##### Table of Contents



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 September 30, 2003

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
(State or other jurisdiction of
incorporation or organization)         |  | 13-3534145
(I.R.S. Employer
Identification No.)
|                                                                                |  |                                                
|6330 San Vicente Blvd.
Los Angeles, CA
(Address of principal executive offices) |  | 90048
(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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes  [  ]   No  [ X ]

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,
5,699,453 shares as of November 12, 2003.





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TABLE OF CONTENTS



|                              |                                                                                               |  |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II. OTHER INFORMATION   
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                   
|EXHIBIT 31.1                 
|EXHIBIT 32.1                 



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EQUITY MARKETING, INC.

Index To Quarterly Report on Form 10-Q
Filed with the Securities and Exchange Commission
September 30, 2003

|         |  |                       |  |                                                                                               |  |      |    | 
|-------- |  | --------------------- |  | --------------------------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                       |  |                                                                                               |  | Page
|         |  |                       |  |                                                                                               |  |     
|Part I.  |  | Financial Information |  |                                                                                               |  |     
|         |  |                       |  | Item 1. Financial Statements                                                                  |  |      | 3  | 
|         |  |                       |  | Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations |  |      | 19 | 
|         |  |                       |  | Item 4. Controls and Procedures                                                               |  |      | 26 | 
|Part II. |  | Other Information     |  |                                                                                               |  |     
|         |  |                       |  | Item 6. Exhibits and Reports on Form 8-K                                                      |  |      | 27 | 

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PART I. FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS

EQUITY MARKETING, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

ASSETS

|                                       |                                                                                                                           |                      |        |              |         |               |        |             |         | 
|-------------------------------------- | ------------------------------------------------------------------------------------------------------------------------- | -------------------- | ------ | ------------ | ------- | ------------- | ------ | ----------- | ------- | 
|                                       |                                                                                                                           |                      |        | December 31, |         | September 30,
|                                       |                                                                                                                           |                      |        | 2002         |         | 2003         
|                                       |                                                                                                                           |                      |        |              |         |              
|                                       |                                                                                                                           |                      |        |              |         |               |        | (Unaudited)
|CURRENT ASSETS:                        |                                                                                                                           |                      |        |              |         |               |        |            
|                                       | Cash and cash equivalents                                                                                                 |                      | $      | 25,833       |         |               | $      | 13,806      |        
|                                       | Marketable securities                                                                                                     |                      |        | 1,000        |         |               |        | 2,500       |        
|                                       | Accounts receivable (net of allowances of $2,033 and
$2,482 as of December 31, 2002 and September 30, 2003, respectively) |                      |        | 43,817       |         |               |        | 31,103      |        
|                                       | Inventories, net (Note 2)                                                                                                 |                      |        | 16,363       |         |               |        | 17,669      |        
|                                       | Prepaid expenses and other current assets                                                                                 |                      |        | 4,807        |         |               |        | 5,704       |        
|                                       |                                                                                                                           |                      |        |              |         |               |        |            
|                                       |                                                                                                                           | Total current assets |        |              | 91,820  |               |        |             | 70,782  | 
|Fixed assets, net                      |                                                                                                                           |                      | 4,185  |              |         |               | 3,560  |            
|Goodwill (Notes 2 and 6)               |                                                                                                                           |                      | 33,730 |              |         |               | 40,778 |            
|Other intangibles, net (Notes 2 and 6) |                                                                                                                           |                      | 769    |              |         |               | 1,226  |            
|Other assets                           |                                                                                                                           |                      | 2,750  |              |         |               | 5,448  |            
|                                       |                                                                                                                           |                      |        |              |         |               |        |            
|                                       |                                                                                                                           | Total assets         |        | $            | 133,254 |               |        | $           | 121,794 | 
|                                       |                                                                                                                           |                      |        |              |         |               |        |            

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

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EQUITY MARKETING, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

LIABILITIES AND STOCKHOLDERS EQUITY

|                                                                                                                                                                                                                                            |                                                                                                                                                                                |                                            |        |              |         |               |        |             |         | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ------ | ------------ | ------- | ------------- | ------ | ----------- | ------- | 
|                                                                                                                                                                                                                                            |                                                                                                                                                                                |                                            |        | December 31, |         | September 30,
|                                                                                                                                                                                                                                            |                                                                                                                                                                                |                                            |        | 2002         |         | 2003         
|                                                                                                                                                                                                                                            |                                                                                                                                                                                |                                            |        |              |         |              
|                                                                                                                                                                                                                                            |                                                                                                                                                                                |                                            |        |              |         |               |        | (Unaudited)
|CURRENT LIABILITIES:                                                                                                                                                                                                                        |                                                                                                                                                                                |                                            |        |              |         |               |        |            
|                                                                                                                                                                                                                                            | Accounts payable                                                                                                                                                               |                                            | $      | 38,334       |         |               | $      | 27,332      |        
|                                                                                                                                                                                                                                            | Accrued liabilities                                                                                                                                                            |                                            |        | 24,329       |         |               |        | 14,990      |        
|                                                                                                                                                                                                                                            |                                                                                                                                                                                |                                            |        |              |         |               |        |             |        
|                                                                                                                                                                                                                                            |                                                                                                                                                                                | Total current liabilities                  |        |              | 62,663  |               |        |             | 42,322  | 
|LONG-TERM LIABILITIES                                                                                                                                                                                                                       |                                                                                                                                                                                |                                            | 1,596  |              |         |               | 6,431  |            
|                                                                                                                                                                                                                                            |                                                                                                                                                                                |                                            |        |              |         |               |        |             |        
|                                                                                                                                                                                                                                            |                                                                                                                                                                                | Total liabilities                          |        |              | 64,259  |               |        |             | 48,753  | 
|                                                                                                                                                                                                                                            |                                                                                                                                                                                |                                            |        |              |         |               |        |             |        
|COMMITMENTS AND CONTINGENCIES                                                                                                                                                                                                               |                                                                                                                                                                                |                                            |        |              |         |               |        |            
|Mandatory redeemable preferred stock, Series A senior cumulative participating
convertible, $.001 par value per share, 25,000 issued and outstanding, stated at liquidation
preference of $1,000 per share ($25,000), net of issuance costs |                                                                                                                                                                                |                                            | 23,049 |              |         |               | 23,049 |            
|                                                                                                                                                                                                                                            |                                                                                                                                                                                |                                            |        |              |         |               |        |             |        
|STOCKHOLDERS EQUITY:                                                                                                                                                                                                                       |                                                                                                                                                                                |                                            |        |              |         |               |        |            
|                                                                                                                                                                                                                                            | Preferred stock, $.001 par value per share, 1,000,000
shares authorized, 25,000 Series A issued and outstanding                                                                |                                            |        |             |         |               |        |            |        
|                                                                                                                                                                                                                                            | Common stock, $.001 par value per share, 50,000,000
shares authorized, 5,716,503 and 5,758,653 shares outstanding
as of December 31, 2002 and September 30, 2003, respectively |                                            |        |             |         |               |        |            |        
|                                                                                                                                                                                                                                            | Additional paid-in capital                                                                                                                                                     |                                            |        | 21,641       |         |               |        | 23,686      |        
|                                                                                                                                                                                                                                            | Retained earnings                                                                                                                                                              |                                            |        | 38,689       |         |               |        | 42,009      |        
|                                                                                                                                                                                                                                            | Accumulated other comprehensive income                                                                                                                                         |                                            |        | 1,710        |         |               |        | 2,141       |        
|                                                                                                                                                                                                                                            |                                                                                                                                                                                |                                            |        |              |         |               |        |             |        
|                                                                                                                                                                                                                                            |                                                                                                                                                                                |                                            | 62,040 |              |         |               | 67,836 |            
|Less                                                                                                                                                                                                                                       |                                                                                                                                                                                |                                            |        |              |         |               |        |            
|                                                                                                                                                                                                                                            | Treasury stock, 3,007,108 and 3,077,008 shares, at cost, as of
December 31, 2002 and September 30, 2003, respectively (Note 4)                                                 |                                            |        | (15,506      | )       |               |        | (16,480     | )      
|                                                                                                                                                                                                                                            | Unearned compensation                                                                                                                                                          |                                            |        | (588         | )       |               |        | (1,364      | )      
|                                                                                                                                                                                                                                            |                                                                                                                                                                                |                                            |        |              |         |               |        |             |        
|                                                                                                                                                                                                                                            |                                                                                                                                                                                | Total stockholders equity                 |        |              | 45,946  |               |        |             | 49,992  | 
|                                                                                                                                                                                                                                            |                                                                                                                                                                                |                                            |        |              |         |               |        |             |        
|                                                                                                                                                                                                                                            |                                                                                                                                                                                | Total liabilities and stockholders equity |        | $            | 133,254 |               |        | $           | 121,794 | 
|                                                                                                                                                                                                                                            |                                                                                                                                                                                |                                            |        |              |         |               |        |             |        

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

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EQUITY MARKETING, INC.

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

|                                                                             |                                     |                                                                                                   |           |                    |        |                   |           |       |        |      |           |        |        |   |           |        |        | 
|---------------------------------------------------------------------------- | ----------------------------------- | ------------------------------------------------------------------------------------------------- | --------- | ------------------ | ------ | ----------------- | --------- | ----- | ------ | ---- | --------- | ------ | ------ | - | --------- | ------ | ------ | 
|                                                                             |                                     |                                                                                                   |           | Three Months Ended |        | Nine Months Ended
|                                                                             |                                     |                                                                                                   |           | September 30,      |        | September 30,    
|                                                                             |                                     |                                                                                                   |           |                    |        |                  
|                                                                             |                                     |                                                                                                   |           | 2002               |        | 2003              |           | 2002  |        | 2003
|                                                                             |                                     |                                                                                                   |           |                    |        |                   |           |       |        |     
|REVENUES                                                                     |                                     | $                                                                                                 | 53,119    |                    |        | $                 | 48,948    |       |        | $    | 136,385   |        |        | $ | 153,468   |       
|COST OF SALES                                                                |                                     |                                                                                                   | 38,084    |                    |        |                   | 35,513    |       |        |      | 99,865    |        |        |   | 112,566   |       
|FORGIVENESS OF NOTE RECEIVABLE                                               |                                     |                                                                                                   |          |                    |        |                   |          |       |        |      | 1,685     |        |        |   |          |       
|                                                                             |                                     |                                                                                                   |           |                    |        |                   |           |       |        |      |           |        |        |   |           |       
|                                                                             |                                     | Gross profit                                                                                      |           |                    | 15,035 |                   |           |       | 13,435 |      |           |        | 34,835 |   |           |        | 40,902 | 
|                                                                             |                                     |                                                                                                   |           |                    |        |                   |           |       |        |      |           |        |        |   |           |       
|OPERATING EXPENSES:                                                          |                                     |                                                                                                   |           |                    |        |                   |           |       |        |      |           |        |        |   |           |       
|                                                                             | Salaries, wages and benefits        |                                                                                                   |           | 6,054              |        |                   |           | 6,141 |        |      |           | 14,979 |        |   |           | 17,539 |       
|                                                                             | Selling, general and administrative |                                                                                                   |           | 5,490              |        |                   |           | 5,546 |        |      |           | 14,552 |        |   |           | 17,056 |       
|                                                                             | Integration costs                   |                                                                                                   |           | 161                |        |                   |           |      |        |      |           | 219    |        |   |           |       |       
|                                                                             | Restructuring charge                |                                                                                                   |           | 178                |        |                   |           |      |        |      |           | 178    |        |   |           |       |       
|                                                                             |                                     |                                                                                                   |           |                    |        |                   |           |       |        |      |           |        |        |   |           |       
|                                                                             |                                     | Total operating expenses                                                                          |           |                    | 11,883 |                   |           |       | 11,687 |      |           |        | 29,928 |   |           |        | 34,595 | 
|                                                                             |                                     |                                                                                                   |           |                    |        |                   |           |       |        |      |           |        |        |   |           |       
|                                                                             |                                     | Income from operations                                                                            |           |                    | 3,152  |                   |           |       | 1,748  |      |           |        | 4,907  |   |           |        | 6,307  | 
|OTHER INCOME, net                                                            |                                     |                                                                                                   | 121       |                    |        |                   | 188       |       |        |      | 191       |        |        |   | 495       |       
|                                                                             |                                     |                                                                                                   |           |                    |        |                   |           |       |        |      |           |        |        |   |           |       
|                                                                             |                                     | Income before provision for income taxes and cumulative
effect of change in accounting principles |           |                    | 3,273  |                   |           |       | 1,936  |      |           |        | 5,098  |   |           |        | 6,802  | 
|PROVISION FOR INCOME TAXES                                                   |                                     |                                                                                                   | 1,142     |                    |        |                   | 609       |       |        |      | 1,752     |        |        |   | 2,357     |       
|                                                                             |                                     |                                                                                                   |           |                    |        |                   |           |       |        |      |           |        |        |   |           |       
|INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLES           |                                     |                                                                                                   | 2,131     |                    |        |                   | 1,327     |       |        |      | 3,346     |        |        |   | 4,445     |       
|Cumulative effect of change in accounting principles,
net of tax (Note 2)    |                                     |                                                                                                   |          |                    |        |                   |          |       |        |      | 2,496     |        |        |   |          |       
|                                                                             |                                     |                                                                                                   |           |                    |        |                   |           |       |        |      |           |        |        |   |           |       
|NET INCOME                                                                   |                                     |                                                                                                   | 2,131     |                    |        |                   | 1,327     |       |        |      | 850       |        |        |   | 4,445     |       
|PREFERRED STOCK DIVIDENDS                                                    |                                     |                                                                                                   | 375       |                    |        |                   | 375       |       |        |      | 1,125     |        |        |   | 1,125     |       
|                                                                             |                                     |                                                                                                   |           |                    |        |                   |           |       |        |      |           |        |        |   |           |       
|NET INCOME (LOSS) AVAILABLE TO COMMON
STOCKHOLDERS                           |                                     | $                                                                                                 | 1,756     |                    |        | $                 | 952       |       |        | $    | (275      | )      |        | $ | 3,320     |       
|                                                                             |                                     |                                                                                                   |           |                    |        |                   |           |       |        |      |           |        |        |   |           |       
|BASIC INCOME (LOSS) PER SHARE:                                               |                                     |                                                                                                   |           |                    |        |                   |           |       |        |      |           |        |        |   |           |       
|Income per share before cumulative effect of change in
accounting principles |                                     | $                                                                                                 | 0.31      |                    |        | $                 | 0.17      |       |        | $    | 0.39      |        |        | $ | 0.58      |       
|Cumulative effect of change in accounting principles                         |                                     |                                                                                                   |          |                    |        |                   |          |       |        |      | (0.44     | )      |        |   |          |       
|                                                                             |                                     |                                                                                                   |           |                    |        |                   |           |       |        |      |           |        |        |   |           |       
|BASIC INCOME (LOSS) PER SHARE                                                |                                     | $                                                                                                 | 0.31      |                    |        | $                 | 0.17      |       |        | $    | (0.05     | )      |        | $ | 0.58      |       
|                                                                             |                                     |                                                                                                   |           |                    |        |                   |           |       |        |      |           |        |        |   |           |       
|BASIC WEIGHTED AVERAGE SHARES OUTSTANDING                                    |                                     |                                                                                                   | 5,740,001 |                    |        |                   | 5,750,736 |       |        |      | 5,714,546 |        |        |   | 5,719,677 |       
|                                                                             |                                     |                                                                                                   |           |                    |        |                   |           |       |        |      |           |        |        |   |           |       
|DILUTED INCOME (LOSS) PER SHARE:                                             |                                     |                                                                                                   |           |                    |        |                   |           |       |        |      |           |        |        |   |           |       
|Income per share before cumulative effect of change in
accounting principles |                                     | $                                                                                                 | 0.28      |                    |        | $                 | 0.15      |       |        | $    | 0.38      |        |        | $ | 0.55      |       
|Cumulative effect of change in accounting principles                         |                                     |                                                                                                   |          |                    |        |                   |          |       |        |      | (0.42     | )      |        |   |          |       
|                                                                             |                                     |                                                                                                   |           |                    |        |                   |           |       |        |      |           |        |        |   |           |       
|DILUTED INCOME (LOSS) PER SHARE                                              |                                     | $                                                                                                 | 0.28      |                    |        | $                 | 0.15      |       |        | $    | (0.05     | )      |        | $ | 0.55      |       
|                                                                             |                                     |                                                                                                   |           |                    |        |                   |           |       |        |      |           |        |        |   |           |       
|DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING                                  |                                     |                                                                                                   | 7,582,285 |                    |        |                   | 6,160,484 |       |        |      | 5,908,233 |        |        |   | 6,029,523 |       
|                                                                             |                                     |                                                                                                   |           |                    |        |                   |           |       |        |      |           |        |        |   |           |       

