<PAGE>   1

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

                                    FORM 10-Q

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

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999


                                       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, 6,226,499 shares as of August 09, 1999.


<PAGE>   2


                             EQUITY MARKETING, INC.

                     INDEX TO QUARTERLY REPORT ON FORM 10-Q
                FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
                                 JUNE 30, 1999

<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                       12

PART II.

         Item 4.  Submission of Matters to a Vote of Security Holders                18

         Item 6.  Exhibits and Reports on Form 8-K                                   18
</TABLE>


                                                                               2

<PAGE>   3





PART I. FINANCIAL INFORMATION

         ITEM 1. FINANCIAL STATEMENTS


                             EQUITY MARKETING, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,         JUNE 30,
                                                                     1998               1999
                                                                 ------------       ------------
                                                                                     (UNAUDITED)
<S>                                                               <C>                  <C>
CURRENT ASSETS:
  Cash and cash equivalents                                      $     7,250          $   2,441
  Accounts receivable (net of allowances
    of $3,684 and $2,586 as of December 31, 1998
    and June 30, 1999, respectively)                                  57,071             39,881
  Inventory                                                           13,117             11,312
  Prepaid expenses and other current assets                            7,915              6,670
                                                                 -----------          ---------
         Total current assets                                         85,353             60,304
FIXED ASSETS, net                                                      5,892              5,306
INTANGIBLE ASSETS, net                                                23,442             22,881
OTHER ASSETS                                                             793              1,225
                                                                 -----------          ---------
         Total assets                                            $   115,480          $  89,716
                                                                 ===========          =========
</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 DATA)

<TABLE>
<CAPTION>
                                                                                          DECEMBER 31,         JUNE 30,
                                                                                              1998               1999
                                                                                          ------------        -----------
                                                                                                              (UNAUDITED)
<S>                                                                                         <C>                <C>
CURRENT LIABILITIES:
  Short-term debt                                                                           $  30,000          $  16,700
  Accounts payable                                                                             28,432             17,029
  Accrued expenses and other current liabilities                                               22,653             18,857
                                                                                            ---------          ---------
         Total current liabilities                                                             81,085             52,586
LONG-TERM LIABILITIES                                                                           1,988              1,998
                                                                                            ---------          ---------
         Total liabilities                                                                     83,073             54,584
                                                                                            ---------          ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
  Preferred stock, $.001 par value per share; 1,000,000                                            --                 --
    shares authorized, none issued or outstanding
  Common stock, par value $.001 per share, 20,000,000 shares authorized,
    6,227,718 and 6,223,665 shares outstanding
    as of December 31, 1998 and June 30, 1999, respectively                                        --                 --
  Additional paid-in capital                                                                   15,343             15,293
  Retained earnings                                                                            19,063             21,662
                                                                                            ---------          ---------
                                                                                               34,406             36,955
Less--
  Treasury stock, 1,892,841 shares and 1,882,518 shares, at cost, as of
    December 31, 1998 and June 30, 1999, respectively                                          (1,279)            (1,274)
  Stock subscription receivable                                                                   (32)               (32)
  Unearned compensation                                                                          (688)              (517)
                                                                                            ---------          ---------
         Total stockholders' equity                                                            32,407             35,132
                                                                                            ---------          ---------
         Total liabilities and stockholders' equity                                         $ 115,480          $  89,716
                                                                                            =========          =========
</TABLE>


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


                                                                               4

<PAGE>   5

                             EQUITY MARKETING, INC.

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

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED                    SIX MONTHS ENDED
                                                            JUNE 30,                            JUNE 30,
                                                 -----------------------------      ----------------------------
                                                     1998             1999              1998            1999
                                                 ------------     ------------      -----------      -----------
<S>                                              <C>              <C>               <C>              <C>
REVENUES                                         $    30,593      $    56,011       $    54,389      $    83,468
COST OF SALES                                         20,572           42,992            38,298           63,537
                                                 -----------      -----------       -----------      -----------

         Gross profit                                 10,021           13,019            16,091           19,931
                                                 -----------      -----------       -----------      -----------
OPERATING EXPENSES:
  Salaries, wages and benefits                         3,437            3,444             6,082            6,916
  Selling, general and administrative                  4,128            4,986             6,691            8,645
  Restructuring gain                                    --               (401)             --               (401)
                                                 -----------      -----------       -----------      -----------
         Total operating expenses                      7,565            8,029            12,773           15,160
                                                 -----------      -----------       -----------      -----------
         Income from operations                        2,456            4,990             3,318            4,771
INTEREST INCOME (EXPENSE), net                            88             (217)              227             (439)
                                                 -----------      -----------       -----------      -----------
         Income before provision for
           income taxes                                2,544            4,773             3,545            4,332
PROVISION FOR INCOME TAXES                               979            1,909             1,364            1,733
                                                 -----------      -----------       -----------      -----------
         Net income                              $     1,565      $     2,864       $     2,181      $     2,599
                                                 ===========      ===========       ===========      ===========

