<PAGE>   1

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

                                    FORM 10-Q

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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000


                                       OR

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

                          COMMISSION FILE NUMBER: 23346


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

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

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


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

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X]           No [ ]

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

Common Stock, $.001 Par Value, 6,283,896 shares as of November 7, 2000.


<PAGE>   2


                             EQUITY MARKETING, INC.

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

<TABLE>
<CAPTION>

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

         Item 1.  Financial Statements                                                                       3

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

PART II. OTHER INFORMATION

         Item 1.  Legal Proceedings                                                                         20

         Item 4.  Submission of Matters to a Vote of Security Holders                                       20

         Item 6.  Exhibit and Report on Form 8-K                                                            21

</TABLE>



                                       2
<PAGE>   3


PART I. FINANCIAL INFORMATION

         ITEM 1. FINANCIAL STATEMENTS


                             EQUITY MARKETING, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

                                     ASSETS

<TABLE>
<CAPTION>

                                                                                          DECEMBER 31,       SEPTEMBER 30,
                                                                                              1999                2000
                                                                                          ------------       -------------
                                                                                                              (UNAUDITED)
<S>                                                                                       <C>              <C>
CURRENT ASSETS:
  Cash and cash equivalents                                                               $     7,131      $      32,478
  Accounts receivable (net of allowances of $5,370 and
    $3,498 as of December 31, 1999 and September 30, 2000, respectively)                       37,385             43,043
  Note receivable, current portion                                                              5,024              8,137
  Inventory                                                                                     8,742             23,805
  Prepaid expenses and other current assets                                                     5,696              6,282
                                                                                          -----------        -----------
         Total current assets                                                                  63,978            113,745
FIXED ASSETS, net                                                                               4,907              4,276
INTANGIBLE ASSETS, net                                                                         21,846             21,286
NOTE RECEIVABLE, long-term portion                                                              5,491              2,151
OTHER ASSETS                                                                                    1,022              1,447
                                                                                        -------------    ---------------
         Total assets                                                                     $    97,244       $    142,905
                                                                                          ===========       ============

</TABLE>


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


                                       3
<PAGE>   4


                             EQUITY MARKETING, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>

                                                                                   DECEMBER 31,     SEPTEMBER 30,
                                                                                       1999             2000
                                                                                   ------------     -----------
                                                                                                    (UNAUDITED)
<S>                                                                                 <C>             <C>
CURRENT LIABILITIES:
  Short-term debt                                                                   $  12,500       $    --
  Accounts payable                                                                     21,726          37,849
  Accrued liabilities                                                                  18,707          29,638
                                                                                    ---------       ---------
         Total current liabilities                                                     52,933          67,487
LONG-TERM LIABILITIES                                                                   2,286           2,391
                                                                                    ---------       ---------
         Total liabilities                                                             55,219          69,878
                                                                                    ---------       ---------

COMMITMENTS AND CONTINGENCIES

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

STOCKHOLDERS' EQUITY:
  Preferred stock, $.001 par value per share; 1,000,000
    shares authorized, 25,000 Series A issued and outstanding                            --              --
  Common stock, par value $.001 per share, 20,000,000
    shares authorized, 6,220,100 and 6,291,596 shares outstanding
    as of December 31, 1999 and September 30, 2000, respectively                         --              --
  Additional paid-in capital                                                           15,942          17,665
  Retained earnings                                                                    28,477          35,774
                                                                                    ---------       ---------
                                                                                       44,419          53,439
Less--
  Treasury stock, 1,921,299 and 2,008,399 shares, at cost, as of
    December 31, 1999 and September 30, 2000, respectively                             (2,129)         (3,277)
  Stock subscription receivable                                                           (21)            (21)
  Unearned compensation                                                                  (244)           (206)
                                                                                    ---------       ---------
         Total stockholders' equity                                                    42,025          49,935
                                                                                    ---------       ---------
         Total liabilities and stockholders' equity                                 $  97,244       $ 142,905
                                                                                    =========       =========

</TABLE>


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

                                       4
<PAGE>   5


                             EQUITY MARKETING, INC.

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

<TABLE>
<CAPTION>

                                                         THREE MONTHS ENDED             NINE MONTHS ENDED
                                                             SEPTEMBER 30,                 SEPTEMBER 30,
                                                     ---------------------------    ----------------------------
                                                         1999           2000           1999            2000
                                                     ------------    -----------    -----------    -------------
<S>                                                  <C>             <C>            <C>             <C>
REVENUES                                             $    53,334     $    56,026    $   136,802     $   154,817
COST OF SALES                                             39,295          39,589        102,832         114,279
                                                     -----------     -----------    -----------     -----------
         Gross profit                                     14,039          16,437         33,970          40,538
                                                     -----------     -----------    -----------     -----------


OPERATING EXPENSES:
  Salaries, wages and benefits                             4,433           5,730         11,349          12,877
  Selling, general and administrative                      5,075           5,233         13,720          15,294
  Restructuring gain                                        (240)           --             (641)           --
                                                     -----------     -----------    -----------     -----------
         Total operating expenses                          9,268          10,963         24,428          28,171
                                                     -----------     -----------    -----------     -----------
         Income from operations                            4,771           5,474          9,542          12,367
OTHER  INCOME (EXPENSE), net                                (151)            391           (590)            746
                                                     -----------     -----------    -----------     -----------
         Income before provision for income taxes          4,620           5,865          8,952          13,113
PROVISION FOR INCOME TAXES                                 1,848           2,346          3,581           5,234
                                                     -----------     -----------    -----------     -----------
         Net income                                  $     2,772     $     3,519    $     5,371     $     7,879
                                                     ===========     ===========    ===========     ===========

