputed interest income
recorded on the note receivable for the six months ended June 30, 2000. The
balance of the note receivable as of June 30, 2000 was approximately $12,200,
$4,300 of which was classified as long-term.

In a press release issued on April 12, 2000, Burger King announced that "it
plans an orderly transition of distribution services as the Burger King(R)
system leaves its relationship with AmeriServe Food Distribution, Inc." The
press release stated that Burger King had arranged for alternative distribution
services for the Burger King restaurants currently served by AmeriServe. The
press release further stated that Burger King expects to complete the transition
to alternative distributors by July, 2000 and that the debtor-in-possession
financing provided by Burger King to AmeriServe would remain in effect until
August, 2000. As of July 2000, the transition to alternative distributors was
completed. Following such transition, the largest distribution company accounted
for approximately 20% of the products purchased from the Company by the
Burger King system.


                                       11
<PAGE>   12

NOTE 9 - STOCK REPURCHASE

The Company's Board of Directors has authorized up to $10,000 for the repurchase
of the Company's common stock over the next twelve months. The repurchase
program commenced on July 21, 2000. Purchases will be conducted in the open
market at prevailing prices, based on market conditions. The Company may also
transact purchases effected as block trades, as well as certain negotiated,
off-exchange purchases not in the open market. This repurchase program will be
funded through a combination of working capital and bank debt. As of the date
hereof, the Company has purchased an aggregate of 20,500 shares at an average
price of $12.34 per share.

                                       12
<PAGE>   13

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

CAUTIONARY STATEMENT

Certain expectations and projections regarding the future performance of Equity
Marketing, Inc. (the "Company") discussed in this quarterly report are
forward-looking and are made under the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. These expectations and projections are
based on currently available competitive, financial and economic data along with
the Company's operating plans and are subject to future events and
uncertainties. Forward-looking statements can be identified by the use of
forward looking terminology, such as may, will, should, expect, anticipate,
estimate, continue, plans, intends or other similar terminology. Management
cautions you that the following factors, among others, could cause the Company's
actual consolidated results of operations and financial position in 2000 and
thereafter to differ significantly from those expressed in forward-looking
statements:

MARKETPLACE RISKS

-    Dependence on a single customer, Burger King, which may adversely affect
     the Company's financial condition and results of operations
-    Availability and pricing of raw materials. Virtually all of the Company's
     raw materials are available from numerous suppliers. However, a worldwide
     shortage of electronic components could impact our ability to meet customer
     demand. In addition, prices for plastics, a major component of the
     Company's products, began rising in late 1999 as a result of the increase
     in petroleum prices. This trend is continuing in 2000. The Company does not
     have long-term supply contracts in place with its suppliers. Accordingly,
     continued shortages of electronic components or petroleum price increases
     could result in higher prices for the Company's products which the Company
     may not be able to pass on to its customers. Any such failure could
     negatively impact the Company's business, financial condition or results of
     operations
-    Significant quarter-to-quarter variability in the Company's revenues and
     net income, which may result in operating results below the expectations of
     securities analysts and investors
-    Dependence on the popularity of licensed entertainment properties, which
     may adversely affect the Company's financial condition and results of
     operations
-    Dependence on the ability to license, develop and market new products,
     which may adversely affect the Company's financial condition and results of
     operations
-    Increased competitive pressure, which may affect the sales of the Company's
     products
-    Dependence on foreign manufacturers, which may increase the costs of the
     Company's products and affect the demand for such products
-    Concentration risk associated with accounts receivable. The Company
     regularly extends credit to several distribution companies in connection
     with its business with Burger King. One of these distribution companies,
     AmeriServe Food Distribution, Inc. ("AmeriServe"), accounted for more than
     50% of the products purchased from the Company by the Burger King system in
     1999. AmeriServe filed a voluntary petition under Chapter 11 of the United
     States Bankruptcy Code on January 31, 2000 (see "AmeriServe Bankruptcy").
     Transition from AmeriServe to other distributors was completed during July
     2000. Following such transition, the largest distribution company currently
     accounts for approximately 20% of the products purchased from the Company
     by the Burger King system.