BASIC NET INCOME PER SHARE                       $      0.26      $      0.46       $      0.36      $      0.42
                                                 ===========      ===========       ===========      ===========
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING          6,035,066        6,223,099         6,022,585        6,216,607
                                                 ===========       ===========      ===========      ===========

DILUTED NET INCOME PER SHARE                     $      0.25      $      0.45       $      0.35      $      0.41
                                                 ===========      ===========       ===========      ===========
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING        6,315,415        6,340,969         6,315,159        6,314,557
                                                 ===========      ===========       ===========      ===========
</TABLE>


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


                                                                               5

<PAGE>   6


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

<TABLE>
<CAPTION>
                                                                                                   SIX MONTHS ENDED
                                                                                                         JUNE 30,
                                                                                             ----------------------------
                                                                                               1998                1999
                                                                                             ---------          ---------
<S>                                                                                           <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                                  $ 2,181            $ 2,599
  Adjustments to reconcile net income to net cash
    provided by operating activities:
        Depreciation and amortization                                                             830              1,371
        Provision for doubtful accounts                                                           165                179
        Loss on asset disposal                                                                     --                 11
        Tax benefit from exercise of stock options                                                186                 32
        Issuance of treasury stock to 401(k) Tax Deferred Savings Plan                             --                 74
        Other                                                                                      (3)               (31)
        Changes in operating assets and liabilities, excluding effects of
            acquisition:
           Increase (decrease) in cash and cash equivalents:
              Accounts receivable                                                                 (14)            17,011
              Inventory                                                                          (710)             1,805
              Prepaid expenses and other current assets                                        (1,603)             1,245
              Other assets                                                                       (115)              (474)
              Accounts payable                                                                    834            (11,403)
              Accrued expenses and other current liabilities                                     (801)            (3,796)
              Long-term liabilities                                                               (35)                10
                                                                                              -------            -------
         Net cash provided by operating activities                                                915              8,633
                                                                                              -------            -------
CASH FLOWS FROM INVESTING ACTIVITIES:
       Purchases of fixed assets                                                                 (784)              (172)
       Proceeds from sale of fixed assets                                                          --                 10
       Payment for purchase of Corinthian and Trademark                                        (8,436)                --
       Other                                                                                      (68)                --
                                                                                              -------            -------
          Net cash used in investing activities                                                (9,288)              (162)
                                                                                              -------            -------
CASH FLOWS FROM FINANCING ACTIVITIES:
       Proceeds from exercise of stock options                                                    585                 20
       Repayment on short-term debt                                                                --            (13,300)
                                                                                              -------            -------
         Net cash provided by (used in) financing activities                                      585            (13,280)
                                                                                              -------            -------
         Net decrease in cash and cash equivalents                                             (7,788)            (4,809)
CASH AND CASH EQUIVALENTS, beginning of period                                                  8,935              7,250
                                                                                              -------            -------
CASH AND CASH EQUIVALENTS, end of period                                                      $ 1,147            $ 2,441
                                                                                              =======            =======

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  CASH PAID FOR:
         Interest                                                                             $    31            $   615
                                                                                              =======            =======
         Income taxes                                                                         $ 1,167            $    --
                                                                                              =======            =======
</TABLE>

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


                                                                               6

<PAGE>   7

                             EQUITY MARKETING, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1999
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)

NOTE 1 - ORGANIZATION AND BUSINESS

Equity Marketing, Inc., a Delaware corporation (the "Company"), is a leading
provider of custom promotional products and services, and a developer of
distinctive, branded consumer products that complement the Company's promotions
business. The Company primarily sells to customers in the United States.

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

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

In July 1998, the Company acquired substantially all of the assets of Contract
Marketing, Inc. ("CMI"), a Massachusetts corporation, and U.S. Import and
Promotions Co. ("USI"), a Florida corporation (collectively referred to herein
as "CMI/ USI"). CMI/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 CMI/USI are located in West Boylston,
Massachusetts and St. Augustine, Florida.


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 generally accepted accounting principles for interim financial
information and in accordance 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 generally accepted accounting principles 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, 1998.

