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United States
Securities and Exchange CommissionWashington, 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, 2002

or



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

Commission File Number: 23346

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

|                                        
|----------------------------------------
|                                        
|Delaware                                
|(State or other jurisdiction of         
|incorporation or organization)          
|                                        
|6330 San Vicente Blvd.                  
|Los Angeles, CA                         
|(Address of principal executive offices)

(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 [  ]       No [X]



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

Common Stock, $.001 Par
Value, 5,748,603 shares as of November 11, 2002.



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TABLE OF CONTENTS



|                              |                                                                                               |  |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II. OTHER INFORMATION   
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                   
|Exhibit 99.1                 
|Exhibit 99.2                 



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EQUITY MARKETING, INC.

Index To Quarterly Report on Form 10-Q
Filed with the Securities and Exchange Commission
September 30, 2002



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

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PART I. FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS

EQUITY MARKETING, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

ASSETS



|                                                                                                                          | December 31, |   | September 30,
|------------------------------------------------------------------------------------------------------------------------- | ------------ | - | -------------
|                                                                                                                          | 2001         |   | 2002         
|                                                                                                                          |              |   |              
|                                                                                                                          |              |   |              
|                                                                                                                          |              |   |              
|CURRENT ASSETS:                                                                                                           |              |   |              
|Cash and cash equivalents                                                                                                 |              | $ | 21,935       
|Marketable securities                                                                                                     |              |   | 7,200        
|Accounts receivable (net of allowances of $2,336
 and $2,596 as of December 31, 2001 andSeptember 30, 2002, respectively) |              |   | 22,695       
|Note receivable (Note 6)                                                                                                  |              |   | 2,183        
|Inventories (Note 2)                                                                                                      |              |   | 9,337        
|Prepaid expenses and other current assets                                                                                 |              |   | 6,775        
|                                                                                                                          |              |   |              
|Total current assets                                                                                                      |              |   | 70,125       
|Fixed assets, net                                                                                                         |              |   | 4,178        
|Goodwill (Notes 2 and 7)                                                                                                  |              |   | 24,690       
|Other intangibles, net (Notes 2 and 7)                                                                                    |              |   | 749          
|Other assets                                                                                                              |              |   | 1,620        
|                                                                                                                          |              |   |              
|Total assets                                                                                                              |              | $ | 101,362      
|                                                                                                                          |              |   |              

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

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EQUITY MARKETING, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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



|                                                                                                                                                                                                                                              | December 31, |   | September 30,
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------ | - | -------------
|                                                                                                                                                                                                                                              | 2001         |   | 2002         
|                                                                                                                                                                                                                                              |              |   |              
|                                                                                                                                                                                                                                              |              |   |              
|CURRENT LIABILITIES:                                                                                                                                                                                                                          |              |   |              
|Accounts payable                                                                                                                                                                                                                              |              | $ | 22,114       
|Accrued liabilities                                                                                                                                                                                                                           |              |   | 11,391       
|                                                                                                                                                                                                                                              |              |   |              
|Total current liabilities                                                                                                                                                                                                                     |              |   | 33,505       
|LONG-TERM LIABILITIES                                                                                                                                                                                                                         |              |   | 2,335        
|                                                                                                                                                                                                                                              |              |   |              
|Total liabilities                                                                                                                                                                                                                             |              |   | 35,840       
|                                                                                                                                                                                                                                              |              |   |              
|COMMITMENTS AND CONTINGENCIES                                                                                                                                                                                                                 |              |   |              
|Mandatory redeemable preferred stock, Series A
 senior cumulative participating convertible, $.001 par value per share, 25,000 issued and
 outstanding, stated at liquidation preference of $1,000 per share ($25,000), net of issuance costs |              |   | 23,049       
|                                                                                                                                                                                                                                              |              |   |              
|STOCKHOLDERS EQUITY:                                                                                                                                                                                                                         |              |   |              
|Preferred stock, $.001 par value per share, 1,000,000 shares
 authorized, 25,000 Series A issued and outstanding                                                                                                                              |              |   |             
|Common stock, $.001 par value
per share, 50,000,000 shares
 authorized, 5,715,293 and 5,748,603 shares outstanding as of December 31, 2001 and September
 30, 2002, respectively                                                              |              |   |             
|Additional paid-in capital                                                                                                                                                                                                                    |              |   | 20,050       
|Retained earnings                                                                                                                                                                                                                             |              |   | 35,964       
|Accumulated other comprehensive income                                                                                                                                                                                                        |              |   | 242          
|                                                                                                                                                                                                                                              |              |   |              
|                                                                                                                                                                                                                                              |              |   | 56,256       
|Less                                                                                                                                                                                                                                         |              |   |              
|Treasury stock, 2,869,793 and 2,899,608 shares, at
 cost, as of December 31, 2001 andSeptember 30, 2002, respectively
(Note 4)                                                                                                                |              |   | (13,773)     
|Unearned compensation                                                                                                                                                                                                                         |              |   | (10)         
|                                                                                                                                                                                                                                              |              |   |              
|Total stockholders equity                                                                                                                                                                                                                    |              |   | 42,473       
|                                                                                                                                                                                                                                              |              |   |              
|Total liabilities and stockholders equity                                                                                                                                                                                                    |              | $ | 101,362      
|                                                                                                                                                                                                                                              |              |   |              