FINANCING RISKS

-    Currency fluctuations, which may affect the Company's suppliers and the
     Company's reportable income
-    Need for additional working capital to fund the Company's business, which
     may not be available at all or on favorable terms when required

OTHER RISKS

-    Potential negative impact of past or future acquisitions, which may disrupt
     the Company's ongoing business, distract senior management and increase
     expenses
-    Adverse results of litigation, governmental proceedings or environmental
     matters, which may lead to increased costs or interruption in normal
     business operations of the Company
-    Changes in laws or regulations, both domestically and internationally,
     including those affecting consumer products or environmental activities or
     trade restrictions, which may lead to increased costs
-    Exposure to liability for the costs related to product recalls. These costs
     can include legal expenses, advertising, collection and destruction of
     product, and free goods. The Company's product liability insurance coverage
     generally excludes such costs and damages resulting from product recall


                                       13
<PAGE>   14

The Company undertakes no obligation to publicly release the results of any
revisions to forward-looking statements, which may be made to reflect events or
circumstance after the date hereof or to reflect the occurrence of unanticipated
events. The risks highlighted herein should not be assumed to be the only items
that could affect future performance of the Company. In addition to the
information contained in this document, readers are advised to review the
Company's Form 10-K for the year ended December 31, 1999, under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Cautionary Statements and Risk Factors."

ORGANIZATION AND BUSINESS

Equity Marketing, Inc., a Delaware corporation (the "Company"), is a leading
marketing services company, providing a wide range of custom promotional
programs that build sales and brand awareness for retailers, restaurant chains
and consumer goods companies such as Burger King Corporation, The Coca-Cola
Company, Exxon Company USA, Sunoco, Inc., CVS/pharmacy and others. The Company
is also a developer and marketer of distinctive, branded consumer products that
complement its core promotions business and are based on trademarks it owns or
classic licensed properties. The Company primarily sells to customers in the
United States.

Equity Marketing Hong Kong, Ltd., a Delaware corporation ("EMHK"), is a 100%
owned subsidiary of the Company. EMHK manages production of the Company's
products by third parties in the Far East and currently is responsible for
performing and/or procuring product sourcing, product engineering, quality
control inspections, independent safety testing and export/import documentation.

In April 1998, the Company purchased 100% of the common stock of Corinthian
Marketing, Inc., a Delaware corporation ("Corinthian"). Corinthian is engaged
principally in the design, manufacture, marketing and distribution of the
Headliners brand of collectible figurines.

In July 1998, the Company acquired substantially all of the assets of Contract
Marketing, Inc. ("CMI"), a Massachusetts corporation, and U.S. Import and
Promotions Co. ("USI"), a Florida corporation, (CMI and USI are collectively
referred to as "USI"). USI focuses primarily on promotions for oil and gas and
other retailers. The Company intends to continue to use the acquired assets for
this purpose. The primary operations of USI are located in West Boylston,
Massachusetts and St. Augustine, Florida.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the Company's
operating results as a percentage of total revenues:


<TABLE>
<CAPTION>

                                                        THREE MONTHS                 SIX MONTHS
                                                        ENDED JUNE 30,              ENDED JUNE 30,
                                                        --------------              --------------


                                                      1999          2000         1999          2000
                                                     ------        ------       ------        ------
<S>                                                   <C>           <C>          <C>          <C>
Revenues                                              100.0%        100.0%        100.0%       100.0%
Cost of sales                                          76.8          75.0         76.1          75.6
                                                     ------        ------       ------        ------
       Gross profit                                    23.2          25.0         23.9          24.4
                                                     ------        ------       ------        ------
Operating Expenses:
  Salaries, wages and benefits                          6.1           6.8          8.3           7.2
  Selling, general and administrative                   8.9           9.5         10.4          10.2
  Restructuring gain                                   (0.7)           --          (.5)           --
                                                     ------        ------       ------        ------
       Total operating expenses                        14.3          16.3         18.2          17.4
                                                     ------        ------       ------        ------
       Income from operations                           8.9           8.7          5.7           7.0
Interest income (expense), net                         (0.4)          0.5          (.5)          0.3
                                                     ------        ------       ------        ------
       Income before provision for income taxes         8.5           9.2          5.2           7.3
Provision for income taxes                              3.4           3.7          2.1           2.9
                                                     ------        ------       ------        ------
         Net income                                     5.1%          5.5%         3.1%          4.4%
                                                     ======        ======       ======        ======
</TABLE>