Certain reclassifications have been made to the accompanying 1998 financial
statements to conform them to the current period presentation.


                                                                               7

<PAGE>   8

NET INCOME PER SHARE

Diluted Earnings Per Share ("EPS") reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock. When dilutive, stock options and warrants are
included as share equivalents in computing diluted earnings per share using the
treasury stock method. The impact of including unexercised dilutive options and
warrants was to increase weighted average shares outstanding by 280,349 at
quarter end June 30, 1998 and 117,870 at quarter end June 30, 1999, 292,574 for
the six months ended June 30, 1998 and 97,950 for the six months ended June
30,1999. Options to purchase 338,000 and 608,000 shares of common stock were
outstanding as of June 30, 1998 and 1999, respectively, which were excluded from
the computation of diluted income per share as they would have been
anti-dilutive.

INVENTORY

Inventory consists of production-in-process which represents direct costs
related to product development, procurement and tooling which are deferred and
amortized over the life of the products and finished products held for sale to
customers and finished products in transit to customers' distribution centers.
Inventory is stated at the lower of average cost or market. As of December 31,
1998 and June 30, 1999, inventory consisted of the following:

<TABLE>
<CAPTION>
                                               DECEMBER 31,         JUNE 30,
                                                   1998               1999
                                               ------------       ------------
<S>                                              <C>              <C>
Production-in-process                             $ 2,140           $   213
Finished goods                                     10,977            11,099
                                                  -------           -------
                                                  $13,117           $11,312
                                                  =======           =======
</TABLE>

NOTE 3 - ACQUISITION

On April 24, 1998, the Company acquired 100% of the common stock of Corinthian
and certain trademarks related to its business, including the "Headliners"
trademark (the "Trademark"), from Corinthian Marketing PLC, for total cash
consideration of $7,892 plus related transaction costs of $544 at the closing.
Corinthian is engaged principally in the design, manufacture, marketing and
distribution of the Headliners brand of collectible sports figurines.

On July 23, 1998, the Company acquired substantially all of the assets of CMI
and USI, in exchange for $14,659 plus related transaction costs of $429.
Potential additional cash consideration may be paid based upon the results of
operations of CMI/USI during each calendar year through December 31, 2002 as set
forth in the respective Asset Purchase Agreements, dated July 23, 1998, by and
among the Company and each of CMI and USI.

These acquisitions have been accounted for under the purchase method of
accounting. The financial statements reflect the operating results of these
acquired entities from the date of acquisition.

The following unaudited pro-forma information presents a summary of the
consolidated results of operations of the Company as if the acquisitions of
Corinthian and CMI/USI had occurred at the beginning of 1998 and includes
pro-forma adjustments to give effect to the amortization of goodwill, decreased
interest income, increased interest expense associated with funding the
acquisitions, and certain other adjustments, together with the related income
tax effects. The pro-forma financial information is presented for informational
purposes only and may not be indicative of the results of operations as they
would have been if the Company, Corinthian and CMI/USI had been a single entity
during 1998, nor is it necessary indicative of the results of operations that
may occur in the future.


                                                                               8

<PAGE>   9

<TABLE>
<CAPTION>
                                                                           SIX MONTHS
                                                                       ENDED JUNE 30, 1998
                                                                       -------------------
<S>                                                                          <C>
Pro forma revenues                                                           $62,005
Pro forma net income                                                           1,456
Pro forma basic income per share                                                 .24
Pro forma diluted net income per share                                           .23
Pro forma basic weighted average
         shares outstanding                                                6,022,585
Pro forma diluted weighted average
         Shares outstanding                                                6,315,159
</TABLE>

NOTE 4 - SEGMENTS

Effective January 1, 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 131-"Disclosures about Segments of an
Enterprise and Related Information." The Company has identified two reportable
segments through which it conducts its continuing operations: promotions and
consumer products. The factors for determining the reportable segments were
based on the distinct nature of their operations. They are managed as separate
business units because each requires and is responsible for executing a unique
business strategy. The promotions segment produces promotional products used as
free premiums or sold in conjunction with the purchase of other items at a
retailer or quick service restaurant. Promotional products are used for
marketing purposes by both the companies sponsoring the promotions and the
licensors of the entertainment properties on which the promotional products are
based. The consumer products segment designs and contracts for the manufacture
of toys and other consumer products for sale to major mass market retailers, who
in turn sell the products to consumers.