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

5



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EQUITY MARKETING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
(UNAUDITED)

|                            |                                                                       |   |                    |     |                   |   |       |    |      |   |       |       |   |   |       |      |  
|--------------------------- | --------------------------------------------------------------------- | - | ------------------ | --- | ----------------- | - | ----- | -- | ---- | - | ----- | ----- | - | - | ----- | ---- | -
|                            |                                                                       |   | Three Months Ended |     | Nine Months Ended
|                            |                                                                       |   | September 30,      |     | September 30,    
|                            |                                                                       |   |                    |     |                  
|                            |                                                                       |   | 2002               |     | 2003              |   | 2002  |    | 2003
|                            |                                                                       |   |                    |     |                   |   |       |    |     
|NET INCOME                  |                                                                       | $ | 2,131              |     |                   | $ | 1,327 |    |      | $ | 850   |       |   | $ | 4,445 |     
|OTHER COMPREHENSIVE INCOME: |                                                                       |   |                    |     |                   |   |       |    |      |   |       |       |   |   |       |     
|                            | Foreign currency translation adjustments (Note 2)                     |   |                    | 222 |                   |   |       | 34 |      |   |       | 1,164 |   |   |       | 540  |  
|                            | Unrealized gain (loss) on foreign currency
forward contracts (Note 2) |   |                    | 130 |                   |   |       | 67 |      |   |       | (40   | ) |   |       | (109 | )
|                            |                                                                       |   |                    |     |                   |   |       |    |      |   |       |       |   |   |       |     
|COMPREHENSIVE INCOME        |                                                                       | $ | 2,483              |     |                   | $ | 1,428 |    |      | $ | 1,974 |       |   | $ | 4,876 |     
|                            |                                                                       |   |                    |     |                   |   |       |    |      |   |       |       |   |   |       |     

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

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##### Table of Contents



EQUITY MARKETING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

|                                                              |                                                                                             |              |                                                                  |                                                      |     |                   |        |       |       |        |         |  
|------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ------------ | ---------------------------------------------------------------- | ---------------------------------------------------- | --- | ----------------- | ------ | ----- | ----- | ------ | ------- | -
|                                                              |                                                                                             |              |                                                                  |                                                      |     | Nine Months Ended
|                                                              |                                                                                             |              |                                                                  |                                                      |     | September 30,    
|                                                              |                                                                                             |              |                                                                  |                                                      |     |                  
|                                                              |                                                                                             |              |                                                                  |                                                      |     | 2002              |        | 2003 
|                                                              |                                                                                             |              |                                                                  |                                                      |     |                   |        |      
|CASH FLOWS FROM OPERATING ACTIVITIES:                         |                                                                                             |              |                                                                  |                                                      |     |                   |        |      
|                                                              | Net income                                                                                  |              | $                                                                | 850                                                  |     |                   | $      | 4,445 |      
|                                                              | Adjustments to reconcile net income to net cash provided by
(used in) operating activities: |              |                                                                  |                                                      |     |                   |        |       |      
|                                                              |                                                                                             |              | Cumulative effect of change in accounting principles, net of tax |                                                      |     | 2,496             |        |       |       |       |        
|                                                              |                                                                                             |              | Depreciation and amortization                                    |                                                      |     | 1,311             |        |       |       | 1,434  |        
|                                                              |                                                                                             |              | Provision for doubtful accounts                                  |                                                      |     | 334               |        |       |       | 232    |        
|                                                              |                                                                                             |              | Gain on disposal of fixed assets                                 |                                                      |     | (12               | )      |       |       | (19    | )      
|                                                              |                                                                                             |              | Tax benefit from exercise of stock options                       |                                                      |     | 16                |        |       |       | 75     |        
|                                                              |                                                                                             |              | Forgiveness of note receivable                                   |                                                      |     | 1,685             |        |       |       |       |        
|                                                              |                                                                                             |              | Amortization of restricted stock                                 |                                                      |     | 33                |        |       |       | 259    |        
|                                                              |                                                                                             |              | Changes in operating assets and liabilities:                     |                                                      |     |                   |        |       |       |        |        
|                                                              |                                                                                             |              |                                                                  | Increase (decrease) in cash and cash equivalents:    |     |                   |        |       |       |        |         |  
|                                                              |                                                                                             |              |                                                                  | Accounts receivable                                  |     |                   | (4,250 | )     |       |        | 17,664  |  
|                                                              |                                                                                             |              |                                                                  | Note receivable                                      |     |                   | 498    |       |       |        |        |  
|                                                              |                                                                                             |              |                                                                  | Inventories                                          |     |                   | (2,430 | )     |       |        | (381    | )
|                                                              |                                                                                             |              |                                                                  | Prepaid expenses and other current assets            |     |                   | 2,552  |       |       |        | 738     |  
|                                                              |                                                                                             |              |                                                                  | Other assets                                         |     |                   | 75     |       |       |        | (837    | )
|                                                              |                                                                                             |              |                                                                  | Accounts payable                                     |     |                   | (1,234 | )     |       |        | (15,160 | )
|                                                              |                                                                                             |              |                                                                  | Accrued liabilities                                  |     |                   | 4,120  |       |       |        | (11,369 | )
|                                                              |                                                                                             |              |                                                                  | Long-term liabilities                                |     |                   | (92    | )     |       |        | 85      |  
|                                                              |                                                                                             |              |                                                                  |                                                      |     |                   |        |      
|                                                              |                                                                                             |              |                                                                  | Net cash provided by (used in) operating activities  |     |                   | 5,952  |       |       |        | (2,834  | )
|                                                              |                                                                                             |              |                                                                  |                                                      |     |                   |        |      
|CASH FLOWS FROM INVESTING ACTIVITIES:                         |                                                                                             |              |                                                                  |                                                      |     |                   |        |      
|                                                              |                                                                                             |              | Purchases of fixed assets                                        |                                                      |     | (624              | )      |       |       | (527   | )      
|                                                              |                                                                                             |              | Proceeds from sale of fixed assets                               |                                                      |     | 133               |        |       |       | 74     |        
|                                                              |                                                                                             |              | Proceeds from sale of marketable securities                      |                                                      |     | 6,700             |        |       |       |       |        
|                                                              |                                                                                             |              | Payment for purchase of UPSHOT                                   |                                                      |     | (9,997            | )      |       |       |       |        
|                                                              |                                                                                             |              | Payment for purchase of SCI, net of cash acquired of $162        |                                                      |     |                  |        |       |       | (6,075 | )      
|                                                              |                                                                                             |              | Purchase of marketable securities                                |                                                      |     |                  |        |       |       | (1,500 | )      
|                                                              |                                                                                             |              |                                                                  |                                                      |     |                   |        |      
|                                                              |                                                                                             |              |                                                                  | Net cash used in investing activities                |     |                   | (3,788 | )     |       |        | (8,028  | )
|                                                              |                                                                                             |              |                                                                  |                                                      |     |                   |        |      
|CASH FLOWS FROM FINANCING ACTIVITIES:                         |                                                                                             |              |                                                                  |                                                      |     |                   |        |      
|                                                              |                                                                                             |              | Payment of preferred stock dividends                             |                                                      |     | (1,125            | )      |       |       | (1,125 | )      
|                                                              |                                                                                             |              | Purchase of treasury stock                                       |                                                      |     | (391              | )      |       |       | (974   | )      
|                                                              |                                                                                             |              | Proceeds from exercise of stock options                          |                                                      |     | 130               |        |       |       | 935    |        
|                                                              |                                                                                             |              |                                                                  |                                                      |     |                   |        |      
|                                                              |                                                                                             |              |                                                                  | Net cash used in financing activities                |     |                   | (1,386 | )     |       |        | (1,164  | )
|                                                              |                                                                                             |              |                                                                  |                                                      |     |                   |        |      
|                                                              |                                                                                             |              |                                                                  | Net increase (decrease) in cash and cash equivalents |     |                   | 778    |       |       |        | (12,026 | )
|Effects of exchange rate changes on cash and cash equivalents |                                                                                             |              | 134                                                              |                                                      |     |                   | (1     | )    
|CASH AND CASH EQUIVALENTS, beginning of period                |                                                                                             |              | 21,935                                                           |                                                      |     |                   | 25,833 |      
|                                                              |                                                                                             |              |                                                                  |                                                      |     |                   |        |      
|CASH AND CASH EQUIVALENTS, end of period                      |                                                                                             | $            | 22,847                                                           |                                                      |     | $                 | 13,806 |      
|                                                              |                                                                                             |              |                                                                  |                                                      |     |                   |        |      
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:             |                                                                                             |              |                                                                  |                                                      |     |                   |        |      
|                                                              | CASH PAID FOR:                                                                              |              |                                                                  |                                                      |     |                   |        |       |      
|                                                              |                                                                                             | Interest     |                                                                  | $                                                    | 184 |                   |        | $     | 164   |       
|                                                              |                                                                                             |              |                                                                  |                                                      |     |                   |        |      
|                                                              |                                                                                             | Income taxes |                                                                  | $                                                    | 255 |                   |        | $     | 3,275 |       
|                                                              |                                                                                             |              |                                                                  |                                                      |     |                   |        |      

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

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EQUITY MARKETING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)

NOTE 1  -  ORGANIZATION AND BUSINESS

Equity Marketing, Inc., a Delaware corporation and subsidiaries (the
Company), is a leading global marketing services company based in Los
Angeles, with offices in Chicago, New York, Ontario (CA), London, Paris and
Hong Kong. The Company focuses on the design and execution of
strategy-based marketing programs, with particular expertise in the areas
of: strategic planning and research, entertainment marketing, design and
manufacturing of custom promotional products, promotion, event marketing,
collaborative marketing, and environmental branding. The Companys clients
include Burger King Corporation, Diageo, Kelloggs,
Kohls, Macys, Nordstroms, and Procter & Gamble, among others. The
Company complements its core marketing services business by developing and
marketing distinctive consumer products, based primarily on licensed
properties, which are sold through specialty and mass-market retailers.
The Company primarily sells to customers in the United States and Europe.
The Companys functional currency is United States dollars.

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.

Logistix Limited, a United Kingdom corporation (Logistix), is a 100% owned
subsidiary of the Company. Logistix is a marketing services agency which
focuses primarily on assisting consumer packaged goods companies in their
efforts to market to children between the ages of seven and fourteen by
developing and executing premium-based promotions and by providing marketing
consulting services. Logistix also derives a portion of its revenues from a
consumer products business which holds the license for the Robot Wars®
entertainment property, among others.

On July 17, 2002, the Company acquired the principal assets of Promotional
Marketing, L.L.C. d/b/a UPSHOT, an Illinois limited liability company
(UPSHOT). UPSHOT is a marketing agency, specializing in promotion, event
marketing, collaborative marketing and environmental branding. UPSHOT has a
reputation for creating successful integrated marketing programs for world
class brands such as Diageo, and Procter & Gamble.

On September 3, 2003, the Company acquired substantially all of the assets of
S.C.I. Promotion Group, LLC (SCI), a privately held promotional marketing
services company based in Ontario, California. SCI specializes in the
development and execution of promotional campaigns that utilize
purchase-with-purchase, gift-with-purchase, incentives, promotional licenses
and promotional retail programs. SCI counts nine of the top ten department
stores in the United States among its clients, including May Department Stores,
Sears, Kohls, Nordstroms, and Macys. Major clients also include consumer
product companies such as Anheuser Busch, Scripto and VF Corporation, owner of
the Lee and Wrangler jeans brands.

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
of America 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 of America for complete financial statements. In
the opinion of management, all adjustments 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
condensed 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, 2002.