                                       14
<PAGE>   15

EBITDA

While many in the financial community consider earnings before interest, taxes,
depreciation and amortization ("EBITDA") to be an important measure of
comparative operating performance, it should be considered in addition to, but
not as a substitute for or superior to, operating income, net earnings, cash
flow and other measures of financial performance prepared in accordance with
accounting principles generally accepted in the United States. EBITDA does not
reflect cash available to fund cash requirements, and the items excluded from
EBITDA, such as depreciation and amortization, are significant components in
assessing the Company's financial performance. Other significant uses of cash
flows are required before cash will be available to the Company, including debt
service, taxes and cash expenditures for various long-term assets. The Company's
calculation of EBITDA may be different from the calculation used by other
companies and, therefore, comparability may be limited. The following table sets
forth EBITDA for the years indicated:

<TABLE>
<CAPTION>

                                           FOR THREE MONTHS ENDED JUNE 30,        FOR SIX MONTHS ENDED JUNE 30,
                                           ------------------------------         -----------------------------
                                              1999               2000               1999               2000
----------------------------------------------------------------------------------------------------------------
<S>                                        <C>                <C>                <C>                <C>
Net income                                 $      2,864       $      3,066       $      2,599       $      4,360
Less:  Restructuring gain                          (401)                --               (401)                --
Add:   Depreciation and amortization                690                657              1,371              1,316
       Interest (income) expense, net               217               (270)               439               (355)
       Provision for income taxes                 1,909              2,043              1,733              2,888
----------------------------------------------------------------------------------------------------------------
EBITDA                                     $      5,279       $      5,496       $      5,741       $      8,209
================================================================================================================
</TABLE>

THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
(000'S OMITTED):

Revenues for the three months ended June 30, 2000 decreased $697 or 1.2% to
$55,314 from $56,011 in the comparable period in 1999. Promotions revenues
decreased $146 to $50,628 primarily due to the timing of promotional programs
for Burger King Corporation. Consumer Product revenues decreased $551 to $4,686
from $5,237. Excluding liquidation sales of discontinued Consumer Product lines
of $1,924 in 1999 related to the Company's decision to exit the event-based
license consumer product business, sales increased $1,373 primarily due to
higher sales in Scooby-Doo and Tub Tints product, partially offset by reduced
sales of Headliners(R).

Cost of sales decreased $1,505 to $41,487 (75.0% of revenues) for the three
months ended June 30, 2000 from $42,992 (76.8% of revenues). This decrease is
due to lower sales and higher gross margins in 2000 compared to 1999. The gross
margin percentage for the period increased to 25.0% for the three months ended
June 30, 2000 from 23.2% in the comparable period for 1999. The increased margin
percentage is attributable to lower than expected returns and better than
expected sales from a promotional program which was closed in a prior period.

Salaries, wages and benefits increased $302, or 8.8% to $3,746 (6.8% of
revenues). This increase was primarily attributable to staffing additions
resulting from the Company's current growth initiatives in 2000.

Selling, general and administrative expenses increased $256, or 5.1% to $5,242
(9.5% of revenues). This increase is due primarily to increased freight out and
warehousing costs associated with several large promotional programs.

Net interest income was $270 for the three months ended June 30, 2000 compared
to net interest expense of $217 for the three months ended June 30, 1999. The
net interest income in 2000 was attributable to approximately $300 of imputed
interest income recorded on a note receivable (see "AmeriServe Bankruptcy") and
to the paydown of all outstanding short-term debt during the second quarter of
2000 as a result of the cash proceed received from the issuance of preferred
stock (see "Issuance of Preferred Stock").

The effective tax rate for the three months ended June 30, 2000 was 40.0% which
is consistent with the effective tax rate for the same period in 1999.