NET INCOME                                           $     2,772     $     3,519    $     5,371     $     7,879
PREFERRED STOCK DIVIDENDS                                   --               375           --               582
                                                     -----------     -----------    -----------     -----------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS                2,772           3,144          5,371           7,297
                                                     ===========     ===========    ===========     ===========

BASIC NET INCOME PER SHARE                           $      0.44     $      0.50    $      0.86     $      1.16
                                                     ===========     ===========    ===========     ===========
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING              6,230,906       6,307,650      6,221,374       6,278,516
                                                     ===========     ===========    ===========     ===========


DILUTED NET INCOME PER SHARE                         $      0.42     $      0.42    $      0.84     $      1.06
                                                     ===========     ===========    ===========     ===========
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING            6,533,737       8,288,741      6,387,617       7,403,427
                                                     ===========     ===========    ===========     ===========

</TABLE>


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



                                       5
<PAGE>   6


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


<TABLE>
<CAPTION>

                                                                                                  NINE MONTHS ENDED
                                                                                                     SEPTEMBER 30,
                                                                                              ---------------------------
                                                                                                1999               2000
                                                                                              --------           --------
<S>                                                                                             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                                    $  5,371       $  7,879
  Adjustments to reconcile net income to net cash
    provided by operating activities:
        Depreciation and amortization                                                              2,050          1,972
        Provision for doubtful accounts                                                              298            867
        Loss on asset disposal                                                                        11           --
        Tax benefit from exercise of stock options                                                    39            295
        Issuance of treasury stock to 401(k) Tax Deferred Saving Plan                                195           --
        Other                                                                                        (31)          --
        Changes in operating assets and liabilities:
           Increase (decrease) in cash and cash equivalents:
              Accounts receivable                                                                 25,680         (6,525)
              Note receivable                                                                       --              227
              Inventory                                                                            3,419        (15,063)
              Prepaid expenses and other current assets                                            1,394           (586)
              Other assets                                                                          (759)          (425)
              Accounts payable                                                                   (13,572)        16,123
              Accrued liabilities                                                                   (920)        10,076
              Long-term liabilities                                                                   26            105
                                                                                                --------       --------
         Net cash provided by operating activities                                                23,201         14,945
                                                                                                --------       --------
CASH FLOWS FROM INVESTING ACTIVITIES:
       Purchases of fixed assets                                                                    (466)          (453)
       Proceeds from sale of fixed assets                                                             10             21
       Payment for purchase of Contract Marketing, Inc. and U.S. Import and Promotions Co.          (149)          (349)
                                                                                                --------       --------
         Net cash used in investing activities                                                      (605)          (781)
                                                                                                --------       --------
CASH FLOWS FROM FINANCING ACTIVITIES:
       Repayments on short-term debt                                                             (29,000)       (12,500)
       Preferred stock dividends paid                                                               --             (582)
       Proceeds from issuance of preferred stock and warrants including $855 of
         accrued offering costs not yet paid                                                        --           24,305
       Purchase of treasury stock                                                                   --           (1,148)
       Proceeds from exercise of stock options                                                        51          1,108
                                                                                                --------       --------
         Net cash (used in) provided by financing activities                                     (28,949)        11,183
                                                                                                --------       --------
         Net (decrease) increase in cash and cash equivalents                                     (6,353)        25,347
CASH AND CASH EQUIVALENTS, beginning of period                                                     7,250          7,131
                                                                                                --------       --------
CASH AND CASH EQUIVALENTS, end of period                                                        $    897       $ 32,478
                                                                                                ========       ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  CASH PAID FOR:
    Interest                                                                                    $    835       $    444
                                                                                                ========       ========
    Income taxes                                                                                $  1,110       $  5,756
                                                                                                ========       ========
</TABLE>



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


                                       6
<PAGE>   7
3

                             EQUITY MARKETING, INC.

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

NOTE 1  --  ORGANIZATION AND BUSINESS

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

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

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

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

In the opinion of management and subject to year-end audit, the accompanying
unaudited condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for fair presentation have been included. The results of operations
for the interim periods are not necessarily indicative of the results for a full
year. These consolidated financial statements should be read in conjunction with
the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.

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

NET INCOME PER SHARE

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

Diluted EPS reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into common
stock. Diluted EPS includes in-the-money options and warrants using the treasury
stock method and also includes the assumed conversion of preferred stock using
the if-converted method. Options and warrants to purchase 320,000 and 1,296,666
shares of common stock, $.001 par value per share (the "Common Stock"), as of
September 30, 1999 and 2000, respectively, were excluded from the computation of
diluted EPS as they would have been anti-dilutive.

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


                                       7
<PAGE>   8
<TABLE>
<CAPTION>
                                                                     For the Three Months Ended September 30,
                                                                   1999                                    2000
----------------------------------------------------------------------------------------------------------------------------------
                                                   Income         Shares     Per Share       Income         Shares     Per Share
                                                (Numerator)   (Denominator)   Amount      (Numerator)   (Denominator)    Amount
----------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>              <C>            <C>       <C>              <C>            <C>
Basic EPS:
   Income available to common stockholders      $    2,772       6,230,906      $.44      $    3,144       6,307,650      $.50
                                                                                ====                                      ====
Preferred stock dividends                             --              --                         375            --
Effect of Dilutive Securities:
     Options and warrants                             --           302,831                      --           286,176
Convertible preferred stock                           --              --                        --         1,694,915
                                                ----------       ---------                ----------       ---------
Dilutive EPS:
   Income available to common
   stockholders and assumed conversion          $    2,772       6,533,737      $.42      $    3,519       8,288,741      $.42
                                                ==========       =========      ====      ==========       =========      ====