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

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EQUITY MARKETING, INC.

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



|                                                                                                   |  | Three Months EndedSeptember 30, |           | Nine Months EndedSeptember 30,
|-------------------------------------------------------------------------------------------------- |  | ------------------------------- | --------- | ------------------------------
|                                                                                                   |  |                                 |           |                               
|                                                                                                   |  | 2001                            |           | 2002                          
|                                                                                                   |  |                                 |           |                               
|REVENUES                                                                                           |  | $                               | 40,828    |                               
|COST OF SALES                                                                                      |  |                                 | 29,187    |                               
|FORGIVENESS OF NOTE RECEIVABLE
(Note 6)                                                            |  |                                 |          |                               
|                                                                                                   |  |                                 |           |                               
|Gross profit                                                                                       |  |                                 | 11,641    |                               
|                                                                                                   |  |                                 |           |                               
|OPERATING EXPENSES:                                                                                |  |                                 |           |                               
|Salaries, wages and benefits                                                                       |  |                                 | 4,152     |                               
|Selling, general and administrative                                                                |  |                                 | 4,725     |                               
|Integration costs (Note 7)                                                                         |  |                                 | 81        |                               
|Restructuring charge
(Note 8)                                                                      |  |                                 |          |                               
|                                                                                                   |  |                                 |           |                               
|Total operating expenses                                                                           |  |                                 | 8,958     |                               
|                                                                                                   |  |                                 |           |                               
|Income from operations                                                                             |  |                                 | 2,683     |                               
|OTHER INCOME, net                                                                                  |  |                                 | 206       |                               
|                                                                                                   |  |                                 |           |                               
|Income before provision for income taxes and cumulative
 effect of change in accounting principles |  |                                 | 2,889     |                               
|PROVISION FOR INCOME TAXES                                                                         |  |                                 | 1,088     |                               
|                                                                                                   |  |                                 |           |                               
|INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
 ACCOUNTING PRINCIPLES                                |  | $                               | 1,801     |                               
|Cumulative effect of change in accounting
 principles, net of tax (Note 2)                         |  |                                 |          |                               
|                                                                                                   |  |                                 |           |                               
|Net income                                                                                         |  | $                               | 1,801     |                               
|                                                                                                   |  |                                 |           |                               
|NET INCOME                                                                                         |  |                                 | 1,801     |                               
|PREFERRED STOCK DIVIDENDS                                                                          |  |                                 | 375       |                               
|                                                                                                   |  |                                 |           |                               
|NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS                                                 |  |                                 | 1,426     |                               
|                                                                                                   |  |                                 |           |                               
|BASIC INCOME (LOSS) PER SHARE                                                                      |  |                                 |           |                               
|Income per share before cumulative effect of
 change in accounting principles                      |  | $                               | 0.24      |                               
|Cumulative effect of change in accounting
 principles                                              |  |                                 |          |                               
|                                                                                                   |  |                                 |           |                               
|BASIC INCOME (LOSS) PER SHARE                                                                      |  | $                               | 0.24      |                               
|                                                                                                   |  |                                 |           |                               
|BASIC WEIGHTED AVERAGE SHARES OUTSTANDING                                                          |  |                                 | 5,978,322 |                               
|                                                                                                   |  |                                 |           |                               
|DILUTED (LOSS) INCOME PER SHARE                                                                    |  |                                 |           |                               
|Income per share before cumulative effect of
 change in accounting principles                      |  | $                               | 0.23      |                               
|Cumulative effect of change in accounting
 principles                                              |  |                                 |          |                               
|                                                                                                   |  |                                 |           |                               
|DILUTED INCOME (LOSS) PER SHARE                                                                    |  | $                               | 0.23      |                               
|                                                                                                   |  |                                 |           |                               
|DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING                                                        |  |                                 | 7,877,538 |                               
|                                                                                                   |  |                                 |           |                               

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

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EQUITY MARKETING, INC.