Net income increased $202 or 7.1% to $3,066 (5.5% of revenues) from $2,864 (5.1%
of revenues) in 1999 primarily due to greater gross profit earned in 2000
partially offset by increased salaries, wages and benefits and selling, general
and administrative expenses.

In 2000, EBITDA increased $217 or 4.1% to $5,496 from $5,279 in 1999 primarily
due to greater gross profit earned in 2000. This increase was partially offset
by the increase in salaries, wages and benefits and selling, general and
administrative expenses for the three months ended June 30, 2000.

                                       15
<PAGE>   16

SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999 (000'S
OMITTED):

Revenues for the six months ended June 30, 2000 increased $15,323 or 18.4% to
$98,791 from $83,468 in the comparable period in 1999. Promotions revenues
increased $15,758 to $90,830 primarily as a result of increased revenues
associated with several Burger King promotions. Consumer Products revenues
decreased $435 to $7,961. Excluding liquidation sales of discontinued consumer
product lines of $2,415 in 1999 related to the Company's decision to exit the
event-based license consumer product business, sales increased $1,980 primarily
due to increased sales in Scooby-Doo and Tub Tints product, partially offset by
reduced sales of Headliners(R).

Cost of sales increased $11,153 to $74,690 (75.6% of revenues) for the six
months ended June 30, 2000 from $63,537 (76.1% of revenues) in the comparable
period in 1999 due to higher sales in 2000. The gross margin percentage for the
period increased to 24.4% for the six months ended June 30, 2000 from 23.9% in
the comparable period for 1999. The increased margin percentage is attributable
to lower than expected returns and better than expected sales from a promotional
program which was closed in a prior period.

Salaries, wages and benefits increased $231, or 3.3% to $7,147 (7.2% of
revenues). This increase was primarily attributable to staffing additions
resulting from the Company's growth initiatives in 2000.

Selling, general and administrative expenses increased $1,416, or 16.4% to
$10,061 (10.2% of revenues). This increase is due primarily to increased freight
out and warehousing costs resulting from the increase in sales volume.
Approximately $500 of this increase resulted from additional bad debt expense
recorded for the bankruptcy of AmeriServe (see "AmeriServe Bankruptcy").
Selling, general and administrative expenses decreased as a percentage of
revenues from 10.4% to 10.2% as a result of revenues which increased at a
greater rate.

Net interest income was $355 for the six months ended June 30, 2000 compared to
net interest expense of $439 for the six months ended June 30, 1999. The net
interest income in 2000 was attributable to approximately $600 of imputed
interest income recorded on a note receivable (see "AmeriServe Bankruptcy") and
to the paydown of short-term debt during 2000 as a result of the cash proceed
received from the issuance of preferred stock (see "Issuance of Preferred
Stock").

The effective tax rate for the six months ended June 30, 2000 was 39.85% which
is consistent with the 40.0% tax rate recorded for the six months ended June 30,
1999.

Net income increased $1,761 or 67.8% to $4,360 (4.4% of revenues) from $2,599
(3.1% of revenues) in 1999 primarily due to greater gross profit earned on the
increased revenues in 2000 partially offset by increased salaries, wages and
benefits and selling, general and administrative expenses.

In 2000, EBITDA increased $2,468 or 43.0% to $8,209 from $5,741 in 1999
primarily due to greater gross profit earned on increased revenues in 2000. This
increase was partially offset by the increase in salaries, wages and benefits
and selling, general and administrative expenses for the six months ended June
30, 2000.

FINANCIAL CONDITION AND LIQUIDITY

As of June 30, 2000, the Company's investment in accounts receivable decreased
$7,507 from the balance at December 31, 1999. This decrease was attributable to
the sale of the AmeriServe trade receivables to Restaurant Services, Inc.
("RSI") (see "AmeriServe Bankruptcy") and to collections of substantially all of
the receivables related to sales shipped late in the 1999 fourth quarter. As of
June 30, 2000, inventory decreased approximately $2,060 from December 31, 1999
primarily due to the timing of Burger King and other client promotions.