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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
represents 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, warrants and restricted
stock units (see Stock Based-Compensation) using the treasury stock method and
also includes the dilutive effect of the assumed conversion of preferred stock
using the if-converted method. Options and warrants to purchase 1,918,666 and
1,146,666 shares of common stock, $.001 par value per share (the Common
Stock), as of September 30, 2002 and 2003, respectively, were excluded from
the computation of diluted EPS as they would have been anti-dilutive. For the
three months ended September 30, 2002, preferred stock convertible into
1,694,915 shares of common stock was included in the computation of diluted EPS
as it was dilutive. For the three months ended September 30, 2003, preferred
stock convertible into 1,694,915 shares of common stock was excluded from the
computation of diluted EPS as it would have been anti-dilutive. For the nine
months ended September 30, 2002 and 2003, preferred stock convertible into
1,694,915 shares of common stock was excluded from the computation of diluted
EPS as it 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 shareholders
and other disclosures required by Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings per Share:

|                                        |                                                                |                             |       |                                          |   |               |           |           |           |             |      |               |  |           |     |     |   |  |           |           |         |   |      |      |  | 
|--------------------------------------- | -------------------------------------------------------------- | --------------------------- | ----- | ---------------------------------------- | - | ------------- | --------- | --------- | --------- | ----------- | ---- | ------------- |  | --------- | --- | --- | - |  | --------- | --------- | ------- | - | ---- | ---- |  | 
|                                        |                                                                |                             |       | For the Three Months Ended September 30,
|                                        |                                                                |                             |       |                                         
|                                        |                                                                |                             |       | 2002                                     |   | 2003         
|                                        |                                                                |                             |       |                                          |   |              
|                                        |                                                                |                             |       | Income                                   |   | Shares        |           | Per Share |           | Income      |      | Shares        |  | Per Share
|                                        |                                                                |                             |       | (Numerator)                              |   | (Denominator) |           | Amount    |           | (Numerator) |      | (Denominator) |  | Amount   
|                                        |                                                                |                             |       |                                          |   |               |           |           |           |             |      |               |  |          
|Basic EPS:                              |                                                                |                             |       |                                          |   |               |           |           |           |             |      |               |  |           |     |     |   |  |           |           |         |   |      |     
|Income available to common stockholders |                                                                | $                           | 1,756 |                                          |   |               | 5,740,001 |           |           | $           | 0.31 |               |  | $         | 952 |     |   |  | 5,750,736 |           |         | $ | 0.17 |     
|                                        |                                                                |                             |       |                                          |   |               |           |           |           |             |      |               |  |           |     |     |   |  |           |           |         |   |      |     
|Preferred stock dividends               |                                                                |                             | 375   |                                          |   |               |          |           |           |             |      |               |  |           |    |     |   |  |          |           |         |   |      |     
|Effect of dilutive securities:          |                                                                |                             |       |                                          |   |               |           |           |           |             |      |               |  |           |     |     |   |  |           |           |         |   |      |     
|                                        |                                                                | Options and warrants        |       |                                          |  |               |           |           | 147,369   |             |      |               |  |           |     |     |  |  |           |           | 331,598 |   |      |      |  | 
|                                        |                                                                | Restricted stock units      |       |                                          |  |               |           |           |          |             |      |               |  |           |     |     |  |  |           |           | 78,150  |   |      |      |  | 
|                                        |                                                                | Convertible preferred stock |       |                                          |  |               |           |           | 1,694,915 |             |      |               |  |           |     |     |  |  |           |           |        |   |      |      |  | 
|                                        |                                                                |                             |       |                                          |   |               |           |           |           |             |      |               |  |           |     |     |   |  |           |           |         |   |      |     
|Dilutive EPS:                           |                                                                |                             |       |                                          |   |               |           |           |           |             |      |               |  |           |     |     |   |  |           |           |         |   |      |     
|                                        | Income available to common
stockholders and assumed conversion |                             | $     | 2,131                                    |   |               |           | 7,582,285 |           |             | $    | 0.28          |  |           | $   | 952 |   |  |           | 6,160,484 |         |   | $    | 0.15 | 
|                                        |                                                                |                             |       |                                          |   |               |           |           |           |             |      |               |  |           |     |     |   |  |           |           |         |   |      |     

|                                               |                                                |                        |      |                                         |   |               |           |           |         |             |       |               |   |           |       |       |   |  |           |           |         |   |      |      |  | 
|---------------------------------------------- | ---------------------------------------------- | ---------------------- | ---- | --------------------------------------- | - | ------------- | --------- | --------- | ------- | ----------- | ----- | ------------- | - | --------- | ----- | ----- | - |  | --------- | --------- | ------- | - | ---- | ---- |  | 
|                                               |                                                |                        |      | For the Nine Months Ended September 30,
|                                               |                                                |                        |      |                                        
|                                               |                                                |                        |      | 2002                                    |   | 2003         
|                                               |                                                |                        |      |                                         |   |              
|                                               |                                                |                        |      | Loss                                    |   | Shares        |           | Per Share |         | Income      |       | Shares        |   | Per Share
|                                               |                                                |                        |      | (Numerator)                             |   | (Denominator) |           | Amount    |         | (Numerator) |       | (Denominator) |   | Amount   
|                                               |                                                |                        |      |                                         |   |               |           |           |         |             |       |               |   |          
|Basic EPS:                                     |                                                |                        |      |                                         |   |               |           |           |         |             |       |               |   |           |       |       |   |  |           |           |         |   |      |     
|Income (loss) available to common
stockholders |                                                | $                      | (275 | )                                       |   |               | 5,714,546 |           |         | $           | (0.05 | )             |   | $         | 3,320 |       |   |  | 5,719,677 |           |         | $ | 0.58 |     
|                                               |                                                |                        |      |                                         |   |               |           |           |         |             |       |               |   |           |       |       |   |  |           |           |         |   |      |     
|Effect of dilutive securities:                 |                                                |                        |      |                                         |   |               |           |           |         |             |       |               |   |           |       |       |   |  |           |           |         |   |      |     
|                                               |                                                | Options and warrants   |      |                                         |  |               |           |           | 193,687 |             |       |               |   |           |       |       |  |  |           |           | 258,912 |   |      |      |  | 
|                                               |                                                | Restricted stock units |      |                                         |  |               |           |           |        |             |       |               |   |           |       |       |  |  |           |           | 50,934  |   |      |      |  | 
|                                               |                                                |                        |      |                                         |   |               |           |           |         |             |       |               |   |           |       |       |   |  |           |           |         |   |      |     
|Dilutive EPS:                                  |                                                |                        |      |                                         |   |               |           |           |         |             |       |               |   |           |       |       |   |  |           |           |         |   |      |     
|                                               | Income (loss) available to common
stockholders |                        | $    | (275                                    | ) |               |           | 5,908,233 |         |             | $     | (0.05         | ) |           | $     | 3,320 |   |  |           | 6,029,523 |         |   | $    | 0.55 | 
|                                               |                                                |                        |      |                                         |   |               |           |           |         |             |       |               |   |           |       |       |   |  |           |           |         |   |      |     

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Inventories

Inventories consist of (a) production-in-process which primarily represents
tooling costs which are deferred and amortized over the life of the products
and deferred costs on service contracts and (b) purchased finished goods held
for sale to customers and purchased finished goods in transit to customers
distribution centers. Inventories are stated at the lower of average cost or
market. As of December 31, 2002 and September 30, 2003, inventories consisted
of the following:

|                      |  |              |        |               |  |   |        | 
|--------------------- |  | ------------ | ------ | ------------- |  | - | ------ | 
|                      |  | December 31, |        | September 30,
|                      |  | 2002         |        | 2003         
|                      |  |              |        |              
|Production-in-process |  | $            | 5,062  |               |  | $ | 1,745  | 
|Finished goods        |  |              | 11,301 |               |  |   | 15,924 | 
|                      |  |              |        |               |  |   |        | 
|                      |  | $            | 16,363 |               |  | $ | 17,669 | 
|                      |  |              |        |               |  |   |        | 

Foreign Currency Translation

Net foreign exchange gains or losses resulting from the translation of foreign
subsidiaries accounts whose functional currency is not the United States
dollar are recognized as a component of accumulated other comprehensive income
in stockholders equity. For such subsidiaries, accounts are translated into
United States dollars at the following rates of exchange: assets and
liabilities at period-end exchange rates, equity accounts at historical rates,
and income and expense accounts at average exchange rates during the period.

For subsidiaries with transactions denominated in currencies other than their
functional currency, net foreign exchange transaction gains or losses are
included in determining net income. Transaction gains included in net income
for the quarters ended September 30, 2002 and 2003 were $103 and $179,
respectively.

Derivative Instruments

The Company adopted SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, which establishes accounting and reporting
standards for derivative instruments and for hedging activities. SFAS No.
133 requires that an entity recognize derivatives as either assets or
liabilities on the balance sheet and measure those instruments at fair
value. The accounting for changes in the fair value of a derivative depends
on the intended use of the derivative and the resulting designation.

The Company designates its derivatives based upon criteria established by
SFAS No. 133. For a derivative designated as a fair value hedge, the gain
or loss is recognized in earnings in the period of change together with the
offsetting loss or gain on the hedged item attributed to the risk being
hedged. For a derivative designated as a cash flow hedge, the effective
portion of the derivatives gain or loss is initially reported as a
component of accumulated other comprehensive income and subsequently
reclassified into earnings when the hedged exposure affects earnings. The
ineffective portion of the gain or loss is reported in earnings
immediately.

The Company uses derivatives to manage exposures to foreign currency. The
Companys objective for holding derivatives is to decrease the volatility
of earnings and cash flows associated with changes in foreign currency.
The Company enters into foreign exchange forward contracts to minimize the
short-term impact of foreign currency fluctuations on foreign currency
receivables, investments, and payables. The gains and losses on the foreign
exchange forward contracts offset the transaction gains and losses on the
foreign currency receivables, investments, and payables recognized in
earnings. The Company does not enter into foreign exchange forward
contracts for trading purposes. Gains and losses on the contracts are
included in other income (expense) in the consolidated statement of
operations and offset foreign exchange gains or losses from the revaluation
of intercompany balances or other current assets, investments, and
liabilities denominated in currencies other than the functional currency of
the reporting entity. The Companys foreign exchange forward contracts
related to current assets and liabilities generally range from one to nine
months in original maturity.

The Companys Logistix subsidiary entered into foreign currency forward
contracts aggregating GBP 3,872 to sell Euros in exchange for pound
sterling and to sell pound sterling in exchange for United States dollars.
The contracts will expire by December 22, 2003. At September 30, 2003, the
foreign currency forward contracts had an estimated fair value of $(134).
The fair value of the foreign currency forward contracts is recorded in
accrued liabilities in the accompanying condensed consolidated balance
sheet as of September 30, 2003. The unrealized loss on the contracts is
reflected in accumulated other comprehensive income.

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Goodwill and Other Intangibles

SFAS No. 141, Business Combinations and SFAS No. 142, Goodwill and Other
Intangible Assets were approved by the Financial Accounting Standards Board
(FASB) effective June 30, 2001 for business combinations consummated after
June 30, 2001. SFAS No. 141 eliminates the pooling-of-interests method for
business combinations and requires use of the purchase method. SFAS No. 142
changes the accounting for goodwill and certain other intangible assets from an
amortization approach to a non-amortization (impairment) approach. The
statement requires amortization of goodwill recorded in connection with
previous business combinations to cease upon adoption of the statement by
calendar year companies on January 1, 2002. The statement required the Company
to perform a transitional goodwill impairment test, using values as of the
beginning of the fiscal year that SFAS No. 142 is adopted. The Company
completed the goodwill transitional impairment test in the second quarter of
2002. As a result, the Company determined that a non-cash charge in the amount
of $2,496, net of tax, was required relating to the goodwill resulting from the
1998 acquisition of Contract Marketing, Inc. and U.S. Import and Promotions
Co., collectively referred to as USI. The transition charge is reflected as
a cumulative effect of change in accounting principles effective January 1,
2002, and therefore, results for the quarter ended March 31, 2002 have been
adjusted retroactively. Subsequent to the transition charge, the balance of
the USI goodwill was $8,198. The Company has adopted the provisions of these
statements for the acquisition of Logistix effective July 1, 2001 and for all
other acquisitions effective January 1, 2002. Accordingly, beginning on
January 1, 2002, the Company has foregone all related goodwill amortization
expense.

The change in the carrying amount of goodwill from $33,730 as of December 31,
2002 to $40,778 as of September 30, 2003 reflects: a foreign currency
translation adjustment of $530, an adjustment to reflect the net increase to
goodwill for the Upshot acquisition of $2,782 (see Note 6) and $3,736 for the
acquisition of SCI (see Note 6). Of the goodwill balance, $8,318 relates to
the consumer products segment and $32,460 relates to the marketing services
segment.

Identifiable intangibles of $1,226 as of September 30, 2003 and $769 as of
December 31, 2002, a portion of which are subject to amortization, are included
in other intangibles in the condensed consolidated balance sheets.

Under the provisions of SFAS No. 142, the carrying value of assets
acquired, including goodwill, are reviewed annually. During such a review
the Company will estimate the fair value of the reporting unit to which the
assets were assigned by discounting the reporting units estimated future
cash flows before interest. The Company will compare the discounted cash
flows to the carrying value of the acquired net assets to determine if an
impairment loss has occurred. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by
which the carrying value of the assets exceeds their estimated fair values.
In the fourth quarter of 2002, the Company performed the annual impairment
test required by SFAS No. 142 and determined that its goodwill was not
impaired as of December 31, 2002.

Royalties

The Company enters into agreements to license intellectual properties such
as trademarks, copyrights, and patents. The agreements may call for minimum
amounts of royalties to be paid in advance and throughout the term of the
agreement, which are non-refundable in the event that product sales fail to
meet certain minimum levels. Advance royalties resulting from such
transactions are stated at the lower of the amounts paid or the amounts
estimated to be recoverable from future sales of the related products.
Furthermore, minimum guaranteed royalty commitments are reviewed on a
periodic basis to ensure that amounts are recoverable based on estimates of
future sales of the products under license. A loss provision will be
recorded in the consolidated statements of operations to the extent that
future minimum royalty guarantee commitments are not recoverable.
Estimated future sales are projected based on historical experience,
including that of similar products, and anticipated advertising and
marketing support by the licensor.