Earnings of industry segments exclude interest income, interest expense,
depreciation and amortization expense, and other unallocated corporate expenses.
Income taxes are allocated to segments on the basis of operating results.
Identified assets are those assets used in the operations of the segments.
Corporate assets consist of cash, certain corporate receivables, fixed assets,
and intangibles.

INDUSTRY SEGMENTS


<TABLE>
<CAPTION>
                                                     AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1998
                                                ----------------------------------------------------------
                                                                      CONSUMER
                                                   PROMOTIONS         PRODUCTS        CORPORATE    TOTAL
----------------------------------------------------------------------------------------------------------
<S>                                             <C>                 <C>              <C>           <C>
Total revenues                                  $    19,519         $    11,074      $   -         $30,593
==========================================================================================================

Income (loss) before provision (benefit)
  for income taxes                              $     4,229         $     1,219      $(2,904)      $ 2,544
==========================================================================================================

Provision (benefit) for income taxes                  1,628                 469       (1,118)          979
----------------------------------------------------------------------------------------------------------
Net income (loss)                               $     2,601         $       750      $(1,786)      $ 1,565
==========================================================================================================

Fixed asset additions, net                      $      -            $      -         $   461       $   461
==========================================================================================================
Depreciation and amortization                   $      -            $      -         $   483       $   483
==========================================================================================================
Total assets                                    $    16,264         $    21,968      $26,188       $64,420
==========================================================================================================
</TABLE>


                                                                               9

<PAGE>   10


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

Income (loss) before provision (benefit)
  for income taxes                              $    10,110         $      (690)     $(4,647)     $  4,773
==========================================================================================================

Provision (benefit) for income taxes                  4,044                (276)      (1,859)        1,909
----------------------------------------------------------------------------------------------------------
Net income (loss)                               $     6,066         $      (414)     $(2,788)     $  2,864
==========================================================================================================

Fixed asset additions, net                      $      -            $      -         $    69      $     69
==========================================================================================================
Depreciation and amortization                   $      -            $      -         $   690      $    690
==========================================================================================================
Total assets                                    $    49,765         $     3,664      $36,287      $ 89,716
==========================================================================================================
</TABLE>


<TABLE>
<CAPTION>
                                                    AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
                                                ----------------------------------------------------------
                                                                      CONSUMER
                                                   PROMOTIONS         PRODUCTS        CORPORATE     TOTAL
----------------------------------------------------------------------------------------------------------
<S>                                             <C>                 <C>              <C>          <C>
Total revenues                                  $    39,648         $    14,741      $    -       $ 54,389
==========================================================================================================

Income (loss) before provision (benefit)
  for income taxes                              $     7,873         $     1,516      $(5,844)     $  3,545
==========================================================================================================

Provision (benefit) for income taxes                  3,031                 583       (2,250)        1,364
----------------------------------------------------------------------------------------------------------
Net income (loss)                               $     4,842         $       933      $(3,594)     $  2,181
==========================================================================================================

Fixed asset additions, net                      $      -            $      -         $   784      $    784
==========================================================================================================
Depreciation and amortization                   $      -            $      -         $   830      $    830
==========================================================================================================
Total assets                                    $    16,264         $    21,968      $26,188      $ 64,420
==========================================================================================================
</TABLE>



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

Income (loss) before provision (benefit)
  for income taxes                              $    14,458         $      (589)     $(9,537)     $  4,332
==========================================================================================================

Provision (benefit) for income taxes                  5,783                (235)      (3,815)        1,733
----------------------------------------------------------------------------------------------------------
Net income (loss)                               $     8,675         $      (354)     $(5,722)     $  2,599
==========================================================================================================

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


                                                                              10

<PAGE>   11


NOTE 5 - SHORT-TERM DEBT

At December 31, 1998 and June 30, 1999, the Company was party to a revolving
credit agreement ("Credit Agreement") with two commercial banks. The agreement,
as amended on June 18, 1999 provides for a line of credit of $30,000 through
October 31, 1999 and $25,000 through June 30, 2000 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 3.00 percent
or a variable rate equivalent to the lead bank's reference rate plus .50
percent. The Company is also required to pay an unused line fee of .50 percent
per annum and certain letter of credit fees. 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 December 31, 1998 and March 31, 1999, the Company was
out of compliance with certain of these covenants, for which it has received
waivers from its banks. As of June 30, 1999, the Company was in compliance with
these covenants.

As of December 31, 1998 and June 30, 1999 there was $30,000 and $16,700,
respectively, outstanding under the Credit Agreement. Letter of credit amounts
outstanding as of December 31, 1998 and June 30, 1999 were $995 and $1,688
respectively.