<CAPTION>


                                                                  For the Nine Months Ended September 30,
                                                                 1999                                 2000
-----------------------------------------------------------------------------------------------------------------------------------
                                                  Income          Shares     Per Share      Income         Shares      Per Share
                                                (Numerator)    (Denominator)   Amount     (Numerator)   (Denominator)    Amount
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>              <C>            <C>        <C>            <C>            <C>
Basic EPS:
   Income available to common stockholders      $   5,371        6,221,374      $ .86      $   7,297      6,278,516        $1.16
                                                                                =====                                      =====
Preferred stock dividends                            --               --                         582           --
Effect of Dilutive Securities:
     Options and warrants                            --            166,243                      --          246,623
Convertible preferred stock                          --               --                        --          878,288
                                                ---------        ---------                 ---------      ---------
Dilutive EPS:
   Income available to common
   stockholders and assumed conversion          $   5,371        6,387,617      $ .84      $   7,879      7,403,427        $1.06
                                                =========        =========      =====      =========      =========        =====
</TABLE>


INVENTORY

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

<TABLE>
<CAPTION>

                                                               DECEMBER 31,         SEPTEMBER 30,
                                                                   1999                 2000
                                                               -----------          -----------
<S>                                                             <C>                <C>
Production-in-process                                           $   1,088          $     4,447
Finished goods                                                      7,654               19,358
                                                             ------------        -------------
                                                                $   8,742           $   23,805
                                                              ===========         ============
</TABLE>

NOTE 3  --  SHORT-TERM DEBT

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

As of December 31, 1999, there was $12,500 outstanding under the Credit
Agreement. There were no amounts outstanding under the Credit Agreement at
September 30, 2000. Letters of credit outstanding as of December 31, 1999 and
September 30, 2000 totaled $401 and $2,389, respectively.


                                       8
<PAGE>   9



NOTE 4  --  RESTRUCTURING RESERVE

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

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

NOTE 5 -  MANDATORY REDEEMABLE PREFERRED STOCK

On March 29, 2000, Crown EMAK Partners, LLC, a Delaware limited liability
company ("Crown"), invested $11,900 in the Company in exchange for preferred
stock and warrants to purchase additional preferred stock. Under the terms of
the investment, Crown acquired 11,900 shares of Series A senior cumulative
participating convertible preferred stock, par value $.001 per share, of the
Company (the "Series A Stock") with a conversion price of $14.75 per share. In
connection with such purchase, the Company granted to Crown five year warrants
(collectively, the "Warrants") to purchase 5,712 shares of Series B senior
cumulative participating convertible preferred stock, par value $.001 per share,
of the Company (the "Series B Stock") at an exercise price of $1,000 per share,
and 1,428 shares of Series C senior cumulative participating convertible
preferred stock, par value $.001 per share, of the Company (the "Series C
Stock") at an exercise price of $1,000 per share. The Warrants are immediately
exercisable. The conversion prices of the Series B Stock and the Series C Stock
are $16.00 and $18.00, respectively. On June 20, 2000, Crown paid an additional
$13,100 to the Company in exchange for an additional 13,100 shares of Series A
Stock with a conversion price of $14.75 per share. In connection with such
purchase, the Company granted to Crown Warrants to purchase an additional 6,288
shares of Series B Stock and an additional 1,572 shares of Series C Stock. Each
share of Series A Stock is convertible into 67.7966 shares of Common Stock,
representing 1,694,915 shares of Common Stock. Each share of Series B Stock and
Series C Stock is convertible into 62.5 and 55.5556 shares of Common Stock,
respectively, representing 916,666 shares of Common Stock in the aggregate. Also
in connection with such purchase, the Company agreed to pay Crown a commitment
fee in the aggregate amount of $1,250, paid in equal quarterly installments of
$62.5 commencing on June 30, 2000 and ending on March 31, 2005. The Company has
paid $125 in fees for the nine months ended September 30, 2000.

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

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

Crown has voting rights equivalent to the number of shares of Common Stock into
which their preferred stock is convertible on the relevant record date. Crown is
also entitled to receive a quarterly dividend equal to 6% of the Liquidation
Preference per share outstanding, payable in cash. A cash dividend of $375 was
paid to Crown on September 30, 2000. Total dividend payments for the nine months
ended September 30, 2000 amounted to $582.

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

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


                                       9
<PAGE>   10

NOTE 6  -  LEGAL PROCEEDINGS

POKEMON RECALL AND RELATED MATTERS
On May 4, 2000, a lawsuit entitled Estate of Kira Alexis Murphy, Madelyne Ariana
Alto, Netanya Noel Alto and Jill Ann Alto v. Burger King Corporation, Fast Food
Enterprise of California, Inc., Equity Marketing, Inc., and Specialized
Technology Resources, Inc., Case No. B C229358, was filed in the Superior Court
of the State of California for the County of Los Angeles. The lawsuit was filed
by plaintiffs who allege that the Pokemon(TM) ball caused the death of Kira
Alexis Murphy. The lawsuit asserted causes of action for product liability,
breach of warranty, wrongful death and negligent infliction of emotional
distress, and sought an unspecified amount of damages and attorneys' fees.
During the reporting period, the lawsuit was settled. The settlement was not
material to the Company's financial condition or results of operations.