Stock-Based Compensation

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure. SFAS No. 148 amends SFAS No.
123, Accounting for Stock-Based Compensation, to provide alternative
methods of transition for a voluntary change to the fair-value for
stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the method used on
reported results. SFAS No. 148 is effective for fiscal years beginning
after December 15, 2002. The interim disclosure provisions are effective
for financial reports containing financial statements for interim periods
beginning after December 15, 2002.

As of September 30, 2003, the Company has one stock option plan; the Equity
Marketing, Inc. 2000 Stock Option Plan (the 2000 Employee Plan). The 2000
Employee Plan terminates on June 27, 2010. In accordance with provisions
of SFAS No. 123, the Company applies Accounting Principles Board (APB)
Opinion No. 25 and related interpretations in accounting

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for its stock option plans and, accordingly, does not recognize
compensation cost for grants whose exercise price equals the market price
of the stock on the date of grant. If the Company had elected to recognize
compensation cost based on the fair value of the options granted at grant
date as prescribed by SFAS No. 123, net income and earnings per share would
have been reduced to the pro forma amounts indicated in the table below:

|                                                                 |  |                    |       |                   |  |      |      |      |  |   |        |   |  |   |       | 
|---------------------------------------------------------------- |  | ------------------ | ----- | ----------------- |  | ---- | ---- | ---- |  | - | ------ | - |  | - | ----- | 
|                                                                 |  | Three Months Ended |       | Nine Months Ended
|                                                                 |  | September 30,      |       | September 30,    
|                                                                 |  |                    |       |                  
|                                                                 |  | 2002               |       | 2003              |  | 2002 |      | 2003
|                                                                 |  |                    |       |                   |  |      |      |     
|Net income (loss) available to common stockholders - as reported |  | $                  | 1,756 |                   |  | $    | 952  |      |  | $ | (275   | ) |  | $ | 3,320 | 
|Less:                                                            |  |                    |       |                   |  |      |      |      |  |   |        |   |  |   |       | 
|Compensation expense (a)                                         |  |                    | 216   |                   |  |      | 398  |      |  |   | 983    |   |  |   | 1,236 | 
|                                                                 |  |                    |       |                   |  |      |      |      |  |   |        |   |  |   |       | 
|Net income (loss) available to common stockholders - pro forma   |  | $                  | 1,540 |                   |  | $    | 554  |      |  | $ | (1,258 | ) |  | $ | 2,084 | 
|                                                                 |  |                    |       |                   |  |      |      |      |  |   |        |   |  |   |       | 
|Earnings (loss) per share:                                       |  |                    |       |                   |  |      |      |      |  |   |        |   |  |   |       | 
|Basic earnings (loss) per share, as reported                     |  | $                  | 0.31  |                   |  | $    | 0.17 |      |  | $ | (0.05  | ) |  | $ | 0.58  | 
|Pro forma basic earnings (loss) per share                        |  | $                  | 0.27  |                   |  | $    | 0.10 |      |  | $ | (0.22  | ) |  | $ | 0.36  | 
|Diluted earnings (loss) per share, as reported                   |  | $                  | 0.28  |                   |  | $    | 0.15 |      |  | $ | (0.05  | ) |  | $ | 0.55  | 
|Pro forma diluted earnings (loss) per share                      |  | $                  | 0.25  |                   |  | $    | 0.09 |      |  | $ | (0.21  | ) |  | $ | 0.35  | 

(a)  Determined under fair value based method for all awards, net of
tax.

Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma
compensation cost may not be representative of the cost to be expected in
future years.

During the first quarter of 2003, the Companys Board of Directors approved
an amendment to the 2000 Employee Plan to permit the grant of restricted
stock units in addition to stock options, restricted stock grants and stock
bonuses previously provided for under the 2000 Employee Plan. Effective
April 1, 2003, a total of 74,650 restricted stock units with an aggregate
market value as of the grant date of $971 were granted to employees under
the 2000 Employee Plan. In September 2003, a total of 3,500 restricted
stock units with an aggregate market value as of the grant date of $51 were
granted to SCI employees under the 2000 Employee Plan. Unearned
compensation was charged upon grant for the market value of these
restricted stock units. The units vest over a four year period subject to
continued employment with the Company. Compensation expense attributable to
these units was $62 and $123 for the three and nine months ended September
30, 2003, respectively. The underlying shares of common stock are issuable
on the fourth anniversary of the date of grant; provided, however, that
shares underlying vested restricted stock units are issuable earlier upon
termination of employment, disability or hardship.

Recent Accounting Pronouncements

In August 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 requires entities to record the fair
value of a liability for an asset retirement obligation in the period in
which the obligation is incurred. When the liability is initially
recorded, the entity capitalizes the cost by increasing the carrying amount
of the related long-lived asset. Over time, the liability is accreted to
its present value each period, and the capitalized cost is depreciated over
the useful life of the related asset. SFAS No. 143 is effective for 2003.
The Company implemented SFAS No. 143 on January 1, 2003. The impact of
such adoption did not have a material effect on the Companys financial
statements.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS No. 145 requires that gains and losses from
extinguishment of debt be classified as extraordinary items only if they
meet the criteria in APB Opinion No. 30 (Opinion No. 30). Applying the
provisions of Opinion No. 30 will distinguish transactions that are part of
an entitys recurring operations from those that are unusual and infrequent
and meet the criteria for classification as an extraordinary item. SFAS No.
145 is effective for the Company beginning January 1, 2003. The Company
implemented SFAS No. 145 on January 1, 2003. The impact of such adoption
did not have a material effect on the Companys financial statements.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities, which supercedes Emerging
Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity.
SFAS No. 146 requires that a liability for a cost associated with an exit
activity or disposal activity be recognized and measured initially at fair
value only when the liability is incurred. EITF Issue No. 94-3 requires
recognition of a liability at the date an entity commits to an exit plan.
All provisions of SFAS No. 146 were effective

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for exit or disposal
activities initiated after December 31, 2002. Consistent with the
provisions of SFAS No. 146, the Companys
previously issued financial statements will not be restated. The Company
implemented SFAS No. 146 on January 1, 2003. The impact of such adoption
did not have a material effect on the Companys financial statements.

In November 2002, the FASB issued FASB Interpretation No. (FIN) 45,
Guarantors Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires
that upon issuance of a guarantee, a guarantor must recognize a liability
for the fair value of an obligation assumed under a guarantee. FIN 45 also
requires additional disclosures by a guarantor in its interim and annual
financial statements about the obligations associated with guarantees
issued. The recognition provisions of FIN 45 are effective for any
guarantees issued or modified after December 31, 2002. The disclosure
requirements are effective for financial statements of interim or annual
periods ending after December 15, 2002. The Company implemented FIN 45 on
January 1, 2003. The impact of such adoption did not have a material
effect on the Companys financial statements.

In January 2003, the FASB issued FIN No. 46, Consolidation of Variable
Interest Entities. FIN 46 will be the guidance that determines (1) whether
consolidation is required under the controlling financial interest model of
Accounting Research Bulletin No. 51 (ARB 51), Consolidated Financial
Statements or, alternatively, (2) whether the variable interest model under
FIN 46 should be used to account for existing and new entities. The variable
interest model of FIN 46 looks to identify the primary beneficiary of a
variable interest entity. The primary beneficiary is the party that is exposed
to the majority of the risk or stands to benefit the most from the variable
interest entitys activities. A variable interest entity would be required to
be consolidated if certain conditions are met. FIN 46 effective dates and
transition provisions will be required for pre-existing entities as of the
beginning of the first interim period beginning after December 15, 2003.
Management does not believe that the adoption of this statement will have a
material impact on the Companys financial statements.

In April 2003, SFAS No. 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities, was issued. In general, this statement
amends and clarifies accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities under SFAS No. 133. This statement is effective for contracts
entered into or modified after June 30, 2003, and for hedging relationships
designated after June 30, 2003. The adoption of SFAS No. 149 did not have
an impact on the Companys consolidated financial statements or
disclosures.

In May 2003, SFAS No. 150, Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity was issued, which
requires that certain financial instruments must now be accounted for as
liabilities. The financial instruments affected include mandatorily
redeemable stock, certain financial instruments that require or may require
the issuer to buy back some of its shares in exchange for cash or other
assets and certain obligations that can be settled with shares of stock.
SFAS No. 150 is effective for all financial instruments entered into or
modified after May 31, 2003 and were applied to the Companys existing
financial instruments effective July 1, 2003, the beginning of the first
fiscal period after June 15, 2003. The adoption of SFAS No. 150 on July 1,
2003, did not have an impact on the Companys consolidated financial
statements or disclosures. The Companys mandatory redeemable preferred
stock does not have a fixed and determinable redemption date and,
therefore, is not impacted by the adoption of SFAS No. 150.

In May 2003, the EITF reached a consensus on EITF Issue No. 01-8,
Determining Whether an Arrangement Contains a Lease. The new requirements
of EITF No. 01-8 potentially affects companies that sell or purchase
products or services through supply, commodity, transportation and
data-processing outsourcing contracts. The guidance in this new release is
designed to mandate reporting revenue as rental or leasing income that
would otherwise be reported as part of product sales or services revenue.
EITF No. 01-8 requires both parties to an arrangement to determine whether
a service contract or similar arrangement includes a lease within the scope
of SFAS No. 13, Accounting for Leases, which means focusing on agreements
conveying the right to use property, plant or equipment. The consensus is
effective prospectively to arrangements agreed to, modified or acquired in
business combinations in fiscal periods beginning after May 28, 2003 (the
quarter beginning July 1, 2003 for the Company). The adoption of EITF No.
01-8 did not have a material effect on the Companys consolidated financial
statements.

NOTE 3  LINE OF CREDIT

On April 24, 2001, the Company signed a credit facility (the Facility) with
Bank of America. The Facility is secured by substantially all of the Companys
assets and provides for a line of credit of up to $35,000 for three years from
the date of closing with borrowing availability determined by a formula based
on qualified assets. Interest on outstanding borrowings will be based on
either a fixed rate equivalent to LIBOR plus an applicable spread of between
1.50 and 2.25 percent or a variable rate equivalent to the 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

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fee of between zero and 0.60 percent per
annum and certain letter of credit fees. The applicable spread is based on the
achievement of certain financial ratios. The Facility also requires the
Company to comply with certain restrictions and covenants as amended from time
to
time. On November 14, 2001, February 8, 2002,
September 30, 2002 and November 14, 2003, certain covenants under the facility were amended. As of September
30, 2003, the Company was in compliance with the amended restrictions and
covenants. The Facility may be used for working capital and acquisition
financing purposes. As of September 30, 2003, there were no amounts
outstanding under the Facility.

Letters of credit outstanding as of December 31, 2002 and September 30, 2003
totaled $823 and $1,438, respectively.

NOTE 4  STOCK REPURCHASE

On July 21, 2000, the Companys Board of Directors authorized up to $10,000
for the repurchase of the Companys common stock over a twelve month
period. In the period from July 21, 2000 to July 21, 2001, the Company
spent $6,430 to purchase an aggregate of 523,594 shares at an average price
of $12.28 per share including commissions. On July 24, 2001, the Companys
Board of Directors authorized up to an additional $10,000 for the
repurchase of the Companys common stock over a twelve month period. In
the period from August 2, 2001 through July 11, 2002, the Company spent
$5,605 to purchase 454,715 shares at an average price of $12.33 per share
including commissions. On July 12, 2002, the Companys Board of Directors
authorized up to an additional $10,000 for the repurchase of the Companys
common stock. The Company spent $2,316 to repurchase 177,400 shares at an
average price of $13.05 per share including commissions under this
authorization through September 30, 2003. The duration of the current
buyback program is indefinite; provided, however, that the Companys Board
of Directors intends to review the program quarterly. Purchases are
conducted in the open market at prevailing prices, based on market
conditions when the Company is not in a quiet period. The Company may also
transact purchases effected as block trades, as well as certain negotiated,
off-exchange purchases not in the open market. Since initiating the
overall buyback program on July 20, 2000, the Company has spent $14,351 to
purchase a total of 1,155,709 shares at an average price of $12.42 per
share including commissions through September 30, 2003. This repurchase
program is being funded through working capital.

NOTE 5  SEGMENTS

Effective January 1, 1998, the Company adopted the provisions of SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information. The
Company has identified two reportable segments through which it conducts its
continuing operations: Marketing Services 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
Marketing Services segment designs and produces promotional products used as
free premiums or sold in conjunction with the purchase of other items at a
retailer or quick service restaurant and provides various services such as
strategic planning and research, entertainment marketing, promotion, event
marketing, collaborative marketing and environmental branding. The Consumer
Products segment designs and contracts for the manufacture of toys and other
consumer products for sale to major mass market and specialty retailers, who in
turn sell the products to consumers.

Earnings of industry segments and geographic areas exclude interest income,
interest expense, depreciation expense, 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 inventory, receivables, goodwill and other intangibles.
Corporate assets consist of cash, certain corporate receivables, fixed assets,
and certain trademarks.

Certain information presented in the tables below has been reclassified to
conform to the current management structure as of January 1, 2003.
Specifically, the results and assets of the USI division, which had previously
been reported as part of Marketing Services, are now being reported as part of
Consumer Products, which is consistent with management responsibility for this
business. The majority of the revenues for the USI division represent sales of
made-to-order custom product to Oil & Gas and other retailers who in turn sell
the products to consumers. As a result of the similarities between the USI
business and the Consumer Products business, the USI division was merged into
the Consumer Products division in connection with the Companys restructuring
in 2002 (see Note  7 Restructuring below).