NOTE 6 - RESTRUCTURING RESERVE

In December 1998, the Company announced its decision to exit the
event-based-license consumer products business along with its retail pin
business. In connection with this decision, the Company recorded a restructuring
charge of $4,121. Details of the restructuring charge are as follows:

<TABLE>
<CAPTION>
                                                                         Utilized
                                                                        Six Months
                                                 Original    Utilized      Ended                     To Be
                                                  Charge       1998    June 30, 1999   Reversed    Utilized
-----------------------------------------------------------------------------------------------------------
<S>                                               <C>       <C>            <C>          <C>          <C>
Provision for projected minimum royalty
  guarantee shortfalls                            $2,187    $    -         $ (267)      $ (401)      $1,519
Employee severance and termination benefits          738       (127)         (358)          -           253
Outstanding inventory purchase commitments           800         -            (25)          -           775
Lease commitment for warehouse facility              396         -             (8)          -           388
-----------------------------------------------------------------------------------------------------------
                                                  $4,121    $  (127)     $   (658)      $ (401)      $2,935
===========================================================================================================
</TABLE>


For the three months ended June 30, 1999 the Company reversed a portion of the
restructuring reserves for projected minimum royalty guarantee shortfalls as a
result of negotiated settlements with certain licensors. This reversal totaled
$401 and is reflected as a restructuring gain in the accompanying condensed
consolidated statements of income.


                                                                              11

<PAGE>   12


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 1999 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    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

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 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    Potential inability of computer systems or software products used by the
     Company and\or its customers and suppliers to properly recognize and
     process date-sensitive information beyond January 1, 2000, which may result
     in an interruption in normal business operations of the Company, its
     suppliers and customers

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
circumstances 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, 1998, under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Cautionary Statements and Risk Factors."


                                                                              12

<PAGE>   13


ORGANIZATION AND BUSINESS

Equity Marketing, Inc., a Delaware corporation (the "Company"), is a leading
provider of custom promotional products and services, and a developer of
distinctive, branded consumer products that complement the Company's promotions
business. The Company primarily sells to customers in the United States.

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

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

In July 1998, the Company acquired substantially all of the assets of Contract
Marketing, Inc. ("CMI"), a Massachusetts corporation, and U.S. Import and
Promotions Co. ("USI"), a Florida corporation (collectively referred to herein
as "CMI/ USI"). CMI/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 CMI/USI are located in West Boylston,
Massachusetts and St. Augustine, Florida.

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
                                                                       THREE MONTHS                  SIX MONTHS
                                                                      ENDED JUNE 30,                ENDED JUNE 30,
                                                                    ------------------          ---------------------
                                                                     1998        1999            1998           1999
                                                                    ------      ------          ------         ------
<S>                                                                  <C>         <C>            <C>            <C>
Revenues                                                             100.0%      100.0%         100.0%         100.0%
Cost of sales                                                         67.2        76.8           70.4           76.1
                                                                    ------      ------          ------         -----
       Gross profit                                                   32.8        23.2           29.6           23.9
                                                                    ------      ------          ------         -----
Operating Expenses:
  Salaries, wages and benefits                                        11.3         6.1           11.2            8.3
  Selling, general and administrative                                 13.5         8.9           12.3           10.4
  Restructuring gain                                                    -         (0.7)            -            (0.5)
                                                                    ------      ------          ------         -----
       Total operating expenses                                       24.8        14.3           23.5           18.2
                                                                    ------      ------          ------         -----
       Income from operations                                          8.0         8.9            6.1            5.7
Interest income (expense), net                                         0.3        (0.4)           0.4           (0.5)
                                                                    ------      ------          ------         -----
       Income before provision for income taxes                        8.3         8.5            6.5            5.2
Provision for income taxes                                             3.2         3.4            2.5            2.1
                                                                    ------      ------          ------         -----
       Net income                                                      5.1%        5.1%           4.0%           3.1%
                                                                    ======      ======          ======         =====
</TABLE>


                                                                              13

<PAGE>   14


EBITDA

While many in the financial community consider earnings before interest, taxes,
depreciation and amortization and restructuring charges ("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 generally accepted accounting principles. 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 periods indicated:


<TABLE>
<CAPTION>
                                                                       THREE MONTHS                SIX MONTHS
                                                                      ENDED JUNE 30,             ENDED JUNE 30,
                                                                  -------------------        --------------------
                                                                   1998         1999          1998          1999
                                                                  ------       ------        ------        ------
<S>                                                               <C>         <C>            <C>          <C>
Net income                                                        $1,565      $2,864         $2,181       $2,599
Less:  Interest income (expense)                                      88        (217)           227         (439)
       Restructuring gain                                             --         401             --          401
Add:   Depreciation and amortization                                 483         690            830        1,371
       Provision for income taxes                                    979       1,909          1,364        1,733
                                                                  ------      ------         ------       ------
EBITDA                                                            $2,939      $5,279         $4,148       $5,741
                                                                  ======      ======         ======       ======
</TABLE>

THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS):

Revenues for the three months ended June 30, 1999 increased $25,418 or 83% to
$56,011 from $30,593 in the comparable period in 1998. Promotions revenues
increased $31,255 to $50,774 primarily as a result of sales associated with
Burger King promotions related to The Itsy Bitsy Entertainment Company's
Teletubbies and Warner Bros. Wild Wild West movie in 1999 compared to a
smaller promotion in 1998 related to DreamWorks SKG's Small Soldiers movie.
Promotions revenue also increased as a result of the addition of oil and gas
promotion revenue generated by CMI/USI which was acquired in the third quarter
of 1998. Consumer products revenues decreased $5,837 to $5,237 primarily due to
lower sales under event-based-licensed consumer products which the Company
decided to exit in December 1998.

Cost of sales increased $22,420 to $42,992 (76.8% of revenues) for the three
months ended June 30, 1999 from $20,572 (67.2% of revenues) in the comparable
period in 1998 due primarily to higher sales in 1999. The gross margin
percentage for the period decreased to 23.2% for the three months ended June 30,
1999 from 32.8% in the comparable period in 1998 due to the planned shift in the
company's revenue mix, which was 91% promotions and 9% consumer products,
compared to 64% and 36% for promotions and consumer products, respectively, one
year ago. In addition, the Company's planned liquidation of discontinued
licensed consumer product lines was a factor in the decreased gross margin.
Excluding the effect of this liquidation, the gross margin percentage would
have been 24.7% for the three months ended June 30, 1999.

Salaries, wages and benefits increased $7, or 0.2% to $3,444 (6.1% of revenues).
This increase was primarily attributable to the addition of employees from the
acquisitions of Corinthian, and CMI/USI. This increase was partially offset by
staffing reductions resulting from the Company's decision to exit the
event-based-licensed consumer products business.


                                                                              14

<PAGE>   15


Selling, general and administrative expenses increased $858, or 20.8% to $4,986
(8.9% of revenues). This increase is due to increased depreciation and
amortization expense associated with higher fixed asset levels in 1998 and
amortization of intangibles related to the acquisitions of Corinthian in April
1998 and CMI/USI in July 1998. The increase is also attributable to increased
support costs associated with the Company's new enterprise resource planning
system (see "Information Systems"), and increased occupancy costs for facilities
to support the higher number of employees. Selling, general and administrative
expenses decreased as a percentage of revenues from 13.5% to 8.9% as a result of
revenues which increased at a greater rate.

The effective tax rate for the three months ended June 30, 1999 increased to
40.0% from 38.5% for the three months ended June 30, 1998. This increase was
attributable to the addition of non-deductible goodwill from the purchase of
Corinthian.

Net income increased $1,299 or 83.0% to $2,864 (5.1% of revenues) from $1,565
(5.1% of revenues) in 1998 primarily due to greater gross profit earned on
increased revenues in 1999 and the restructuring gain of $401. The increase
in net income was partially offset by interest expense of $217 on the Company's
short-term debt borrowing for the three months ended June 30, 1999, compared to
interest income of $88 for the same period in 1998. Excluding the impact of the
restructuring gain, the Company would have reported net income of $2,623 or
$0.41 per diluted share for the three months ended June 30, 1999.

EBITDA increased $2,340 or 79.6% primarily due to greater gross profit earned on
increased revenues in 1999. This increase was partially offset by increases in
selling, general and administrative expenses attributable to higher support and
occupancy costs.

SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS):

Revenues for the six months ended June 30, 1999 increased $29,079 or 53.5% to
$83,468 from $54,389 in the comparable period in 1998. Promotions revenues
increased $35,424 to $75,072 primarily as a result of increased sales on three
Burger King promotions related to Mr. Potato Head, The Itsy Bitsy Entertainment
Company's Teletubbies, and Warner Bros. Wild Wild West movie in 1999
compared to two promotions associated with the release of DreamWorks SKG's Small
Soldiers movie and Nickelodeon's Rugrats for the same period in 1998. Promotions
revenue also increased as a result of the addition of oil and gas promotion
revenue generated by CMI/USI which was acquired in the third quarter of 1998.
Consumer products revenues decreased $6,345 to $8,396 primarily due to decreased
sales under event-based-licensed consumer products which the Company decided to
exit in December 1998. This decrease was partially offset by sales of Headliners
subsequent to the acquisition of Corinthian, which was acquired in the second
quarter of 1998.