As of June 30, 2000, accounts payable decreased $10,422 compared to December 31,
1999. This decrease is attributable to payments to vendors associated with the
manufacturing related to large fourth quarter 1999 promotional programs.

As of June 30, 2000, accrued liabilities decreased $5,969 compared to December
31, 1999. This decrease is primarily attributable to the payment of employee
bonuses related to 1999, the payment of royalty guarantees associated with the
restructuring charge recorded in 1998, the payment of royalties associated with
fourth quarter 1999 Consumer Products revenue, and the payment of federal and
state income taxes related to 1999 net income.

                                       16
<PAGE>   17

As of June 30, 2000, working capital was $41,395 compared to $11,045 at December
31, 1999. The increase in working capital was primarily due to the cash received
from the issuances of senior cumulative participating convertible preferred
stock on March 29, 2000 and on June 20, 2000 (see "Issuance of Preferred
Stock"). The Company did not have any significant investing activities in the
quarter. The Company believes that its cash from operations, cash on hand at
June 30, 2000 and its credit facility will be sufficient to fund its working
capital needs for at least the next twelve months. The statements set forth
herein are forward-looking and actual results may differ materially.

CREDIT FACILITIES

The Company maintains and periodically amends or replaces a credit agreement
with two commercial banks that is utilized to finance the seasonal working
capital requirements of its operations. The credit facility is secured by
substantially all of the Company's assets. The agreement, as amended on July 27,
2000, provides for a line of credit of $25,000 through June 30, 2001 with
borrowing availability determined by a formula based on qualified assets. There
were no amounts outstanding under the credit facility as of June 30, 2000.
Letters of credit outstanding as of June 30, 2000 totaled $401. The Credit
Agreement requires the Company to comply with certain restrictions and financial
covenants as defined in the agreement. As of June 30, 2000, the Company was in
compliance with these covenants.

The Credit Agreement also places restrictions on, among other things, the
Company's capital expenditures, payment of dividends, stock repurchases,
acquisitions, investments and transactions with affiliates.

ISSUANCE OF PREFERRED STOCK

On March 29, 2000, Crown EMAK Partners, LLC, a Delaware limited liability
company ("Crown"), invested $11,900 in the Company in exchange for preferred
stock and warrants to purchase additional preferred stock. Under the terms of
the investment, Crown acquired 11,900 shares of Series A senior cumulative
participating convertible preferred stock, par value $.001 per share, of the
Company (the "Series A Stock") with a conversion price of $14.75 per share. In
connection with such purchase, the Company granted to Crown five year warrants
(collectively, the "Warrants") to purchase 5,712 shares of Series B senior
cumulative participating convertible preferred stock, par value $.001 per share,
of the Company (the "Series B Stock") at an exercise price of $1,000 per share,
and 1,428 shares of Series C senior cumulative participating convertible
preferred stock, par value $.001 per share, of the Company (the "Series C
Stock") at an exercise price of $1,000 per share. The Warrants are immediately
exercisable. The conversion prices of the Series B Stock and the Series C Stock
are $16.00 and $18.00, respectively. On June 20, 2000, Crown paid an additional
$13,100 to the Company in exchange for an additional 13,100 shares of Series A
Stock with a conversion price of $14.75 per share. In connection with such
purchase, the Company granted to Crown Warrants to purchase an additional 6,288
shares of Series B Stock and an additional 1,572 shares of Series C Stock. Each
share of Series A Stock is convertible into 67.7966 shares of Common Stock,
representing 1,694,915 shares of Common Stock in aggregate. Each share of Series
B Stock and Series C Stock is convertible into 62.5 and 55.5556 shares of Common
Stock, respectively, representing 916,666 shares of Common Stock in aggregate.
Also in connection with such purchase, the Company agreed to pay Crown a
commitment fee in the aggregate amount of $1,250, paid in equal quarterly
installments of $62.5 commencing on June 30, 2000 and ending on March 31, 2005.
A payment of $62.5 was made for the quarter ended June 30, 2000.