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##### Table of Contents



Industry Segments

|                                                          |  |                                                         |        |          |  |           |        |       |  |   |        |   |  |   |         | 
|--------------------------------------------------------- |  | ------------------------------------------------------- | ------ | -------- |  | --------- | ------ | ----- |  | - | ------ | - |  | - | ------- | 
|                                                          |  | As of and For the Three Months Ended September 30, 2002
|                                                          |  |                                                        
|                                                          |  | Marketing                                               |        | Consumer |  |           |        |       |  |   |        |  
|                                                          |  | Services                                                |        | Products |  | Corporate |        | Total
|                                                          |  |                                                         |        |          |  |           |        |      
|Total revenues                                            |  | $                                                       | 42,097 |          |  | $         | 11,022 |       |  | $ |       |   |  | $ | 53,119  | 
|                                                          |  |                                                         |        |          |  |           |        |       |  |   |        |   |  |   |         | 
|Income (loss) before provision (benefit)
for income taxes |  | $                                                       | 7,254  |          |  | $         | 947    |       |  | $ | (4,928 | ) |  | $ | 3,273   | 
|Provision (benefit) for income taxes                      |  |                                                         | 2,664  |          |  |           | 331    |       |  |   | (1,853 | ) |  |   | 1,142   | 
|                                                          |  |                                                         |        |          |  |           |        |       |  |   |        |   |  |   |         | 
|Net income (loss)                                         |  | $                                                       | 4,590  |          |  | $         | 616    |       |  | $ | (3,075 | ) |  | $ | 2,131   | 
|                                                          |  |                                                         |        |          |  |           |        |       |  |   |        |   |  |   |         | 
|Fixed asset additions                                     |  | $                                                       |       |          |  | $         |       |       |  | $ | 167    |   |  | $ | 167     | 
|                                                          |  |                                                         |        |          |  |           |        |       |  |   |        |   |  |   |         | 
|Depreciation and amortization                             |  | $                                                       | 65     |          |  | $         | 17     |       |  | $ | 426    |   |  | $ | 508     | 
|                                                          |  |                                                         |        |          |  |           |        |       |  |   |        |   |  |   |         | 
|Total assets                                              |  | $                                                       | 60,630 |          |  | $         | 16,321 |       |  | $ | 35,774 |   |  | $ | 112,725 | 
|                                                          |  |                                                         |        |          |  |           |        |       |  |   |        |   |  |   |         | 

|                                                          |  |                                                         |        |          |  |           |        |       |  |   |        |   |  |   |         | 
|--------------------------------------------------------- |  | ------------------------------------------------------- | ------ | -------- |  | --------- | ------ | ----- |  | - | ------ | - |  | - | ------- | 
|                                                          |  | As of and For the Three Months Ended September 30, 2003
|                                                          |  |                                                        
|                                                          |  | Marketing                                               |        | Consumer |  |           |        |       |  |   |        |  
|                                                          |  | Services                                                |        | Products |  | Corporate |        | Total
|                                                          |  |                                                         |        |          |  |           |        |      
|Total revenues                                            |  | $                                                       | 41,513 |          |  | $         | 7,435  |       |  | $ |       |   |  | $ | 48,948  | 
|                                                          |  |                                                         |        |          |  |           |        |       |  |   |        |   |  |   |         | 
|Income (loss) before provision (benefit)
for income taxes |  | $                                                       | 5,995  |          |  | $         | 761    |       |  | $ | (4,820 | ) |  | $ | 1,936   | 
|Provision (benefit) for income taxes                      |  |                                                         | 1,954  |          |  |           | 248    |       |  |   | (1,593 | ) |  |   | 609     | 
|                                                          |  |                                                         |        |          |  |           |        |       |  |   |        |   |  |   |         | 
|Net income (loss)                                         |  | $                                                       | 4,041  |          |  | $         | 513    |       |  | $ | (3,227 | ) |  | $ | 1,327   | 
|                                                          |  |                                                         |        |          |  |           |        |       |  |   |        |   |  |   |         | 
|Fixed asset additions                                     |  | $                                                       |       |          |  | $         |       |       |  | $ | 154    |   |  | $ | 154     | 
|                                                          |  |                                                         |        |          |  |           |        |       |  |   |        |   |  |   |         | 
|Depreciation and amortization                             |  | $                                                       | 21     |          |  | $         | 66     |       |  | $ | 411    |   |  | $ | 498     | 
|                                                          |  |                                                         |        |          |  |           |        |       |  |   |        |   |  |   |         | 
|Total assets                                              |  | $                                                       | 73,794 |          |  | $         | 16,957 |       |  | $ | 31,043 |   |  | $ | 121,794 | 
|                                                          |  |                                                         |        |          |  |           |        |       |  |   |        |   |  |   |         | 

|                                                                                                                   |  |                                                        |         |          |  |           |        |       |  |   |         |   |  |   |         | 
|------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------ | ------- | -------- |  | --------- | ------ | ----- |  | - | ------- | - |  | - | ------- | 
|                                                                                                                   |  | As of and For the Nine Months Ended September 30, 2002
|                                                                                                                   |  |                                                       
|                                                                                                                   |  | Marketing                                              |         | Consumer |  |           |        |       |  |   |         |  
|                                                                                                                   |  | Services                                               |         | Products |  | Corporate |        | Total
|                                                                                                                   |  |                                                        |         |          |  |           |        |      
|Total revenues                                                                                                     |  | $                                                      | 109,794 |          |  | $         | 26,591 |       |  | $ |        |   |  | $ | 136,385 | 
|                                                                                                                   |  |                                                        |         |          |  |           |        |       |  |   |         |   |  |   |         | 
|Income (loss) before provision (benefit) for
income taxes and cumulative effect of change
in accounting principles |  | $                                                      | 16,488  |          |  | $         | 1,155  |       |  | $ | (12,545 | ) |  | $ | 5,098   | 
|Provision (benefit) for income taxes                                                                               |  |                                                        | 5,728   |          |  |           | 331    |       |  |   | (4,307  | ) |  |   | 1,752   | 
|                                                                                                                   |  |                                                        |         |          |  |           |        |       |  |   |         |   |  |   |         | 
|Income (loss) before cumulative effect of change
in accounting principles                                          |  |                                                        | 10,760  |          |  |           | 824    |       |  |   | (8,238  | ) |  |   | 3,346   | 
|Cumulative effect of change in
accounting principles, net of tax                                                   |  |                                                        |        |          |  |           | 2,496  |       |  |   |        |   |  |   | 2,496   | 
|                                                                                                                   |  |                                                        |         |          |  |           |        |       |  |   |         |   |  |   |         | 
|Net income (loss)                                                                                                  |  | $                                                      | 10,760  |          |  | $         | (1,672 | )     |  | $ | (8,238  | ) |  | $ | 850     | 
|                                                                                                                   |  |                                                        |         |          |  |           |        |       |  |   |         |   |  |   |         | 
|Fixed asset additions                                                                                              |  | $                                                      |        |          |  | $         |       |       |  | $ | 624     |   |  | $ | 624     | 
|                                                                                                                   |  |                                                        |         |          |  |           |        |       |  |   |         |   |  |   |         | 
|Depreciation and amortization                                                                                      |  | $                                                      | 134     |          |  | $         | 49     |       |  | $ | 1,128   |   |  | $ | 1,311   | 
|                                                                                                                   |  |                                                        |         |          |  |           |        |       |  |   |         |   |  |   |         | 
|Total assets                                                                                                       |  | $                                                      | 60,630  |          |  | $         | 16,321 |       |  | $ | 35,774  |   |  | $ | 112,725 | 
|                                                                                                                   |  |                                                        |         |          |  |           |        |       |  |   |         |   |  |   |         | 

|                                                          |  |                                                        |         |          |  |           |        |       |  |   |         |   |  |   |         | 
|--------------------------------------------------------- |  | ------------------------------------------------------ | ------- | -------- |  | --------- | ------ | ----- |  | - | ------- | - |  | - | ------- | 
|                                                          |  | As of and For the Nine Months Ended September 30, 2003
|                                                          |  |                                                       
|                                                          |  | Marketing                                              |         | Consumer |  |           |        |       |  |   |         |  
|                                                          |  | Services                                               |         | Products |  | Corporate |        | Total
|                                                          |  |                                                        |         |          |  |           |        |      
|Total revenues                                            |  | $                                                      | 130,396 |          |  | $         | 23,072 |       |  | $ |        |   |  | $ | 153,468 | 
|                                                          |  |                                                        |         |          |  |           |        |       |  |   |         |   |  |   |         | 
|Income (loss) before provision (benefit)
for income taxes |  | $                                                      | 17,820  |          |  | $         | 2,973  |       |  | $ | (13,991 | ) |  | $ | 6,802   | 
|Provision (benefit) for income taxes                      |  |                                                        | 6,351   |          |  |           | 1,083  |       |  |   | (5,077  | ) |  |   | 2,357   | 
|                                                          |  |                                                        |         |          |  |           |        |       |  |   |         |   |  |   |         | 
|Net income (loss)                                         |  | $                                                      | 11,469  |          |  | $         | 1,890  |       |  | $ | (8,914  | ) |  | $ | 4,445   | 
|                                                          |  |                                                        |         |          |  |           |        |       |  |   |         |   |  |   |         | 
|Fixed asset additions                                     |  | $                                                      |        |          |  | $         |       |       |  | $ | 527     |   |  | $ | 527     | 
|                                                          |  |                                                        |         |          |  |           |        |       |  |   |         |   |  |   |         | 
|Depreciation and amortization                             |  | $                                                      | 68      |          |  | $         | 128    |       |  | $ | 1,238   |   |  | $ | 1,434   | 
|                                                          |  |                                                        |         |          |  |           |        |       |  |   |         |   |  |   |         | 
|Total assets                                              |  | $                                                      | 73,794  |          |  | $         | 16,957 |       |  | $ | 31,043  |   |  | $ | 121,794 | 
|                                                          |  |                                                        |         |          |  |           |        |       |  |   |         |   |  |   |         | 

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NOTE 6  ACQUISITIONS

On July 17, 2002, the Company consummated the acquisition of UPSHOT, a
marketing agency with expertise in promotion, event marketing,
collaborative marketing and environmental branding. The Company financed
the acquisition through its existing cash reserves. The acquisition was
consummated pursuant to an Asset Purchase Agreement, dated May 22, 2002, by
and among the Company, Promotional Marketing, LLC (Promotional Marketing)
and HA-LO Industries, Inc. (HA-LO) (the Purchase Agreement). Under the
terms of the Purchase Agreement, the Company acquired the principal assets
of Promotional Marketing (consisting of the principal assets used in
connection with the operation of the UPSHOT business) for $9,206 in cash
plus related transaction costs of $685. This purchase price is net of
$106 received in the fourth quarter of 2002 for a closing balance sheet
working capital adjustment. The Company assumed the principal current
liabilities of the UPSHOT business in connection with the acquisition. In
addition to the cash purchase price paid at the closing, the Company may be
obligated to pay additional consideration to Promotional Marketing
contingent upon the results of certain performance targets attained in the
twelve month period ending July 31, 2003. The additional consideration, if
any, will be recorded as goodwill. Based on actual results through July 31,
2003, the Company does not expect to be obligated to pay any additional
consideration. HA-LO, which is the parent company of Promotional Marketing,
was in Chapter 11 bankruptcy proceedings as of the acquisition date, and
the Companys acquisition of the UPSHOT business was approved by the United
States bankruptcy court.

The UPSHOT acquisition has been accounted for under the purchase method of
accounting. The financial statements reflect the allocation of the purchase
price to the acquired net assets based on their estimated fair values as of
the acquisition date. During the nine months ended September 30, 2003, the
preliminary allocation of the purchase price was adjusted to revise the
estimated value of prepaid expenses ($72 increase), deferred tax assets
($1,852 increase), accrued liabilities ($168 decrease) and non-current
liabilities ($4,874 increase). These adjustments resulted in a net increase
to goodwill of $2,782. The adjustments to increase non-current liabilities
are attributable to a final determination of an unfavorable lease liability
for UPSHOTs Chicago, Illinois office totaling $2,975 and to an adjustment
totaling $1,900 due to the finalization of an exit plan (see Note 7 
Restructuring) both of which were contemplated as of the close of the
transaction. The unfavorable lease liability reflects the present value of
the lease payments in excess of market for the remaining term of the
Chicago office lease. The increase in deferred tax assets reflects the tax
benefit associated with the increase in non-current liabilities. Subsequent
to these adjustments, the Companys allocation of purchase price for the
acquisition, based upon estimated fair values is as follows:

|                                              |  |   |        |  
|--------------------------------------------- |  | - | ------ | -
|Net current assets                            |  | $ | 7,029  |  
|Property, plant and equipment                 |  |   | 700    |  
|Other non-current assets                      |  |   | 1      |  
|Net current liabilities                       |  |   | (7,783 | )
|Non-current liabilities                       |  |   | (4,874 | )
|                                              |  |   |        |  
|Estimated fair value, net liabilities assumed |  |   | (4,927 | )
|Goodwill                                      |  |   | 14,631 |  
|Other intangible assets                       |  |   | 187    |  
|                                              |  |   |        |  
|Total purchase price                          |  | $ | 9,891  |  
|                                              |  |   |        |  

The intangible assets of $187 are comprised of customer contracts and
related customer relationships and sales order backlog, and are being
amortized over estimated useful lives ranging from 6 to 12 months.
Intangible assets associated with the UPSHOT acquisition are accounted for
in accordance with SFAS No. 142, Goodwill and Other Intangible Assets.
Goodwill has an indefinite life and is not amortized.

On September 3, 2003, the Company acquired substantially all of the assets
of SCI, a privately held promotional marketing services company based in
Ontario, California. The Company financed the acquisition through its
existing cash reserves. The acquisition was consummated pursuant to an
Asset Purchase Agreement dated September 3, 2003, by and among the Company,
SCI and Joseph J. Schmidt, III (the Purchase Agreement). Under the terms
of the Purchase Agreement, the Company acquired substantially all of the
assets of SCI for a cash purchase price of approximately $5.9 million
(before closing balance sheet working capital adjustment), plus additional
earnout consideration of up to $3.5 million based upon future performance
of the acquired business. Net of a holdback of $250, the Company paid
$5,683 in cash plus related transaction costs of $554. The Company also
assumed the operating liabilities of the business in connection with the
acquisition. The earnout consideration is based upon the business achieving
targeted levels of earning before interest, taxes, depreciation and
amortization (EBITDA) over the period from 2003 through 2006. The earnout
payments, if required, are payable 50% in cash and 50% in shares of the
Companys common stock. The additional consideration, if any, will be
recorded as goodwill.