On August 11, 2000, two lawsuits entitled Ashley L. Jones v. Burger King
Corporation, Southdown Corporation, Equity Marketing, Inc., and Specialized
Technology Resources, Inc., Case No. 49D130008CT001170, and Sheila Jones v.
Burger King Corporation, Southdown Corporation, Equity Marketing, Inc., and
Specialized Technology Resources, Inc., Case No. 49D050008CT001154, were filed
in the Superior Court of the State of Indiana for the County of Marion. The
lawsuits were filed by plaintiffs who allege that the Pokemon(TM) ball caused
the death of Zachary B. Jones. The lawsuits assert causes of action for
negligence, product liability, breach of warranty, wrongful death and negligent
infliction of emotional distress, and seek an unspecified amount of compensatory
and punitive damages and attorneys' fees. On September 7, 2000, the lawsuits
were removed to the United States District Court for the Southern District of
Indiana, Indianapolis Division (Case No. IP00-1400 C Y/G and Case No. IP00-1401
C B/S, respectively).

The Company may be contractually required to indemnify Burger King and its
franchisees for the expenses and damages, if any, incurred in connection with
these two lawsuits. Burger King has requested indemnification for such expenses
and damages, if any. While the Company believes these lawsuits are without merit
and intends to defend them vigorously, they may, regardless of the outcome,
result in substantial expenses and damages to the Company and may significantly
divert the attention of the Company's management. There can be no assurance that
the Company will be able to achieve favorable settlements of these lawsuits,
will be able to obtain favorable resolutions of such lawsuits if they are not
settled or that the Company's insurance carriers will cover all of the Company's
obligations thereunder. Unfavorable resolutions of these lawsuits or prolonged
litigation, the costs of which may be substantial, could have a material adverse
effect on the Company's business, financial condition and results of operations.

In addition to the information regarding the Pokemon(TM) recall and related
matters contained in this document, readers are advised to review the Company's
Form 10-K for the year ended December 31, 1999, under the heading "Item 3. Legal
Proceedings." and the Company's Form 10-Qs for the quarters ended March 31, 2000
and June 30, 2000, under the heading "Item 1. Legal Proceedings."

NOTE 7  -  SEGMENTS

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

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


                                       10
<PAGE>   11


INDUSTRY SEGMENTS

<TABLE>
<CAPTION>

                                                      AS OF AND FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
                                                    ------------------------------------------------------------
                                                                           CONSUMER
                                                       PROMOTIONS          PRODUCTS         CORPORATE      TOTAL
----------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                 <C>               <C>           <C>
Total revenues                                      $    47,651         $     5,683       $      -      $ 53,334
================================================================================================================
Income (loss) before provision (benefit)
  for income taxes                                  $     9,693         $       (10)      $    (5,063)  $  4,620
Provision (benefit) for income taxes                      3,877                  (4)           (2,025)     1,848
----------------------------------------------------------------------------------------------------------------
Net income (loss)                                   $     5,816         $        (6)      $    (3,038)  $  2,772
================================================================================================================

Fixed asset additions, net                          $      -            $      -          $       294   $    294
================================================================================================================
Depreciation and amortization                       $       186         $       126       $       367   $    679
================================================================================================================
Total assets                                        $    35,737         $     5,054       $    36,279   $ 77,070
================================================================================================================

<CAPTION>

                                                       AS OF AND FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
                                                    ------------------------------------------------------------
                                                                           CONSUMER
                                                       PROMOTIONS          PRODUCTS         CORPORATE      TOTAL
----------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                 <C>               <C>           <C>
Total revenues                                      $    47,652         $     8,374       $      -      $ 56,026
================================================================================================================

Income (loss) before provision (benefit)
  for income taxes                                  $    10,066         $     1,703       $    (5,904)  $  5,865
Provision (benefit) for income taxes                      4,026                 681            (2,361)     2,346
----------------------------------------------------------------------------------------------------------------
Net income (loss)                                   $     6,040         $     1,022       $    (3,543)  $  3,519
================================================================================================================

Fixed asset additions, net                          $      -            $      -          $       109   $    109
================================================================================================================
Depreciation and amortization                       $       183         $       119       $       355   $    657
================================================================================================================
Total assets                                        $    80,901         $    17,480       $    44,524   $142,905
================================================================================================================

<CAPTION>

                                                    AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
                                                                           CONSUMER
                                                       PROMOTIONS          PRODUCTS         CORPORATE      TOTAL
----------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                 <C>               <C>           <C>
Total revenues                                      $   122,723         $    14,079       $      -      $136,802
================================================================================================================
Income (loss) before provision (benefit)
  for income taxes                                  $    24,047         $    (1,227)      $   (13,868)  $  8,952
Provision (benefit) for income taxes                      9,619                (491)           (5,547)     3,581
----------------------------------------------------------------------------------------------------------------
Net income (loss)                                   $    14,428         $      (736)      $    (8,321)  $  5,371
================================================================================================================

Fixed asset additions, net                          $      -            $      -          $       466   $    466
================================================================================================================
Depreciation and amortization                       $       561         $       383       $     1,106   $  2,050
================================================================================================================
Total assets                                        $    35,737         $     5,054       $    36,279   $ 77,070
================================================================================================================

<CAPTION>

                                                        AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
                                                   -------------------------------------------------------------
                                                                           CONSUMER
                                                       PROMOTIONS          PRODUCTS         CORPORATE      TOTAL
----------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                 <C>               <C>            <C>
Total revenues                                      $   138,482         $    16,335       $      -      $154,817
================================================================================================================

Income (loss) before provision (benefit)
  for income taxes                                  $    24,398         $     2,470       $   (13,755)  $ 13,113
Provision (benefit) for income taxes                      9,738                 986            (5,490)     5,234
----------------------------------------------------------------------------------------------------------------
Net income (loss)                                   $    14,660         $     1,484       $    (8,265)  $  7,879
================================================================================================================