Cost of sales increased $25,239 to $63,537 (76.1% of revenues) for the six
months ended June 30, 1999 from $38,298 (70.4% of revenues) in the comparable
period in 1998 due primarily to higher sales in 1999. The gross margin
percentage for the period decreased to 23.9% for the six months ended June 30,
1999 from 29.6% in the comparable period in 1998 due primarily to the planned
shift in the company's revenue mix, which was 90% promotions and 10% consumer
products, compared to 73% and 27% for promotions and consumer products,
respectively, one year ago. In addition, the Company's planned liquidation of
discontinued licensed consumer product lines was a factor in the decreased gross
margin. Excluding the effect of this liquidation, the gross margin percentage
would have been 25.1% for the six months ended June 30, 1999.

Salaries, wages and benefits increased $834, or 13.7% to $6,916 (8.3% of
revenues). This increase was primarily attributable to the addition of employees
from the acquisitions of Corinthian, and CMI/USI. This increase was partially
offset by staffing reductions resulting from the Company's decision to exit the
event-based-licensed consumer products business.

Selling, general and administrative expenses increased $1,954, or 29.2% to
$8,645 (10.4% of revenues). This increase is due to increased depreciation and
amortization expense associated with higher fixed asset levels in 1998 and
amortization of intangibles related to the acquisitions of Corinthian in April
1998 and CMI/USI in July 1998. The increase is also attributable to increased
support costs associated with the Company's new enterprise resource planning
system (see "Information Systems"), and increased occupancy costs for facilities
to support the higher number of employees. Selling, general and administrative
expenses decreased as a percentage of revenues from 12.3% to 10.4% as a result
of revenues which increased at a greater rate.


                                                                              15

<PAGE>   16


The effective tax rate for the six months ended June 30, 1999 increased to 40.0%
from 38.5% for the six months ended June 30, 1998. This increase was
attributable to the addition of non-deductible goodwill from the purchase of
Corinthian.

Net income increased $418 or 19.2% to $2,599 (3.1% of revenues) from $2,181
(4.0% of revenues) in 1998 primarily due to greater gross profit earned on the
increased revenues in 1999 and the restructuring gain of $401. The increase in
net income was partially offset by interest expense of $439 on the Company's
short-term debt borrowing for the six months ended June 30, 1999, compared to
interest income of $227 for the same period in 1998. Excluding the impact of the
restructuring gain, the Company would have reported net income of $2,358 or
$0.37 per diluted share for the six months ended June 30, 1999.

EBITDA increased $1,593 or 38.4% primarily due to greater gross profit earned on
increased revenues in 1999. This increase was partially offset by both the
increases in salaries, wages and benefits and in selling, general and
administrative expenses attributable to higher support and occupancy costs for
the six months ended June 30, 1999, compared to the same period in 1998.

FINANCIAL CONDITION AND LIQUIDITY

As of June 30, 1999, the Company's investment in accounts receivable decreased
$17,190 from the balance at December 31, 1998. This decrease was attributable to
collections of substantially all of the receivables related to sales shipped
late in the 1998 fourth quarter. As of June 30, 1999, inventory decreased
approximately $1,805 from December 31, 1998 primarily as a result of consumer
product and promotional program inventory which was shipped during the six
months ended June 30, 1999.

As of June 30, 1999, accounts payable decreased $11,403 compared to December 31,
1998. This decrease is primarily attributable to payments to vendors associated
with the manufacturing related to the large fourth quarter 1998 promotional
programs.

As of June 30, 1999, working capital was $7,718 compared to $4,268 at December
31, 1998. The increase in working capital was primarily due to the cash
generated by operating activities in the six months ended June 30, 1999. The
Company did not have any significant investing activities in the quarter. The
Company believes that its cash from operations, cash on hand at June 30, 1999
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 June 18,
1999 provides for a line of credit of $30,000 through October 31, 1999 and
$25,000 through June 30, 2000 with borrowing availability determined by a
formula based on qualified assets. As of June 30, 1999, $16,700 was outstanding
under the credit facility. Letters of credit outstanding as of June 30, 1999
were $1,688. The credit agreement requires the Company to comply with certain
financial covenants, including minimum tangible net worth, minimum current
ratio, ratio of total liabilities to tangible net worth, maximum funded debt
coverage ratio, minimum fixed charge coverage ratio and net profit after taxes.
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. As of June 30, 1999,
the Company was in compliance with these covenants.