Upon any voluntary or involuntary liquidation, dissolution or winding-up of the
affairs of the Company, Crown, as holder of the preferred stock, will be
entitled to payment out of the assets of the Company available for distribution
of an amount equal to the greater of (a) the liquidation preference of $1,000
per share (the "Liquidation Preference") plus all accrued and unpaid dividends
or (b) the aggregate amount of payment that the outstanding preferred stock
holder would have received assuming conversion to Common Stock immediately prior
to the date of liquidation of capital stock, before any payment is made to other
stockholders.

The Series A Stock, Series B Stock and Series C Stock are subject to mandatory
redemption at 101% of the aggregate Liquidation Preference plus accrued and
unpaid dividends if a change in control of the Company occurs.

Crown has voting rights equivalent to the number of shares of Common Stock into
which their preferred stock is convertible on the relevant record date. Crown is
also entitled to receive a quarterly dividend equal to 6% of the Liquidation
Preference per share outstanding, payable in cash. A cash dividend of $207 was
paid to Crown on June 30, 2000.

Crown currently holds 100% of the outstanding shares of Series A Stock, and
consequently, has designated two individuals to the Board of Directors of the
Company.

                                       17
<PAGE>   18

The Series A Stock is recorded in the accompanying condensed consolidated
balance sheets at its Liquidation Preference net of issuance costs. The issuance
costs total approximately $1,900 and include an accrual of approximately $1,000
for the present value of the commitment fee discussed above.

STOCK REPURCHASE
The Company's Board of Directors has authorized up to $10,000 for the repurchase
of the Company's common stock over the next twelve months. The repurchase
program commenced on July 21, 2000. Purchases will be conducted in the open
market at prevailing prices, based on market conditions. The Company may also
transact purchases effected as block trades, as well as certain negotiated,
off-exchange purchases not in the open market. This repurchase program will be
funded through a combination of working capital and bank debt. As of the date
hereof, the Company has purchased an aggregate of 20,500 shares at an average
price of $12.34 per share.

INFORMATION SYSTEMS

YEAR 2000 UPDATE

To address the year 2000 issue the Company established and implemented a plan to
remediate and test its most critical computer systems and applications,
including its enterprise resource planning system, computer networks and desktop
applications. The plan also included steps to verify that all key third-party
suppliers and customers were taking measures to ensure their own readiness.
Based on strategic and operational assessments, the Company decided to replace
its existing information systems in 1998. The new enterprise resource planning
system is designed to enhance management information, financial reporting,
inventory management, order entry and cost evaluation and control and has the
added benefit of addressing the year 2000 issue. The new enterprise resource
planning system went into operation in January 1999. All phases of the year 2000
readiness plan were completed as scheduled. To date, the Company has not
experienced any material year 2000 issues with its internal systems or with its
third party customers and suppliers. In addition, the Company did not experience
any loss of revenues due to the year 2000 issue. The Company will continue to
monitor its critical computer applications and those of its suppliers and
vendors throughout the year 2000 to ensure that any latent year 2000 matters
that may arise are promptly addressed.

Although unlikely given that the Company has not experienced any year 2000
issues to date, there can be no assurance that any future unforeseen year 2000
issues will not materially adversely affect the Company's results of operations,
liquidity and financial position or adversely affect the Company's relationships
with customers, vendors or others.

AMERISERVE BANKRUPTCY

The Company regularly extends credit to several distribution companies in
connection with its business with Burger King. One of these distribution
companies, AmeriServe, accounted for more than 50 percent of the products
purchased from the Company by the Burger King system in 1999. AmeriServe filed a
voluntary petition under Chapter 11 of the United States Bankruptcy Code on
January 31, 2000. As of January 31, 2000, AmeriServe owed the Company
approximately $28,800 in trade receivables. AmeriServe was able to secure
temporary debtor in possession funding to enable it to continue operating in the
short-term post bankruptcy.