Fixed asset additions, net                          $      -            $      -          $       453   $    453
================================================================================================================
Depreciation and amortization                       $       548         $       356       $     1,068   $  1,972
================================================================================================================
Total assets                                        $    80,901         $    17,480       $    44,524   $142,905
================================================================================================================
</TABLE>


                                       11
<PAGE>   12

NOTE 8 - AMERISERVE BANKRUPTCY

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

Restaurant Services, Inc. ("RSI"), a not-for-profit purchasing cooperative that
has as its members Burger King franchisees and Burger King, is the exclusive
purchasing agent for the Burger King system of franchisee-owned and
company-owned restaurants located in the United States. Subsequent to January
31, 2000, the Company reached an agreement with RSI in which RSI purchased all
pre-petition trade receivables owed to the Company by AmeriServe in exchange for
a two-year non-interest-bearing note valued at approximately $16,000 and the
satisfaction of certain contractual obligations owed by the Company to RSI. This
agreement resulted in a net pre-tax charge of approximately $1,000 for the year
ended December 31, 1999. A note receivable of approximately $10,500 has been
recorded on the accompanying condensed consolidated balance sheet as of December
31, 1999. Approximately $6,600 of the $28,800 pre-petition trade receivables
relate to sales made in January 2000. Accordingly, the remaining $5,500 portion
of the note receivable was recorded in January 2000, and resulted in a net
pre-tax charge of approximately $500 for the quarter ended March 31, 2000. This
charge was offset by approximately $900 of imputed interest income recorded on
the note receivable for the nine months ended September 30, 2000. The balance of
the note receivable as of September 30, 2000 was $10,288, $2,151 of which was
classified as long-term.

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

NOTE 9 - STOCK REPURCHASE

The Company's Board of Directors has authorized up to $10,000 for the repurchase
of the Company's common stock over the next twelve months. The repurchase
program commenced on July 21, 2000. Purchases will be conducted in the open
market at prevailing prices, based on market conditions 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. This repurchase program will be funded through a combination of working
capital and bank debt. As of September 30, 2000, the Company has purchased an
aggregate of 87,100 shares at an average price of $13.18 per share. From October
1, 2000 through November 7, 2000, the Company purchased an additional 14,100
shares at an average price of $13.26 per share.



                                       12
<PAGE>   13



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

CAUTIONARY STATEMENT

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

MARKETPLACE RISKS

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

FINANCING RISKS

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

OTHER RISKS

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



                                       13
<PAGE>   14

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

ORGANIZATION AND BUSINESS

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

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

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

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>

                                                        THREE MONTHS            NINE MONTHS
                                                     ENDED SEPTEMBER 30,      ENDED SEPTEMBER 30,
                                                     -------------------     -------------------
                                                      1999         2000       1999          2000
                                                     ------       ------     ------        -----
<S>                                                  <C>          <C>         <C>          <C>
Revenues                                             100.0%       100.0%      100.0%       100.0%
Cost of sales                                         73.7         70.7        75.2         73.8
                                                     -----        -----       -----        -----

       Gross profit                                   26.3         29.3        24.8         26.2
                                                     -----        -----       -----        -----
Operating Expenses:
  Salaries, wages and benefits                         8.3         10.2         8.3          8.3
  Selling, general and administrative                  9.5          9.3        10.0          9.9
  Restructuring gain                                  (0.4)          --         (.5)          --
                                                     -----        -----       -----        -----
       Total operating expenses                       17.4         19.5        17.8         18.2
                                                     -----        -----       -----        -----
       Income from operations                          8.9          9.8         7.0          8.0
Interest income (expense), net                        (0.2)         0.7         (.4)         0.5
                                                     -----        -----       -----        -----
       Income before provision for income taxes        8.7         10.5         6.6          8.5
Provision for income taxes                             3.5          4.2         2.6          3.4
                                                     -----        -----       -----        -----
         Net income                                    5.2%         6.3%        4.0%         5.1%
                                                     =====        =====       =====        =====

</TABLE>


                                       14
<PAGE>   15


EBITDA

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

<TABLE>
<CAPTION>

                                          FOR THREE MONTHS ENDED SEPTEMBER 30,    FOR NINE MONTHS ENDED SEPTEMBER 30,
                                          -----------------------------------     -----------------------------------
                                                 1999               2000                  1999                2000
--------------------------------------------------------------------------------------------------------------------
<S>                                            <C>                <C>                   <C>               <C>
Net income                                     $ 2,772            $ 3,519               $  5,371          $  7,879
Less:  Restructuring gain                          240               --                      641              --
Add:   Depreciation and amortization               679                656                  2,050             1,972
       Interest (income) expense, net              151               (391)                   590              (746)
       Provision for income taxes                1,848              2,346                  3,581             5,234
--------------------------------------------------------------------------------------------------------------------
EBITDA                                         $ 5,210            $ 6,130                $10,951           $14,339
====================================================================================================================
</TABLE>

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

Revenues for the three months ended September 30, 2000 increased $2,692 or 5% to
$56,026 from $53,334 in the comparable period in 1999. Promotions revenues were
consistent with prior year levels. Promotions revenues were $47,652 for the
three months ended September 30, 2000 compared to $47,651 in the comparable
period in 1999. Consumer Product revenues increased $2,691 to $8,374 from $5,683
primarily due to higher sales in Scooby-Doo and Tub Tints product, partially
offset by reduced sales of Headliners(R).