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



|                                                                       |  | Three Months EndedSeptember 30, |       | Nine Months EndedSeptember 30,
|---------------------------------------------------------------------- |  | ------------------------------- | ----- | ------------------------------
|                                                                       |  |                                 |       |                               
|                                                                       |  | 2001                            |       | 2002                          
|                                                                       |  |                                 |       |                               
|NET INCOME                                                             |  | $                               | 1,801 |                               
|OTHER COMPREHENSIVE INCOME
(LOSS):                                     |  |                                 |       |                               
|Foreign currency translation
adjustments (Note 2)                      |  |                                 | 377   |                               
|Unrealized gain (loss) on foreign
 currency forward contracts (Note 2) |  |                                 |      |                               
|                                                                       |  |                                 |       |                               
|COMPREHENSIVE INCOME                                                   |  | $                               | 2,178 |                               
|                                                                       |  |                                 |       |                               

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

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EQUITY MARKETING, INC.

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



|                                                                                    |  | Nine Months EndedSeptember 30,
|----------------------------------------------------------------------------------- |  | ------------------------------
|                                                                                    |  |                               
|                                                                                    |  | 2001                          
|                                                                                    |  |                               
|CASH FLOWS FROM OPERATING ACTIVITIES:                                               |  |                               
|Net income                                                                          |  | $                             
|Adjustments to reconcile net income to net
 cash provided by operating activities:  |  |                               
|Cumulative effect of change in accounting
 principles, net of tax                   |  |                               
|Depreciation and amortization                                                       |  |                               
|Provision for doubtful accounts                                                     |  |                               
|(Gain) loss on disposal of fixed assets                                             |  |                               
|Tax benefit from exercise of stock options                                          |  |                               
|Amortization of restricted stock                                                    |  |                               
|Forgiveness of note receivable                                                      |  |                               
|Changes in operating assets and liabilities:                                        |  |                               
|Increase (decrease) in cash and cash equivalents:                                   |  |                               
|Accounts receivable                                                                 |  |                               
|Note receivable                                                                     |  |                               
|Inventories                                                                         |  |                               
|Prepaid expenses and other current assets                                           |  |                               
|Other assets                                                                        |  |                               
|Accounts payable                                                                    |  |                               
|Accrued liabilities                                                                 |  |                               
|Long-term liabilities                                                               |  |                               
|                                                                                    |  |                               
|Net cash provided by operating activities                                           |  |                               
|                                                                                    |  |                               
|CASH FLOWS FROM INVESTING ACTIVITIES:                                               |  |                               
|Purchases of fixed assets                                                           |  |                               
|Proceeds from sale of fixed assets                                                  |  |                               
|Proceeds from sale of marketable securities                                         |  |                               
|Payment for purchase of UPSHOT                                                      |  |                               
|Payment for purchase of Logistix Limited, net of $1,747 cash acquired               |  |                               
|Payment for purchase of Contract Marketing,
 Inc. and U.S. Import and Promotion Co. |  |                               
|                                                                                    |  |                               
|Net cash used in investing activities                                               |  |                               
|                                                                                    |  |                               
|CASH FLOWS FROM FINANCING ACTIVITIES:                                               |  |                               
|Payment of preferred stock dividends                                                |  |                               
|Purchase of treasury stock                                                          |  |                               
|Proceeds from exercise of stock options                                             |  |                               
|                                                                                    |  |                               
|Net cash used in financing activities                                               |  |                               
|                                                                                    |  |                               
|Net (decrease) increase in cash and cash
 equivalents                               |  |                               
|Effects of exchange rate changes on cash and
 cash equivalents                      |  |                               
|CASH AND CASH EQUIVALENTS, beginning of period                                      |  |                               
|                                                                                    |  |                               
|CASH AND CASH EQUIVALENTS, end of period                                            |  | $                             
|                                                                                    |  |                               
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                   |  |                               
|CASH PAID FOR:                                                                      |  |                               
|Interest                                                                            |  | $                             
|                                                                                    |  |                               
|Income taxes                                                                        |  | $                             
|                                                                                    |  |                               

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

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EQUITY MARKETING, INC.

NOTES TO CONDENSED CONSOLIDATED
 FINANCIAL STATEMENTSSEPTEMBER 30, 2002(IN THOUSANDS, EXCEPT
 SHARE AND PER SHARE DATA)(UNAUDITED)

NOTE 1  ORGANIZATION
 AND BUSINESS

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

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.