INFORMATION SYSTEMS

IMPACT OF THE YEAR 2000 ISSUE INTRODUCTION
The term "Year 2000 issue" is a general term used to describe the various
problems that may result from the improper processing of dates and date
sensitive calculations by computers and other machinery as the Year 2000 is
approached and reached. These problems generally arise from the fact that most
of the world's computer hardware and software have historically used only two
digits to identify the year in a date, often meaning that the computer will fail
to distinguish dates in the "2000's" from the dates in the "1900's." These
problems may also arise from other sources as well, such as the use of special
codes and conventions in software that makes use of the date field.


                                                                              16
<PAGE>   17

STATE OF READINESS
The Company's primary focus has been on its own internal systems. To date, the
Company has completed the Year 2000 conversion with respect to its most critical
computer systems and applications, including its enterprise resource planning
system, computer networks and desktop applications. 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 issues. The new enterprise system went into operation in January
1999.

The Company is also communicating with suppliers, distributors, financial
institutions and others with which it does business to evaluate their Year 2000
compliance plans and state of readiness and to determine the extent to which the
Company will be affected by the failure of others to remediate their own Year
2000 issues. There can be no assurance that the systems of other companies on
which the Company's systems rely will also be timely converted or that any such
failure to convert by another company would not have an adverse effect on the
Company's systems. Failure to complete the system conversion in a timely manner
or any significant disruption of the Company's ability to communicate
electronically with its business partners could negatively impact the Company's
business, financial condition and results of operations. The statements set
forth herein are forward looking; and actual results may differ materially.

COSTS TO ADDRESS THE YEAR 2000 ISSUE
The projects associated with the replacement of the enterprise resource planning
system are expected to cost approximately $4,400. To date the Company has spent
a total of approximately $4,300 on the conversion to the new enterprise resource
planning system, of which approximately $2,220 was spent on business process
reengineering. In accordance with Emerging Issues Task Force Issue No. 97-13,
such business process reengineering costs were expensed as incurred.
Approximately $2,085 of these costs have been capitalized and are reflected in
fixed assets in the accompanying condensed consolidated balance sheet.

Costs to address the Year 2000 issue affecting all other information systems are
relatively insignificant, with the majority of the work being performed by
Company employees.

CONTINGENCY PLANS
Because the Company's Year 2000 conversion is expected to be completed prior to
any potential disruption to the Company's business, the Company has not yet
completed the development of a comprehensive Year 2000 specific contingency
plan. However, as part of its Year 2000 contingency effort, information received
from external sources is examined for date integrity before being brought into
the Company's internal systems. If the Company determines that its business or a
segment thereof is at a material risk of disruption due to the Year 2000 issue,
the Company will work to enhance its contingency plan.


                                                                              17

<PAGE>   18


PART II.

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

         The Annual Meeting of Stockholders of the Company was held on May 26,
         1999. 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
              Lawrence Elins                                 6,101,711                --                   30,610
              Sanford R. Climan                              6,101,761                --                   30,560
              Donald A. Kurz                                 6,112,361                --                   19,960
              Mitchell H. Kurz                               6,112,411                --                   19,910
              Bruce Raben                                    6,101,611                --                   30,710
              Stephen P. Robeck                              6,112,211                --                   20,110
2.            Ratification of Arthur Anderson LLP            6,127,326              4,249                     746
              as the Company's Independent Auditor
</TABLE>


         ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits:

         10.1  Second Amendment to Amended and Restated Credit Agreement dated
               June 18, 1999 between the Company and Sanwa Bank California and
               Imperial Bank.

         27.0  Financial Data Schedule.


         (b)    Reports on Form 8-K:

                Report on Form 8-K filed with the Securities and Exchange
                Commission on April 16, 1999. (Item 7)

                Report on Form 8-K filed with the Securities and Exchange
                Commission on April 29, 1999. (Item 5)


                                                                              18

<PAGE>   19


                                   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 16th day of August, 1999.


                                        EQUITY MARKETING, INC.



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


                                                                              19

<PAGE>   20

                                  EXHIBIT INDEX


EXHIBIT


10.1              Second Amendment to Amended and Restated Credit Agreement
                  dated June 18, 1999 between the Company and Sanwa Bank
                  California and Imperial Bank.

27.0              Financial Data Schedule


                                                                              20