Cost of sales increased $294 to $39,589 (70.7% of revenues) for the three months
ended September 30, 2000 from $39,295 (73.7% of revenues) in the comparable
period in 1999 due to higher sales in 2000. The gross margin percentage for the
period increased to 29.3% for the three months ended September 30, 2000 from
26.3% in the comparable period for 1999. The increased margin percentage is due
to a shift in the Company's revenue mix, resulting from growth in 2000 in
Consumer Product and international promotional product revenues, which tend to
carry higher gross margins.

Salaries, wages and benefits increased $1,297, or 29.3% to $5,730 (10.2% of
revenues). This increase was primarily due to staffing additions resulting from
the Company's current growth initiatives in 2000 and also due to the accrual of
performance bonuses for employees in 2000.

Selling, general and administrative expenses increased $158, or 3.1% to $5,233
(9.3% of revenues). This increase is due primarily to an increase in creative
design and development costs associated with several large promotional programs,
and commissions and bad debts expenses related to the increase in Consumer
Product sales volumes.

Net interest income was $391 for the three months ended September 30, 2000
compared to net interest expense of $151 for the three months ended September
30, 1999. The net interest income in 2000 was primarily attributable to
approximately $300 of imputed interest income recorded on a note receivable (see
"AmeriServe Bankruptcy") and to interest earned on the cash proceeds received
from the issuance of preferred stock (see "Issuance of Preferred Stock").

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

Net income increased $747 or 26.9% to $3,519 (6.3% of revenues) from $2,772
(5.2% of revenues) in 1999 primarily due to greater gross profit earned in 2000
partially offset by increased salaries, wages and benefits and selling, general
and administrative expenses.

In 2000, EBITDA increased $920 or 17.7% to $6,130 from $5,210 in 1999 primarily
due to greater gross profit earned in 2000. This increase was partially offset
by the increase in salaries, wages and benefits and selling, general and
administrative expenses for the three months ended September 30, 2000.



                                       15
<PAGE>   16

NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999 (000'S OMITTED):

Revenues for the nine months ended September 30, 2000 increased $18,015 or 13.2%
to $154,817 from $136,802 in the comparable period in 1999. Promotions revenues
increased $15,759 to $138,482 primarily as a result of increased revenues
associated with several large promotions during the first half of 2000. Consumer
Products revenues increased $2,256 to $16,335. Excluding liquidation sales of
discontinued consumer product lines of $2,415 in 1999 related to the Company's
decision to exit the event-based license consumer product business, sales
increased $4,671 primarily due to increased sales in Scooby-Doo and Tub Tints
product, partially offset by reduced sales of Headliners(R).

Cost of sales increased $11,447 to $114,279 (73.8% of revenues) for the nine
months ended September 30, 2000 from $102,832 (75.2% of revenues) in the
comparable period in 1999 due to higher sales in 2000. The gross margin
percentage for the period increased to 26.2% for the nine months ended September
30, 2000 from 24.8% in the comparable period for 1999. This increase is
partially a result of lower than expected returns and better than expected sales
from a promotional program, which was closed in the prior year. The increase was
also due to a shift in the Company's revenue mix, resulting from growth in 2000
in Consumer Product and international promotional product revenues, which tend
to carry higher gross margins.

Salaries, wages and benefits increased $1,528, or 13.5% to $12,877 (8.3% of
revenues). This increase was primarily due to staffing additions resulting from
the Company's current growth initiatives in 2000 and also due to the accrual of
performance bonuses for employees in 2000.

Selling, general and administrative expenses increased $1,574, or 11.5% to
$15,294 (9.9% of revenues). This increase is due primarily to increased freight
out and warehousing costs resulting from the increase in sales volume.
Approximately $500 of this increase resulted from additional bad debt expense
recorded for the bankruptcy of AmeriServe (see "AmeriServe Bankruptcy"). This
increase is also a result of higher creative design and development costs
associated with several large promotional programs.

Net interest income was $746 for the nine months ended September 30, 2000
compared to net interest expense of $590 for the nine months ended September 30,
1999. The net interest income in 2000 was attributable to approximately $900 of
imputed interest income recorded on a note receivable (see "AmeriServe
Bankruptcy") and to interest earned on the cash proceeds received from the
issuance of preferred stock (see "Issuance of Preferred Stock") partially offset
by interest expense on the line of credit through June 2000.

The effective tax rate for the nine months ended September 30, 2000 was 39.9%
which is consistent with the 40.0% tax rate recorded for the nine months ended
September 30, 1999.

Net income increased $2,508 or 46.7% to $7,879 (5.1% of revenues) from $5,371
(4.0% of revenues) in 1999 primarily due to greater gross profit earned on the
increased revenues in 2000 partially offset by increased salaries, wages and
benefits and selling, general and administrative expenses.

In 2000, EBITDA increased $3,388 or 30.9% to $14,339 from $10,951 in 1999
primarily due to greater gross profit earned on increased revenues in 2000. This
increase was partially offset by the increase in salaries, wages and benefits
and selling, general and administrative expenses for the nine months ended
September 30, 2000.

FINANCIAL CONDITION AND LIQUIDITY

As of September 30, 2000, the Company's investment in accounts receivable
increased $5,658 from the balance at December 31, 1999. This increase was
attributable to a large promotional program and Consumer Product sales which
shipped late in the third quarter. As of September 30, 2000, inventory increased
$15,063 from December 31, 1999 primarily due to the timing of promotional
programs for Burger King Corporation and other clients, which are to be
delivered in the fourth quarter.