On July 31, 2001, the Company acquired 100%
 of the common stock of Logistix Limited, a United Kingdom corporation, (Logistix) (see Note 7  Acquisitions). Logistix is a marketing services agency
 which focuses primarily on assisting consumer packaged goods companies in their
 efforts to market to children between the ages of seven and fourteen by developing
 and executing premium-based promotions and by providing marketing consulting services.
 Logistix also derives a portion of its revenues from a consumer products business
 which holds the license for the Robot Wars® entertainment property, among others.

On July 17, 2002, the Company acquired the
 principal assets of Promotional Marketing, L.L.C. d/b/a UPSHOT, an Illinois limited
 liability company (UPSHOT) (see Note 7  Acquisitions). UPSHOT is a marketing
 agency, specializing in promotion, event, collaborative, and environmental marketing.
 UPSHOT has a reputation for creating highly successful integrated marketing programs
 for world class brands such as Diageo, Morgan Stanley, and
 Procter & Gamble.

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 condensed
 consolidated financial statements should be read in conjunction with the consolidated
 financial statements and footnotes thereto included in the Companys Annual
 Report on Form 10-K for the year ended December 31, 2001.

Net Income per Share

Basic net income per share (EPS)
 is computed by dividing net income available to common stockholders by the weighted
 average number of common shares outstanding during each period. Net income available
 to common stockholders represents reported net income (loss) 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 dilutive effect of the assumed
 conversion of preferred stock using the if-converted method. Options and warrants
 to purchase 1,481,666 and 1,918,666 shares of common stock, $.001 par value per
 share (the Common Stock), as of September 30, 2001 and 2002, respectively,
 were excluded from the computation of diluted EPS as they would have been anti-dilutive.
 For the nine

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months ended September 30, 2001 and 2002, preferred
 stock convertible into 1,694,915 shares of common stock was excluded from the computation of
 diluted EPS as it would have been anti-dilutive.

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



|                                                               | For the Three Months Ended September 30,
|-------------------------------------------------------------- | ----------------------------------------
|                                                               | 2001                                    
|                                                               |                                         
|                                                               | Income(Numerator)                       
|                                                               |                                         
|Basic EPS:                                                     |                                         
|Income available to common stockholders                        | $                                       
|                                                               |                                         
|Preferred stock dividends                                      |                                         
|Effect of dilutive securities:                                 |                                         
|Options and warrants                                           |                                         
|Convertible preferred stock                                    |                                         
|                                                               |                                         
|Dilutive EPS:                                                  |                                         
|Income available to common stockholders and assumed conversion | $                                       
|                                                               |                                         



|                                                                      | For the Nine Months Ended September 30,
|--------------------------------------------------------------------- | ---------------------------------------
|                                                                      | 2001                                   
|                                                                      |                                        
|                                                                      | Income(Numerator)                      
|                                                                      |                                        
|Basic EPS:                                                            |                                        
|Income(loss) available to common stockholders                         | $                                      
|                                                                      |                                        
|Effect of dilutive securities:                                        |                                        
|Options and warrants                                                  |                                        
|                                                                      |                                        
|Dilutive EPS:                                                         |                                        
|Income (loss) available to common stockholders and assumed conversion | $                                      
|                                                                      |                                        







Inventories

Inventories consist of (a) production-in-process
 which primarily represents tooling costs which are deferred and amortized over the
 life of the products and deferred costs on service contracts and (b) purchased finished
 goods held for sale to customers and purchased finished goods in transit to customers distribution centers. Inventories are stated at the lower of average cost
 or market. As of December 31, 2001 and September 30, 2002, inventories consisted
 of the following:



|                      | December 31,2001 |       | September 30,2002
|--------------------- | ---------------- | ----- | -----------------
|                      |                  |       |                  
|Production-in-process | $                | 3,991 |                  
|Finished goods        |                  | 5,346 |                  
|                      |                  |       |                  
|                      | $                | 9,337 |                  
|                      |                  |       |                  

As of September 30,
2002, inventories increased $4,244 to $13,581 from $9,337 at
December 31, 2001. This increase in inventories is primarily the
result of increased promotional programs expected to be delivered in
the fourth quarter of 2002 relative to the first quarter of
2002.

Foreign Currency Translation

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

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For subsidiaries with transactions denominated
 in currencies other than their functional currency, net foreign exchange transaction
 gains or losses are included in determining net income. Transaction gains or losses
 included in net income for the quarters ended September 30, 2001 and
2002 were not significant.