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The SCI acquisition has been accounted for under the purchase method of
accounting. The financial statements reflect the preliminary allocation of
the purchase price to the acquired net assets based on their estimated fair
values as of the acquisition date. The Company is in the process of
finalizing valuations of the individual assets and liabilities which would
result in an adjustment to goodwill and other intangibles. The allocation
of the purchase price may change based upon these valuations. The
allocation reflects a receivable from SCI resulting from a closing balance
sheet working capital adjustment of $855, accruing interest at the rate of
5% per annum, that will offset additional earnout consideration. This
receivable is recorded in prepaid expenses and other current assets in the
Companys condensed consolidated balance sheet as of September 30, 2003.
The Companys preliminary allocation of purchase price for the acquisition,
based upon estimated fair values is as follows:

|                                          |  |   |        |  
|----------------------------------------- |  | - | ------ | -
|Net current assets                        |  | $ | 6,671  |  
|Receivable from SCI                       |  |   | 855    |  
|Property, plant and equipment             |  |   | 37     |  
|Other non-current assets                  |  |   | 13     |  
|Net current liabilities                   |  |   | (5,710 | )
|                                          |  |   |        |  
|Estimated fair value, net assets acquired |  |   | 1,866  |  
|Goodwill                                  |  |   | 3,736  |  
|Other intangible assets                   |  |   | 635    |  
|                                          |  |   |        |  
|Total purchase price                      |  | $ | 6,237  |  
|                                          |  |   |        |  

The intangible assets of $635 are comprised of customer contracts and
related customer relationships and sales order backlog, and are being
amortized over estimated useful lives ranging from 4 months to 5 years.
Intangible assets associated with the SCI acquisition are accounted for in
accordance with SFAS No. 142, Goodwill and Other Intangible Assets.
Goodwill has an indefinite life and is not amortized.

SCI was formed in June 2002 when
SCIs management purchased the assets and assumed certain liabilities of
SCIs predecessor business from Aspen Marketing, Inc. (a privately
held promotions company). In conjunction with this acquisition, SCIs
management implemented a number of significant structural changes in
the business and ascribed different underlying basis to SCIs assets
and liabilities than previously ascribed by Aspen Marketing, Inc. As
a result of the acquisition and the changes in the business, the
Companys management believes that the financial information for SCI
for the first half of 2002 is not meaningful or relevant. The pro
forma information shown below for 2002 excludes the impact of the
SCI acquisition. The following selected unaudited pro forma consolidated results of
operations are presented as if the UPSHOT acquisition had occurred
as of the beginning of 2002 and as if the SCI acquisition had
occurred at the beginning of 2003 after giving effect to certain adjustments for the
amortization of intangibles, reduced interest income and related income tax
effects.

The pro forma data is for informational purposes only and does not
necessarily reflect the results of operations had the businesses operated
as one during the period. No effect has been given for synergies, if any,
that may have been realized through the acquisitions.

|                                            |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |         | 
|------------------------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------- | - |  | - | ------- | 
|                                            |  | Three Months Ended |        | Nine Months Ended
|                                            |  | September 30,      |        | September 30,    
|                                            |  |                    |        |                  
|                                            |  | 2002               |        | 2003              |  | 2002 |        | 2003
|                                            |  |                    |        |                   |  |      |        |     
|Pro forma revenues                          |  | $                  | 54,867 |                   |  | $    | 55,013 |      |  | $ | 150,386 |   |  | $ | 170,090 | 
|Pro forma net income (loss)                 |  | $                  | 2,071  |                   |  | $    | 1,633  |      |  | $ | (39     | ) |  | $ | 4,663   | 
|Pro forma basic earnings (loss) per share   |  | $                  | 0.30   |                   |  | $    | 0.22   |      |  | $ | (0.20   | ) |  | $ | 0.62    | 
|Pro forma diluted earnings (loss) per share |  | $                  | 0.27   |                   |  | $    | 0.20   |      |  | $ | (0.20   | ) |  | $ | 0.59    | 

Refer to Note 2 for further discussion of the method of computation of earnings
per share.

NOTE 7  RESTRUCTURING

During the third quarter of 2002, the Company formulated and implemented a
restructuring plan in connection with the UPSHOT acquisition in order to
combine and streamline the operations of the Company and UPSHOT. The Company
evaluated the current cost structure of both businesses. In connection with
this plan the Company recorded a restructuring charge of $178. This charge
represents severance for a workforce reduction of seven employees in the
Companys Los Angeles office, who were terminated, and is reflected as a
restructuring charge in the accompanying consolidated statement of operations.
The workforce reduction included

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employees from the Companys marketing
services division as well as other support services. The full amount of the
restructuring charge was paid as of September 30, 2003.

In connection with the restructuring plan, the Company also decided to close
UPSHOTs Richmond, Virginia office and eliminate certain positions at UPSHOTs
Chicago, Illinois office. Additionally, in 2003 the Company finalized its exit
plan with respect to vacating half of its leased space (thirty thousand square
feet) at UPSHOTs Chicago, Illinois office. This resulted in an adjustment to
the liabilities recorded and an increase to goodwill of $1,900 for the present
value of the remaining lease payments for the vacated office space in excess of
the estimated sub-lease income. The liabilities assumed in connection with this
restructuring plan totaled $3,535 and are included as part of goodwill in
accordance with EITF Issue No. 95-3, Recognition of Liabilities in Connection
with a Purchase Business Combination. $1,155 of these liabilities were paid as
of September 30, 2003.

NOTE 8  RELATED PARTY TRANSACTION

On July 15, 2003, the Company entered into an agreement with U.S. Capital
Investors, Inc. (USCI), an entity controlled by Jeffrey S. Deutschman,
pursuant to which USCI will serve as an advisor to the Company with respect to
potential mergers and acquisitions through December 31, 2003. Mr. Deutschman
currently serves on the Board of Directors of the Company as the representative
of the holder of the Companys Series A Preferred Stock. The Companys
agreement with USCI provides for the payment of a discretionary success fee for
completed acquisition transactions in an amount determined by an independent
committee of the Board in accordance with certain guidelines and criteria. The
guidelines for fees payable upon successful completion of an acquisition
transaction are $200 for up to $10,000 of consideration, 1.5% of consideration
from $10,000 to $25,000 and 1% of consideration over $25,000; provided,
however, that the success fee for the first transaction under the agreement has
an initial fee guideline of $275 for up to $10,000 of consideration.
Notwithstanding the guidelines, the independent committee has absolute
discretion in determining the amount, if any, of the success fee for any
transaction. The USCI agreement provides for the payment of a refundable
advance against success fees in the aggregate amount of $275. The USCI
agreement was approved by the Board and acknowledged by the holder of the
Series A Preferred Stock. The Company believes that this agreement will enhance
its ability to analyze and close merger and acquisition transactions in a
manner that is more cost effective than traditional outside advisory firms. In
connection with the acquisition of SCI (see Note 6 
Acquisitions), USCI earned a success fee of $275. This success fee is
recorded as a transaction cost of the SCI acquisition.

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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 that the following factors, among others, could cause the Companys
actual consolidated results of operations and financial position in 2003 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.                                                  
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Increased competitive pressure, which may affect the sales of the Companys products and services.                                                                                     
| 
| |  | Dependence on the popularity of licensed entertainment properties, which may adversely affect the Companys financial
condition and results of operations.                             
| 
| |  | Concentration risk associated with accounts receivable. The Company regularly extends credit to several distribution
companies in connection with its business with Burger King.       
| 
| |  | 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 foreign manufacturers, which may increase the costs of the Companys products and affect the demand for
such products.                                                   

Financing Risks



| |  | Currency fluctuations, which may affect the Companys suppliers and the Companys reportable income.
|- |  | ----------------------------------------------------------------------------------------------------

Other Risks



| |  | Products that we develop or sell may expose us to liability from claims by users of such products for damages
including, but not limited to, bodily injury or property damage. We currently maintain product liability insurance
coverage in amounts that we believe are adequate. There can be no assurance that we will be able to maintain such
coverage or obtain additional coverage on acceptable terms in the future, or that such insurance will provide
adequate coverage against all potential claims.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | 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.                                                                                                                                                                                                         
| 
| |  | 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.                                                                                                                                                                                                                                                                                                        
| 
| |  | Strike and other labor disputes which may negatively impact the distribution channels for the Companys products.                                                                                                                                                                                                                                                                                                                                                                                               
| 
| |  | Exposure to liabilities for minimum royalty commitments in connection with license agreements for entertainment
properties. The Company enters into significant minimum royalty commitments from time to time in connection with its
consumer products business.                                                                                                                                                                                                                                                

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, 2002, under the
heading Managements Discussion and Analysis of Financial Condition and
Results of Operations - Cautionary Statements and Risk Factors.

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Organization and Business

Equity Marketing, Inc., a Delaware corporation and subsidiaries (the
Company), is a leading global marketing services company based in Los
Angeles, with offices in Chicago, New York, Ontario (CA), London, Paris and
Hong Kong. The Company focuses on the design and execution of
strategy-based marketing programs, with particular expertise in the areas
of: strategic planning and research, entertainment marketing, design and
manufacturing of custom promotional products, promotion, event marketing,
collaborative marketing, and environmental branding. The Companys clients
include Burger King Corporation, Diageo, Kelloggs,
Kohls, Macys, Nordstroms, and Procter & Gamble, among others. The
Company complements its core marketing services business by developing and
marketing distinctive consumer products, based primarily on licensed
properties, which are sold through specialty and mass-market retailers.
The Company primarily sells to customers in the United States and Europe.
The Companys functional currency is United States dollars.

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.

Logistix Limited, a United Kingdom corporation (Logistix), is a 100% owned
subsidiary of the Company. Logistix is a marketing services agency which
focuses primarily on assisting consumer packaged goods companies in their
efforts to market to children between the ages of seven and fourteen by
developing and executing premium-based promotions and by providing marketing
consulting services. Logistix also derives a portion of its revenues from a
consumer products business which holds the license for the Robot Wars®
entertainment property, among others.

On July 17, 2002, the Company acquired the principal assets of Promotional
Marketing, L.L.C. d/b/a UPSHOT, an Illinois limited liability company
(UPSHOT). UPSHOT is a marketing agency, specializing in promotion, event
marketing, collaborative marketing and environmental branding. UPSHOT has a
reputation for creating successful integrated marketing programs for world
class brands such as Diageo, and Procter & Gamble.

On September 3, 2003, the Company acquired substantially all of the assets of
S.C.I. Promotion Group, LLC (SCI), a privately held promotional marketing
services company based in Ontario, California. SCI specializes in the
development and execution of promotional campaigns that utilize
purchase-with-purchase, gift-with-purchase, incentives, promotional licenses
and promotional retail programs. SCI counts nine of the top ten department
stores in the United States among its clients, including May Department Stores,
Sears, Kohls, Nordstroms, and Macys. Major clients also include consumer
product companies such as Anheuser Busch, Scripto and VF Corporation, owner of
the Lee and Wrangler jeans brands.

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Results of Operations

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

|                                                                 |                                     |                                                                                                   |              |      |                     |      |                     |      |      |      |       |      |      |      |       |      |      |      |  
|---------------------------------------------------------------- | ----------------------------------- | ------------------------------------------------------------------------------------------------- | ------------ | ---- | ------------------- | ---- | ------------------- | ---- | ---- | ---- | ----- | ---- | ---- | ---- | ----- | ---- | ---- | ---- | -
|                                                                 |                                     |                                                                                                   |              |      | Three Months        |      | Nine Months        
|                                                                 |                                     |                                                                                                   |              |      | Ended September 30, |      | Ended September 30,
|                                                                 |                                     |                                                                                                   |              |      |                     |      |                    
|                                                                 |                                     |                                                                                                   |              |      | 2002                |      | 2003                |      | 2002 |      | 2003 
|                                                                 |                                     |                                                                                                   |              |      |                     |      |                     |      |      |      |      
|Revenues                                                         |                                     |                                                                                                   | 100.0        | %    |                     |      | 100.0               | %    |      |      | 100.0 | %    |      |      | 100.0 | %   
|Cost of sales                                                    |                                     |                                                                                                   | 71.7         |      |                     |      | 72.6                |      |      |      | 73.3  |      |      |      | 73.3  |     
|Forgiveness of note receivable                                   |                                     |                                                                                                   |             |      |                     |      |                    |      |      |      | 1.2   |      |      |      |      |     
|                                                                 |                                     |                                                                                                   |              |      |                     |      |                     |      |      |      |       |      |      |      |       |     
|                                                                 |                                     |                                                                                                   | Gross profit |      |                     | 28.3 |                     |      |      | 27.4 |       |      |      | 25.5 |       |      |      | 26.7 |  
|                                                                 |                                     |                                                                                                   |              |      |                     |      |                     |      |      |      |       |      |      |      |       |     
|Operating expenses:                                              |                                     |                                                                                                   |              |      |                     |      |                     |      |      |      |       |      |      |      |       |     
|                                                                 | Salaries, wages and benefits        |                                                                                                   |              | 11.4 |                     |      |                     | 12.6 |      |      |       | 11.0 |      |      |       | 11.4 |     
|                                                                 | Selling, general and administrative |                                                                                                   |              | 10.4 |                     |      |                     | 11.3 |      |      |       | 10.6 |      |      |       | 11.1 |     
|                                                                 | Integration costs                   |                                                                                                   |              | 0.3  |                     |      |                     |     |      |      |       | 0.2  |      |      |       |     |     
|                                                                 | Restructuring charge                |                                                                                                   |              | 0.3  |                     |      |                     |     |      |      |       | 0.1  |      |      |       |     |     
|                                                                 |                                     |                                                                                                   |              |      |                     |      |                     |      |      |      |       |      |      |      |       |     
|                                                                 |                                     | Total operating expenses                                                                          |              |      | 22.4                |      |                     |      | 23.9 |      |       |      | 21.9 |      |       |      | 22.5 |     
|                                                                 |                                     |                                                                                                   |              |      |                     |      |                     |      |      |      |       |      |      |      |       |     
|                                                                 |                                     | Income from operations                                                                            |              |      | 5.9                 |      |                     |      | 3.5  |      |       |      | 3.6  |      |       |      | 4.2  |     
|Other income, net                                                |                                     |                                                                                                   | 0.2          |      |                     |      | 0.4                 |      |      |      | 0.1   |      |      |      | 0.3   |     
|                                                                 |                                     |                                                                                                   |              |      |                     |      |                     |      |      |      |       |      |      |      |       |     
|                                                                 |                                     | Income before provision for income taxes and cumulative
effect of change in accounting principles |              |      | 6.1                 |      |                     |      | 3.9  |      |       |      | 3.7  |      |       |      | 4.5  |     
|Provision for income taxes                                       |                                     |                                                                                                   | 2.1          |      |                     |      | 1.2                 |      |      |      | 1.3   |      |      |      | 1.6   |     
|                                                                 |                                     |                                                                                                   |              |      |                     |      |                     |      |      |      |       |      |      |      |       |     
|                                                                 |                                     | Income before cumulative effect of change
in accounting principles                                |              |      | 4.0                 |      |                     |      | 2.7  |      |       |      | 2.4  |      |       |      | 2.9  |     
|                                                                 |                                     |                                                                                                   |              |      |                     |      |                     |      |      |      |       |      |      |      |       |     
|Cumulative effect of change in accounting principles, net of tax |                                     |                                                                                                   |             |      |                     |      |                    |      |      |      | (1.8  | )    |      |      |      |     
|                                                                 |                                     |                                                                                                   |              |      |                     |      |                     |      |      |      |       |      |      |      |       |     
|                                                                 |                                     |                                                                                                   | Net income   |      |                     | 4.0  | %                   |      |      | 2.7  | %     |      |      | 0.6  | %     |      |      | 2.9  | %
|                                                                 |                                     |                                                                                                   |              |      |                     |      |                     |      |      |      |       |      |      |      |       |     