As of September 30, 2000, accounts payable increased $16,123 compared to
December 31, 1999. This increase is attributable to increased inventory levels
related to large fourth quarter 2000 promotional programs.

As of September 30, 2000, accrued liabilities increased $10,931 compared to
December 31, 1999. This increase is primarily attributable to royalty and
administrative fees collected from distribution companies on behalf of
promotional customers. These fees will be remitted to the customers.



                                       16
<PAGE>   17


As of September 30, 2000, working capital was $46,258 compared to $11,045 at
December 31, 1999. The increase in working capital was primarily due to the cash
received from the issuances of senior cumulative participating convertible
preferred stock on March 29, 2000 and on June 20, 2000 (see "Issuance of
Preferred Stock") and cash generated by operating activities for the nine months
ended September 30, 2000. The Company believes that its cash from operations,
cash on hand at September 30, 2000 and its credit facility will be sufficient to
fund its working capital needs for at least the next twelve months. The
statements set forth herein are forward-looking and actual results may differ
materially.

CREDIT FACILITIES

The Company maintains and periodically amends or replaces a credit agreement
with two commercial banks that is utilized to finance the seasonal working
capital requirements of its operations. The credit facility is secured by
substantially all of the Company's assets. The agreement, as amended on July 27,
2000, provides for a line of credit of $25,000 through June 30, 2001 with
borrowing availability determined by a formula based on qualified assets. There
were no amounts outstanding under the credit facility as of September 30, 2000.
Letters of credit outstanding as of September 30, 2000 was $2,389. The Credit
Agreement requires the Company to comply with certain restrictions and financial
covenants as defined in the agreement. As of September 30, 2000, the Company was
in compliance with these covenants.

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

ISSUANCE OF PREFERRED STOCK

On March 29, 2000, Crown EMAK Partners, LLC, a Delaware limited liability
company ("Crown"), invested $11,900 in the Company in exchange for preferred
stock and warrants to purchase additional preferred stock. Under the terms of
the investment, Crown acquired 11,900 shares of Series A senior cumulative
participating convertible preferred stock, par value $.001 per share, of the
Company (the "Series A Stock") with a conversion price of $14.75 per share. In
connection with such purchase, the Company granted to Crown five year warrants
(collectively, the "Warrants") to purchase 5,712 shares of Series B senior
cumulative participating convertible preferred stock, par value $.001 per share,
of the Company (the "Series B Stock") at an exercise price of $1,000 per share,
and 1,428 shares of Series C senior cumulative participating convertible
preferred stock, par value $.001 per share, of the Company (the "Series C
Stock") at an exercise price of $1,000 per share. The Warrants are immediately
exercisable. The conversion prices of the Series B Stock and the Series C Stock
are $16.00 and $18.00, respectively. On June 20, 2000, Crown paid an additional
$13,100 to the Company in exchange for an additional 13,100 shares of Series A
Stock with a conversion price of $14.75 per share. In connection with such
purchase, the Company granted to Crown Warrants to purchase an additional 6,288
shares of Series B Stock and an additional 1,572 shares of Series C Stock. Each
share of Series A Stock is convertible into 67.7966 shares of Common Stock,
representing 1,694,915 shares of Common Stock in aggregate. Each share of Series
B Stock and Series C Stock is convertible into 62.5 and 55.5556 shares of Common
Stock, respectively, representing 916,666 shares of Common Stock in aggregate.
Also in connection with such purchase, the Company agreed to pay Crown a
commitment fee in the aggregate amount of $1,250, paid in equal quarterly
installments of $62.5 commencing on June 30, 2000 and ending on March 31, 2005.
The Company has paid $125 in fees for the nine months ended September 30, 2000.

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

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

Crown has voting rights equivalent to the number of shares of Common Stock into
which their preferred stock is convertible on the relevant record date. Crown is
also entitled to receive a quarterly dividend equal to 6% of the Liquidation
Preference per share outstanding, payable in cash. A cash dividend of $375 was
paid to Crown on September 30, 2000. Total dividend payments for the nine months
ended September 30, 2000 amounted to $582.

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



                                       17
<PAGE>   18

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

STOCK REPURCHASE

The Company's Board of Directors has authorized up to $10,000 for the repurchase
of the Company's common stock over the next twelve months. The repurchase
program commenced on July 21, 2000. Purchases will be conducted in the open
market at prevailing prices, based on market conditions 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. This repurchase program will be funded through a combination of working
capital and bank debt. As of September 30, 2000, the Company has purchased an
aggregate of 87,100 shares at an average price of $13.18 per share. From October
1, 2000 through November 7, 2000, the Company purchased an additional 14,100
shares at an average price of $13.26 per share.

INFORMATION SYSTEMS

YEAR 2000 UPDATE

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

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

AMERISERVE BANKRUPTCY

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

RSI, a not-for-profit purchasing cooperative that has as its members Burger King
franchisees and Burger King, is the exclusive purchasing agent for the Burger
King system of franchisee-owned and company-owned restaurants located in the
United States. Subsequent to January 31, 2000, the Company reached an agreement
with RSI in which RSI purchased all pre-petition trade receivables owed to the
Company by AmeriServe in exchange for a two-year non-interest-bearing note
valued at approximately $16,000 and satisfaction of certain contractual
obligations owed by the Company to RSI. This agreement resulted in a net pre-tax
charge of approximately $1,000 for the quarter ended December 31, 1999. A note
receivable of approximately $10,500 has been recorded on the accompanying
condensed consolidated balance sheet as of December 31, 1999. Approximately
$6,600 of the $28,800 pre-petition trade receivables relate to sales made in
January 2000. Accordingly, the remaining $5,500 portion of the note receivable
was recorded in January 2000, and resulted in a net pre-tax charge of
approximately $500 for the quarter ending March 31, 2000. This charge was offset
by approximately $900 of imputed interest income recorded on the note receivable
for the nine months ended September 30, 2000. The balance of the note receivable
as of September 30, 2000 was $10,288, $2,151 of which was classified as
long-term.