RSI, a not-for-profit purchasing cooperative that has as its members Burger King
franchisees and Burger King, is the exclusive purchasing agent for the Burger
King system of franchisee-owned and company-owned restaurants located in the
United States. Subsequent to January 31, 2000, the Company reached an agreement
with RSI in which RSI purchased all pre-petition trade receivables owed to the
Company by AmeriServe in exchange for a two-year non-interest-bearing note
valued at approximately $16,000 and satisfaction of certain contractual
obligations owed by the Company to RSI. This agreement resulted in a net pre-tax
charge of approximately $1,000 for the quarter ended December 31, 1999. A note
receivable of approximately $10,500 has been recorded on the accompanying
condensed consolidated balance sheet as of December 31, 1999. Approximately
$6,600 of the $28,800 pre-petition trade receivables relate to sales made in
January 2000. Accordingly, the remaining $5,500 portion of the note receivable
was recorded in January 2000, and resulted in a net pre-tax charge of
approximately $500 for the quarter ending March 31, 2000. This charge was
partially offset by approximately $600 of imputed interest income recorded on
the note receivable for the six months ended June 30, 2000. The balance of the
note receivable as of June 30, 2000 was approximately $12,200, $4,300 of
which was classified as long-term.

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<PAGE>   19

In a press release issued on April 12, 2000, Burger King announced that "it
plans an orderly transition of distribution services as the Burger King(R)
system leaves its relationship with AmeriServe Food Distribution, Inc." The
press release stated that Burger King had arranged for alternative distribution
services for the Burger King restaurants currently served by AmeriServe. The
press release further stated that Burger King expects to complete the transition
to alternative distributors by July, 2000 and that the debtor-in-possession
financing provided by Burger King to AmeriServe would remain in effect until
August, 2000. As of July 2000, the transition to alternative distributors was
completed. Following such transition, the largest distribution company accounted
for approximately 20% of the products purchased from the Company by the
Burger King system.


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<PAGE>   20

PART II.  OTHER INFORMATION

         ITEM 1.  LEGAL PROCEEDINGS

POKEMON RECALL AND RELATED MATTERS
On January 21, 2000, a purported class action lawsuit entitled Domingo
Quintinilla v. Tex-Best Travel Centers, Inc., Burger King Corporation, and
Equity Marketing, Inc. was filed in the District Court of Hidalgo County, Texas.
The lawsuit was filed by an individual purporting to represent all individuals
in the United States that had received a Pokemon(TM) ball from a Burger King(R)
restaurant. On May 26, 2000, the case was dismissed without prejudice by the
plaintiff.

In addition to the information regarding the Pokemon(TM) recall and related
matters contained in this document, readers are advised to review the Company's
Form 10-K for the year ended December 31, 1999, under the heading "Item 3. Legal
Proceedings." and the Company's Form 10-Q for the quarter ended March 31, 2000,
under the heading "Item 1. Legal Proceedings."

         ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

On March 29, 2000 and June 20, 2000, the Company sold to Crown an aggregate of
25,000 shares of Series A Stock and warrants to purchase 12,000 shares of Series
B Stock and 3,000 shares of Series C Stock (see "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Issuance of
Preferred Stock"). The sales and issuances of such securities were deemed to be
exempt from registration under the Securities Act of 1933 by virtue of
Regulation D promulgated thereunder. Appropriate legends are affixed to the
securities issued in the aforementioned transactions.

         ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits:

                  10.1     Seventh Amendment to Amended and Restated Credit
                           Agreement dated July 27, 2000 between the Company and
                           Sanwa Bank California and Imperial Bank

                  27.0     Financial Data Schedule

         (b)      Reports on Form 8-K:

                  Report on Form 8-K filed with the Securities and Exchange
                  Commission on July 20, 2000

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<PAGE>   21

                                   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, in the City of Los Angeles
and State of California on the 14th day of August, 2000.


                                  EQUITY MARKETING, INC.



                                  /s/ TERESA P. COVINGTON
                                  -------------------------
                                  Teresa P. Covington
                                  Vice President, Finance
                                  (Principal Financial and Accounting Officer)


                                       21
<PAGE>   22

                                  EXHIBIT INDEX
<TABLE>
<CAPTION>

        EXHIBIT

        <S>       <C>
         10.1     Seventh Amendment to Amended and Restated Credit Agreement
                  dated July 27, 2000 between the Company and Sanwa Bank
                  California and Imperial Bank

         27.0     Financial Data Schedule
</TABLE>



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