Three Months Ended September 30, 2003 Compared to Three Months Ended September
30, 2002 (In Thousands):

Revenues for the three months ended September 30, 2003 decreased $4,171, or
7.9%, to $48,948 from $53,119 in the comparable period in 2002. Marketing
Services revenues decreased $584, or 1.4%, to $41,513 primarily as a result of
decreased revenues associated with Burger King programs in 2003 compared to the
same period in 2002. This decrease was partially offset by the inclusion of
revenues generated by SCI for the period from September 3, 2003 through
September 30, 2003 and an increase in promotional revenues from Kelloggs. The
results for 2002 exclude SCI (acquired September 3, 2003) and approximately two
weeks of UPSHOT (acquired July 17, 2002). Excluding the impact of the SCI
acquisition, revenues decreased 14.9% for the three months ended September 30,
2003 compared to the same period in 2002. Consumer product revenues decreased
$3,587, or 32.5%, to $7,435 primarily as a result of decreased sales of
Scooby-Doo, Robot Wars® and Tub Tints® product, partially offset by increased
sales of Crayola® product and product based on Disneys Kim Possible. Revenues
for Scooby-Dooproduct in 2002 were higher primarily due to increased
shipments attributable to the Scooby-Doofeature film, which was released in
the Summer of 2002.

Cost of sales decreased $2,571 to $35,513 (72.6% of revenues) for the three
months ended September 30, 2003 from $38,084 (71.7% of revenues) in the
comparable period in 2002 due to the lower sales volume in 2003. The gross
margin percentage decreased to 27.4% for the three months ended September 30,
2003 from 28.3% in the comparable period for 2002. This decrease is primarily
the result of lower margins in the Burger King business for the three months
ended September 30, 2003 resulting from increased vendor costs, the provision
of lower margin logistical services and general pricing pressures. The margin
decrease in the Burger King business was partially offset by higher margins for
consumer products as a result of higher margin new product introductions and
effective inventory management.

Salaries, wages and benefits increased $87, or 1.4%, to $6,141 (12.6% of
revenues) for the three months ended September 30, 2003 from $6,054 (11.4% of
revenues) in the comparable period for 2002. This increase was primarily
attributable to the addition of employees from the acquisition of SCI partially
offset by a reduction in performance bonuses for employees in 2003.

Selling, general and administrative expenses increased $56, or 1.0%, to $5,546
(11.3% of revenues) for the three months ended September 30, 2003 from $5,490
(10.4% of revenues) in the comparable period for 2002. The increase is
primarily the result of additional operating expenses resulting from the
acquisition of SCI, partially offset by lower selling expenses.

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For the three months ended September 30, 2002, the Company recorded integration
costs of $161 (0.3% of revenues). These costs represent expenses directly
related to the integration of UPSHOT such as travel, training and consulting.

For the three months ended September 30, 2002, the Company recorded a
restructuring charge of $178 (0.3% of revenues). This restructuring charge
represents severance for workforce reductions made in 2002 to combine and
streamline the operations of the Company subsequent to the acquisition of
UPSHOT.

Net other income increased $67 to $188 for the three months ended September 30,
2003 from $121 in the comparable period for 2002. This increase was
attributable to foreign exchange gains, partially offset by reduced net
interest income attributable to a reduced level of cash, cash equivalents and
marketable securities as a result of cash utilized for the acquisition of SCI.

The effective tax rate for the three months ended September 30, 2003 was 31.5 %
compared to 34.9% for the same period in 2002. The decrease in the effective
tax rate is primarily the result of revised estimates of state income
tax apportionment factors and an increase in the relative mix of earnings
being generated internationally in territories which have more favorable tax
rates.

Net income decreased $804 to $1,327 (2.7% of revenues) in 2003 from $2,131
(4.0% of revenues) in 2002 primarily due to the decrease in gross profit earned
on lower revenues in 2003, partially offset by an increase in net other income
in 2003. The decrease was also due to increased salaries, wages and benefits
and selling, general and administrative expenses.

Nine Months Ended September 30, 2003 Compared to Nine Months Ended September
30, 2002 (In Thousands):

Revenues for the nine months ended September 30, 2003 increased $17,083, or
12.5%, to $153,468 from $136,385 in the comparable period in 2002. Marketing
Services revenues increased $20,602, or 18.8%, to $130,396 primarily as a
result of increased revenues associated with Burger King in the first half of
2003 and Kelloggs programs throughout 2003 compared to the same period in
2002. The increase in Marketing Services revenues was also attributable to the
inclusion of revenues generated by UPSHOT and SCI. The results for 2002 include UPSHOT from
July 18, 2002 (acquired July 17, 2002) and exclude SCI (acquired September 3,
2003). Excluding the impact of the UPSHOT and SCI acquisitions, revenues
increased 2.5% for the nine months ended September 30, 2003 compared to the
same period in 2002. Consumer Product revenues decreased $3,519, or 13.2%, to
$23,072 primarily as a result of decreased sales of Scooby-Doo, Robot Wars®
and Tub Tints® product partially offset by sales from the launch of a product
line based on Disneys Kim Possible and increased sales of Crayola® product.
Revenues for Scooby-Doo product in 2002 were higher primarily due to increased
shipments attributable to the Scooby-Doo feature film, which was released in
the summer of 2002.

Cost of sales increased $12,701 to $112,566 (73.3% of revenues) for the nine
months ended September 30, 2003 from $99,865 (73.3% of revenues) in the
comparable period in 2002 due to the higher sales volume in 2003. The gross
margin percentage increased to 26.7% for the nine months ended September 30,
2003 from 25.5% in the comparable period for 2002. This increase is primarily
the result of a charge for the forgiveness of a note receivable of $1,685 (1.2%
of revenues) included in the nine months ended September 30, 2002. Excluding
the impact for the forgiveness of the note receivable, gross margins decreased
slightly primarily as a result of a decrease in margins for Burger King
resulting from increased vendor costs, the provision of lower margin logistical
services and general pricing pressures. This decrease was largely offset by
higher margins for consumer products as a result of higher margin new product
introductions and effective inventory management.

Salaries, wages and benefits increased $2,560, or 17.1%, to $17,539 (11.4% of
revenues) for the nine months ended September 30, 2003 from $14,979 (11.0% of
revenues) in the comparable period for 2002. This increase was primarily
attributable to the addition of employees from the acquisitions of UPSHOT and
SCI partially offset by a reduction in performance bonuses for employees in
2003.

Selling, general and administrative expenses increased $2,504, or 17.2%, to
$17,056 (11.1% of revenues) for the nine months ended September 30, 2003 from
$14,552 (10.6% of revenues) in the comparable period for 2002. The increase is
primarily the result of additional operating expenses resulting from the
acquisitions of UPSHOT and SCI, and increased selling expenses resulting from
the higher sales level.

For the nine months ended September 30, 2002, the Company recorded integration
costs of $219 (0.2% of revenues). These costs represent expenses directly
related to the integration of UPSHOT such as travel, training and consulting.

For the nine months ended September 30, 2002, the Company recorded a
restructuring charge of $178 (0.1% of revenues). This restructuring charge
represents severance for workforce reductions made during 2002 to combine and
streamline the operations of the Company subsequent to the acquisition of
UPSHOT.

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Net other income increased $304 to $495 for the nine months ended September 30,
2003 from $191 in the comparable period for 2002. This increase was
attributable to foreign exchange gains, partially offset by reduced net
interest income attributable to a reduced level of cash, cash equivalents and
marketable securities as a result of cash utilized for the
acquisitions of
UPSHOT and SCI.

The effective tax rate for the nine months ended September 30, 2003 was 34.7 %
compared to 34.4% for the same period in 2002.

The cumulative effect of change in accounting principles in 2002 is due to the
adoption of Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets. SFAS 142 requires that companies no
longer amortize goodwill and indefinite life intangible assets, such as
trademarks. SFAS 142 also requires that companies evaluate goodwill and
indefinite life intangible assets for impairment. As a result of this
evaluation, the Company recorded a charge of $2,496, net of tax, in connection
with the goodwill resulting from the 1998 acquisition of Contract Marketing,
Inc. and U.S. Import and Promotions Co., collectively referred to as USI.
The transition charge is reflected as a cumulative effect of change in
accounting principles effective January 1, 2002, and therefore results for the
quarter ended March 31, 2002 have been adjusted retroactively.

Net income increased $3,595 to $4,445 (2.9% of revenues) in 2003 from $850
(0.6% of revenues) in 2002. The increase was primarily due to the cumulative
effect of change in accounting principles in 2002 of $2,496, net of tax, a
charge for the forgiveness of a note receivable in 2002, the increase in gross
profit earned on higher revenues in 2003 and the increase in net other income
in 2003. The increase was partially offset by the increased salaries, wages
and benefits and selling, general and administrative expenses in 2003.

Financial Condition and Liquidity

The Companys financial position remained strong in the third quarter of 2003.
At September 30, 2003, the Company had no debt and its cash, cash equivalents
and marketable securities were $16,306, compared to $26,833 as of December 31,
2002. The decrease in cash, cash equivalents and marketable securities was
attributable to the acquisition of SCI on September 3, 2003 and payment of
current liabilities partially offset by collection of accounts receivable
during the first quarter of 2003.

As of September 30, 2003, the Companys net accounts receivable decreased
$12,714 to $31,103 from $43,817 at December 31, 2002. Accounts receivable as of
December 31, 2002 were at higher than normal levels as a result of shipment
delays attributable to the West Coast port dispute. This decrease was
partially offset by additional receivables acquired as a result of the SCI
acquisition. As of September 30, 2003, inventories increased $1,306 to $17,669
from $16,363 at December 31, 2002. This increase in inventories is primarily
the result of the timing of Consumer Products expected to be delivered in the
fourth quarter of 2003 in anticipation of the holiday shopping season, as well
as the result of additional inventories related to SCI, partially offset by a
decrease in Marketing Services inventories. Marketing Services inventories
represent 68% and 87% of total inventories as of September 30, 2003 and
December 31, 2002, respectively. Promotional product inventory used in
Marketing Services generally has lower risk than Consumer Product inventory, as
it usually represents product made to order.

As of September 30, 2003, accounts payable decreased $11,002 to $27,332 from
$38,334 at December 31, 2002. This decrease is associated with the payment of
liabilities related to fourth quarter 2002 promotional programs. Accounts
payable as of December 31, 2002 were at higher than normal levels as a result
of shipment delays attributable to the West Coast port dispute. This decrease
was partially offset by additional payables as a result of the SCI acquisition.

As of September 30, 2003, accrued liabilities decreased $9,339 to $14,990 from
$24,329 at December 31, 2002. This decrease is primarily attributable to the
payment of administrative fees collected from distribution companies during the
fourth quarter of 2002 on behalf of promotional customers, employee performance
bonuses and income taxes. This decrease was partially offset by additional
accrued liabilities as a result of the SCI acquisition.

As of September 30, 2003, working capital was $28,460 compared to $29,157 at
December 31, 2002. Cash flows used in operations for the nine months ended
September 30, 2003 were $2,834 compared to cash flows provided by operations of
$5,952 in the prior year. This change is the result of the reduction of current
assets and liabilities to more normalized levels as discussed above. Cash flows
used in investing activities for the nine months ended September 30, 2003
increased $4,240 to $8,028 from $3,788 in the prior year. This increase is
primarily the result of proceeds received in 2002 from sales of marketable
securities which partially offset the
payment for the purchase of UPSHOT, compared to the use of cash in 2003 to
purchase SCI and to purchase marketable securities. Cash flows used in
financing activities for the nine months ended September 30, 2003 were $1,164
compared to $1,386 in the prior year. This decrease is the result of an
increase in the proceeds from the exercise of stock options, partially offset
by an increase in the

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repurchase of Company stock. As of the date hereof, the
Company believes that its cash flows from operations, cash, cash equivalents
and marketable securities at September 30, 2003 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

On April 24, 2001, the Company signed a credit facility (the Facility) with
Bank of America. The Facility is secured by substantially all of the Companys
assets and provides for a line of credit of up to $35,000 for three years from
the date of closing with borrowing availability determined by a formula based
on qualified assets. Interest on outstanding borrowings will be based on
either a fixed rate equivalent to LIBOR plus an applicable spread of between
1.50 and 2.25 percent or a variable rate equivalent to the 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 0.60 percent per
annum and certain letter of credit fees. The applicable spread is based on the
achievement of certain financial ratios. The Facility also requires the
Company to comply with certain restrictions and covenants as amended from time
to time. On November 14, 2001, February 8, 2002, September 30, 2002 and
November 14, 2003, certain covenants under the facility were amended. As of
September 30, 2003, the Company was in compliance with the amended restrictions
and covenants. The Facility may be used for working capital and acquisition
financing purposes. As of September 30, 2003, there were no amounts
outstanding under the Facility.