                                       18
<PAGE>   19


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



                                       19
<PAGE>   20


PART II.  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

POKEMON RECALL AND RELATED MATTERS

On May 4, 2000, a lawsuit entitled Estate of Kira Alexis Murphy, Madelyne Ariana
Alto, Netanya Noel Alto and Jill Ann Alto v. Burger King Corporation, Fast Food
Enterprise of California, Inc., Equity Marketing, Inc., and Specialized
Technology Resources, Inc., Case No. B C229358, was filed in the Superior Court
of the State of California for the County of Los Angeles. The lawsuit was filed
by plaintiffs who allege that the Pokemon(TM) ball caused the death of Kira
Alexis Murphy. The lawsuit asserted causes of action for product liability,
breach of warranty, wrongful death and negligent infliction of emotional
distress, and sought an unspecified amount of damages and attorneys' fees.
During the reporting period, the lawsuit was settled. The settlement was not
material to the Company's financial condition or results of operations.

On August 11, 2000, two lawsuits entitled Ashley L. Jones v. Burger King
Corporation, Southdown Corporation, Equity Marketing, Inc., and Specialized
Technology Resources, Inc., Case No. 49D130008CT001170, and Sheila Jones v.
Burger King Corporation, Southdown Corporation, Equity Marketing, Inc., and
Specialized Technology Resources, Inc., Case No. 49D050008CT001154, were filed
in the Superior Court of the State of Indiana for the County of Marion. The
lawsuits were filed by plaintiffs who allege that the Pokemon(TM) ball caused
the death of Zachary B. Jones. The lawsuits assert causes of action for
negligence, product liability, breach of warranty, wrongful death and negligent
infliction of emotional distress, and seek an unspecified amount of compensatory
and punitive damages and attorneys' fees. On September 7, 2000, the lawsuits
were removed to the United States District Court for the Southern District of
Indiana, Indianapolis Division (Case No. IP00-1400 C Y/G and Case No. IP00-1401
C B/S, respectively).

The Company may be contractually required to indemnify Burger King and its
franchisees for the expenses and damages, if any, incurred in connection with
these two lawsuits. Burger King has requested indemnification for such expenses
and damages, if any. While the Company believes these lawsuits are without merit
and intends to defend them vigorously, they may, regardless of the outcome,
result in substantial expenses and damages to the Company and may significantly
divert the attention of the Company's management. There can be no assurance that
the Company will be able to achieve favorable settlements of these lawsuits,
will be able to obtain favorable resolutions of such lawsuits if they are not
settled or that the Company's insurance carriers will cover all of the Company's
obligations thereunder. Unfavorable resolutions of these lawsuits or prolonged
litigation, the costs of which may be substantial, could have a material adverse
effect on the Company's business, financial condition and results of operations.

In addition to the information regarding the Pokemon(TM) recall and related
matters contained in this document, readers are advised to review the Company's
Form 10-K for the year ended December 31, 1999, under the heading "Item 3. Legal
Proceedings." and the Company's Form 10-Qs for the quarters ended March 31, 2000
and June 30, 2000, under the heading "Item 1. Legal Proceedings."

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Annual Meeting of Stockholders of the Company was held on September 7, 2000.
Proxies for the Annual Meeting were solicited pursuant to Regulation 14A of the
Securities Exchange Act of 1934, as amended, and there was no solicitation in
opposition to that of management. All of management's nominees for directors as
listed in the proxy statement were elected. At the Annual Meeting, the following
matters were approved by the Stockholders:

<TABLE>
<CAPTION>

                                                       Votes For    Votes Against     Abstentions and
                                                                     or Withheld     Broker Non-Votes
                                                     ------------   -------------    -----------------
<S>                                                  <C>            <C>              <C>
1.       Election of Directors
         by holders of Common Stock
         Stephen P. Robeck                           5,459,923            --             250,778
         Donald A. Kurz                              5,460,001            --             250,700
         Mitchell H. Kurz                            5,460,001            --             250,700
         Bruce Raben                                 5,462,876            --             247,825
         Sanford R. Climan                           5,462,976            --             247,725
2.       Election of Directors by holders of
         Series A Preferred Stock
         Peter Ackerman                                 25,000            --                --
         Jeffrey S. Deutschman                          25,000            --                --
3.       Approval of the Equity Marketing,Inc.       5,096,187          430,275           15,915
         2000 Stock Option Plan
4.       Ratification of Arthur Andersen LLP         7,397,181            6,970            1,465
         as the Company's Independent
         Auditor
</TABLE>


                                       20
<PAGE>   21


ITEM 6. EXHIBIT AND REPORT ON FORM 8-K

(a)  Exhibit:

     27.0     Financial Data Schedule

(b)  Report on Form 8-K:

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




                                       21
<PAGE>   22



                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles
and State of California on the 14th day of November, 2000.


                                            EQUITY MARKETING, INC.



                                            /s/ LAWRENCE J. MADDEN
                                            ----------------------------------
                                            Lawrence J. Madden
                                            Senior Vice President and Chief
                                            Financial Officer (Principal
                                            Financial and Accounting Officer)




                                       22
<PAGE>   23


                                  EXHIBIT INDEX

EXHIBIT


27.0          Financial Data Schedule



                                       23