Acquisitions

On July 17, 2002, the Company consummated the acquisition of UPSHOT, a
marketing agency with expertise in promotion, event, collaborative and
environmental marketing. The Company financed the acquisition through its
existing cash reserves. The acquisition was consummated pursuant to an Asset
Purchase Agreement, dated May 22, 2002, by and among the Company, Promotional
Marketing, LLC (Promotional Marketing) and HA-LO Industries, Inc. (HA-LO)
(the Purchase Agreement). Under the terms of the Purchase Agreement, the
Company acquired the principal assets of Promotional Marketing (consisting of
the principal assets used in connection with the operation of the UPSHOT
business) for $9,206 in cash plus related transaction costs of $685.
This purchase price is net of $106 received in the fourth quarter of
2002 for a closing balance sheet working capital adjustment. The
Company assumed the principal current liabilities of the UPSHOT business in
connection with the acquisition. In addition to the cash purchase price paid at
the closing, the Company may be obligated to pay additional consideration to
Promotional Marketing contingent upon the results of certain performance
targets attained in the twelve month period ending July 31, 2003. The
additional consideration, if any, will be recorded as goodwill. Based on actual
results through September 30, 2003, the Company does not expect to be obligated
to pay any additional consideration. HA-LO, which is the parent company of
Promotional Marketing, was in Chapter 11 bankruptcy proceedings as of the
acquisition date, and the Companys acquisition of the UPSHOT business was
approved by the United States bankruptcy court.

On September 3, 2003, the Company acquired substantially all of the assets of
SCI, a privately held promotional marketing services company based in Ontario,
California. The Company financed the acquisition through its existing cash
reserves. The acquisition was consummated pursuant to an Asset Purchase
Agreement dated September 3, 2003, by and among the Company, SCI and Joseph J.
Schmidt, III (the Purchase Agreement). Under the terms of the Purchase
Agreement, the Company acquired substantially all of the assets of SCI for a
cash purchase price of approximately $5.9 million (before closing balance sheet
working capital adjustment), plus additional earnout consideration of up to
$3.5 million based upon future performance of the acquired business. Net of a
holdback of $250, the Company paid $5,683 in cash plus related transaction
costs of $554. The Company also assumed the operating liabilities of the
business in connection with the acquisition. The earnout consideration is based
upon the business achieving targeted levels of earning before interest, taxes,
depreciation and amortization (EBITDA) over the period from 2003 through
2006. The earnout payments, if required, are payable 50% in cash and 50% in
shares of the Companys common stock. The additional consideration, if any,
will be recorded as goodwill.

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Stock Repurchase

On July 21, 2000, the Companys Board of Directors authorized up to $10,000
for the repurchase of the Companys common stock over a twelve month
period. In the period from July 21, 2000 to July 21, 2001, the Company
spent $6,430 to purchase an aggregate of 523,594 shares at an average price
of $12.28 per share including commissions. On July 24, 2001, the Companys
Board of Directors authorized up to an additional $10,000 for the
repurchase of the Companys common stock over a twelve month period. In
the period from August 2, 2001 through July 11, 2002, the Company spent
$5,605 to purchase 454,715 shares at an average price of $12.33 per share
including commissions. On July 12, 2002, the Companys Board of Directors
authorized up to an additional $10,000 for the repurchase of the Companys
common stock. The Company spent $2,316 to repurchase 177,400 shares at an
average price of $13.05 per share including commissions under this
authorization through September 30, 2003. The duration of the current
buyback program is indefinite; provided, however, that the Companys Board
of Directors intends to review the program quarterly. Purchases are
conducted in the open market at prevailing prices, based on market
conditions when the Company is not in a quiet period. The Company may also
transact purchases effected as block trades, as well as certain negotiated,
off-exchange purchases not in the open market. Since initiating the
overall buyback program on July 20, 2000, the Company has spent $14,351 to
purchase a total of 1,155,709 shares at an average price of $12.42 per
share including commissions through September 30, 2003. This repurchase
program is being funded through working capital.

Recent Accounting Pronouncements

In August 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 requires entities to record the fair
value of a liability for an asset retirement obligation in the period in
which the obligation is incurred. When the liability is initially
recorded, the entity capitalizes the cost by increasing the carrying amount
of the related long-lived asset. Over time, the liability is accreted to
its present value each period, and the capitalized cost is depreciated over
the useful life of the related asset. SFAS No. 143 is effective for 2003.
The Company implemented SFAS No. 143 on January 1, 2003. The impact of
such adoption did not have a material effect on the Companys financial
statements.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS No. 145 requires that gains and losses from
extinguishment of debt be classified as extraordinary items only if they
meet the criteria in APB Opinion No. 30 (Opinion No. 30). Applying the
provisions of Opinion No. 30 will distinguish transactions that are part of
an entitys recurring operations from those that are unusual and infrequent
and meet the criteria for classification as an extraordinary item. SFAS No.
145 is effective for the Company beginning January 1, 2003. The Company
implemented SFAS No. 145 on January 1, 2003. The impact of such adoption
did not have a material effect on the Companys financial statements.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities, which supercedes Emerging
Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity.
SFAS No. 146 requires that a liability for a cost associated with an exit
activity or disposal activity be recognized and measured initially at fair
value only when the liability is incurred. EITF Issue No. 94-3 requires
recognition of a liability at the date an entity commits to an exit plan.
All provisions of SFAS No. 146 were effective for exit or disposal
activities initiated after December 31, 2002. Consistent with the
provisions of SFAS No. 146, the Companys previously issued financial
statements will not be restated. The Company implemented SFAS No. 146 on
January 1, 2003. The impact of such adoption did not have a material effect
on the Companys financial statements.

In November 2002, the FASB issued FASB Interpretation No. (FIN) 45,
Guarantors Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires
that upon issuance of a guarantee, a guarantor must recognize a liability
for the fair value of an obligation assumed under a guarantee. FIN 45 also
requires additional disclosures by a guarantor in its interim and annual
financial statements about the obligations associated with guarantees
issued. The recognition provisions of FIN 45 are effective for any
guarantees issued or modified after December 31, 2002. The disclosure
requirements are effective for financial statements of interim or annual
periods ending after December 15, 2002. The Company implemented FIN 45 on
January 1, 2003. The impact of such adoption did not have a material
effect on the Companys financial statements.

In January 2003, the FASB issued FIN No. 46, Consolidation of Variable
Interest Entities. FIN 46 will be the guidance that determines (1) whether
consolidation is required under the controlling financial interest model of
Accounting Research Bulletin No. 51 (ARB 51), Consolidated Financial
Statements or, alternatively, (2) whether the variable interest model under
FIN 46 should be used to account for existing and new entities. The variable
interest model of FIN 46 looks to identify the primary beneficiary of a
variable interest entity. The primary beneficiary is the party that is exposed
to the majority of the risk or stands to benefit the most from the variable
interest entitys activities. A variable interest entity would be required to
be consolidated if certain conditions are met. FIN 46 effective dates and
transition provisions will be required for pre-existing entities as of the
beginning of the first interim

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period beginning after December 15, 2003. Management does not believe that the
adoption of this statement will have a material impact on the Companys
financial statements.

In April 2003, SFAS No. 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities, was issued. In general, this statement
amends and clarifies accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities under SFAS No. 133. This statement is effective for contracts
entered into or modified after June 30, 2003, and for hedging relationships
designated after June 30, 2003. The adoption of SFAS No. 149 did not have
an impact on the Companys consolidated financial statements or
disclosures.

In May 2003, SFAS No. 150, Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity was issued, which
requires that certain financial instruments must now be accounted for as
liabilities. The financial instruments affected include mandatorily
redeemable stock, certain financial instruments that require or may require
the issuer to buy back some of its shares in exchange for cash or other
assets and certain obligations that can be settled with shares of stock.
SFAS No. 150 is effective for all financial instruments entered into or
modified after May 31, 2003 and were applied to the Companys existing
financial instruments effective July 1, 2003, the beginning of the first
fiscal period after June 15, 2003. The adoption of SFAS No. 150 on July 1,
2003, did not have an impact on the Companys consolidated financial
statements or disclosures. The Companys mandatory redeemable preferred
stock does not have a fixed and determinable redemption date and,
therefore, is not impacted by the adoption of SFAS No. 150.

In May 2003, the EITF reached a consensus on EITF Issue No. 01-8,
Determining Whether an Arrangement Contains a Lease. The new requirements
of EITF No. 01-8 potentially affects companies that sell or purchase
products or services through supply, commodity, transportation and
data-processing outsourcing contracts. The guidance in this new release is
designed to mandate reporting revenue as rental or leasing income that
would otherwise be reported as part of product sales or services revenue.
EITF No. 01-8 requires both parties to an arrangement to determine whether
a service contract or similar arrangement includes a lease within the scope
of SFAS No. 13, Accounting for Leases, which means focusing on agreements
conveying the right to use property, plant or equipment. The consensus is
effective prospectively to arrangements agreed to, modified or acquired in
business combinations in fiscal periods beginning after May 28, 2003 (the
quarter beginning July 1, 2003 for the Company). The adoption of EITF No.
01-8 did not have a material effect on the Companys consolidated financial
statements.

Restructuring

During the third quarter of 2002, the Company formulated and implemented a
restructuring plan in connection with the UPSHOT acquisition in order to
combine and streamline the operations of the Company and UPSHOT. The Company
evaluated the current cost structure of both businesses. In connection with
this plan the Company recorded a restructuring charge of $178. This charge
represents severance for a workforce reduction of seven employees in the
Companys Los Angeles office, who were terminated, and is reflected as a
restructuring charge in the accompanying consolidated statement of operations.
The workforce reduction included employees from the Companys marketing
services division as well as other support services. The full amount of the
restructuring charge was paid as of September 30, 2003.

In connection with the restructuring plan, the Company also decided to close
UPSHOTs Richmond, Virginia office and eliminate certain positions at UPSHOTs
Chicago, Illinois office. Additionally, in 2003 the Company finalized its exit
plan with respect to vacating half of its leased space (thirty thousand square
feet) at UPSHOTs Chicago, Illinois office. This resulted in an adjustment to
the liabilities recorded and an increase to goodwill of $1,900 for the present
value of the remaining lease payments for the vacated office space in excess of
the estimated sub-lease income. The liabilities assumed in connection with this
restructuring plan totaled $3,535 and are included as part of goodwill in
accordance with EITF Issue No. 95-3, Recognition of Liabilities in Connection
with a Purchase Business Combination. $1,155 of these liabilities were paid as
of September 30, 2003.

Related Party Transaction

On July 15, 2003, the Company
entered into an agreement with U.S. Capital Investors, Inc.
(USCI), an entity controlled by Jeffrey S.
Deutschman, pursuant to which USCI will serve as an advisor to the
Company with respect to potential mergers and acquisitions through
December 31, 2003. Mr. Deutschman currently serves on the
Board of Directors of the Company as the representative of the holder
of the Companys Series A Preferred Stock. The
Companys agreement with USCI provides for the payment of a
discretionary success fee for completed acquisition transactions in
an amount determined by an independent committee of the Board in
accordance with certain guidelines and criteria. The guidelines for
fees payable upon successful completion of an acquisition transaction
are $200 for up to $10,000 of consideration, 1.5% of consideration
from $10,000 to $25,000 and 1% of consideration over $25,000;
provided, however, that the success fee for the first transaction
under the agreement has an initial fee guideline of $275 for up to
$10,000 of consideration. Notwithstanding the guidelines, the
independent committee has absolute discretion in determining the
amount, if any, of the success fee for any transaction. The USCI
agreement provides for the payment of a refundable advance against
success fees in the aggregate amount of $275. The USCI agreement was
approved by the Board and acknowledged by the holder of the
Series A Preferred Stock. The Company believes that this
agreement will enhance its ability to analyze and close merger and
acquisition transactions in a manner that is more cost effective than
traditional outside advisory firms. In connection with the
acquisition of SCI, USCI earned a success fee of $275. This success
fee is recorded as a transaction cost of the SCI acquisition.




ITEM 4. CONTROLS AND PROCEDURES

The Company carried out an evaluation, with the participation of its
management, including the Chief Executive Officer and Acting Chief Financial
Officer, of the effectiveness of the Companys disclosure controls and
procedures (pursuant to Rule 13a-15(e) under the Securities Exchange Act of
1934) as of the end of the period covered by this report. Based upon that
evaluation, the Chief Executive Officer and Acting Chief Financial Officer
concluded that the Companys disclosure controls and procedures are effective
in timely alerting them to material information relating to the Company
(including its consolidated subsidiaries) required to be included in the
Companys periodic SEC filings. There has been no change in the Companys
internal control over financial reporting during the quarter ended September
30, 2003 that has materially affected, or is reasonably likely to materially
affect, its internal control over financial reporting.

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PART II. OTHER INFORMATION




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



| | (a) |  | Exhibits
| | --- |  | --------

| |  |  |      |  |  |                                                                                                                                           
| |  |  | ---- |  |  | ------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | 31.1 |  |  | Certification of Chief Executive Officer and Acting Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.    
|
| |  |  | 32.1 |  |  | Certification of the Chief Executive Officer and Acting Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|

| | (b) |  | Reports on Form 8-K:                                                                                       
| | --- |  | -----------------------------------------------------------------------------------------------------------
|
| |     |  | Report on Form 8-K filed with the Securities and Exchange Commission on
July 29, 2003 (Items 7 and 12).    
|
| |     |  | Report on Form 8-K filed with the Securities and Exchange Commission on
September 18, 2003 (Items 2 and 7).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

EQUITY MARKETING, INC.


|                         |  |                                                           
|------------------------ |  | ----------------------------------------------------------
|Dated: November 14, 2003 |  |                                                           
|                         |  |                                                           
|                         |  | /s/ Donald A. Kurz                                        
|                         |  |                                                           
|                         |  | Donald A. Kurz,                                           
|                         |  | Chief Executive Officer and Acting Chief Financial Officer

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