Derivative Instruments

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

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

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

The Companys Logistix subsidiary entered
 into four foreign currency forward contracts to sell Euros in exchange for
 pound sterling aggregating GBP 1,181 at an average rate of 1.596. These contracts
 expire on various dates between December 2002 and March 2003. At September 30, 2002,
 these foreign currency forward contracts had a balance of GBP 1,181 and an estimated
 fair value of $(10). The fair value of these foreign currency forward contracts
 is recorded in accrued liabilities in the accompanying condensed consolidated balance
 sheet as of September 30, 2002. The unrealized loss on these contracts is reflected
 in accumulated other comprehensive income.

Revenue Recognition

For product related sales, the Company records
 revenues when title and risk of loss pass to the customer. When a right of return
 exists, the Companys practice is to estimate and provide for any future returns
 at the time of sale, in accordance with SFAS No. 48, Revenue Recognition When
 Right of Return Exists. Accruals for customer discounts and rebates and defective
 returns are recorded as the related revenues are recognized.

Service revenues include all amounts that
 are billable to clients under service contracts. Service related revenues are recognized
 on a time and materials basis, or on a straight-line basis, depending on the contract.
 Revenues from time and materials service contracts are recognized as the services
 are rendered. Revenues from fixed price retainer contracts are recognized on a straight-line
 basis over the contract term. Losses on contracts are recognized during the period
 in which the loss first becomes probable and reasonably estimable. Reimbursements,
 including those relating to travel and other out-of-pocket expenses, and other similar
 third-party costs, such as printing costs, are included in revenues, and an equivalent
 amount of reimbursable expenses are included in cost of sales. Service revenues
 for the three months ended September 30, 2001 and 2002 totaled
$1,339 and $5,944,
 respectively. Service revenues for the nine months ended September 30, 2001 and
 2002 totaled $2,445 and $6,435, respectively. Unbilled revenues
represent revenues
 recognized in advance of billings rendered based on work performed to date on certain
 service contracts. Unbilled revenues as of December 31, 2001 and September 30, 2002
 totaled $0 and $1,067, respectively. Unbilled revenues are recorded in accounts receivable
 in the accompanying condensed consolidated balance sheet as of
September 30, 2002. Unbilled revenues are expected to be billed and
collected within the next six months.

The Companys revenue recognition policies
 are in compliance with the Securities and Exchange Commissions Staff Accounting
 Bulletin No. 101: Revenue Recognition in Financial Statements.

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Goodwill and Other Intangibles

SFAS No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible Assets were approved
 by the Financial Accounting Standards Board (FASB) effective June 30,
 2001 for business combinations consummated after June 30, 2001. SFAS No.
 141 eliminates the pooling-of-interests method for business combinations and requires
 use of the purchase method. SFAS No. 142 changes the accounting for goodwill and
 certain other intangible assets from an amortization approach to a non-amortization
 (impairment) approach. The statement requires amortization of goodwill recorded
 in connection with previous business combinations to cease upon adoption of the
 statement by calendar year companies on January 1, 2002. The statement required
 the Company to perform a transitional goodwill impairment test, using values as
 of the beginning of the fiscal year that SFAS No. 142 is adopted. The Company completed
 the goodwill transitional impairment test in the second quarter of 2002. As a result,
 the Company determined that a non-cash charge in the amount of $2,496, net of tax,
 is required in connection with the goodwill resulting from the 1998 acquisition
 of Contract Marketing, Inc. and U.S. Import and Promotions Co., collectively referred
 to as USI. The transition charge is reflected as a cumulative effect
 of change in accounting principles effective January 1, 2002, and therefore, results
 for the quarter ended March 31, 2002 have been adjusted retroactively. The Company
 has adopted the provisions of these statements for the acquisition of Logistix (see
 Note 7) effective July 1, 2001 and for all other acquisitions effective January
 1, 2002. Accordingly, beginning on January 1, 2002, the Company has foregone all
 related goodwill amortization expense, which totaled $125 and $367, net of tax effect,
 for the three and nine months ended September 30, 2001, respectively.

Prior to implementing SFAS No. 142, the
 Company reviewed all goodwill assets for impairment under the methodology of SFAS
 No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
 Assets to be Disposed of. The undiscounted cash flows associated with all
 goodwill assets were in excess of the book value of the related goodwill assets,
 including USI goodwill. Therefore, no goodwill assets, including USI goodwill, were
 considered impaired under SFAS No. 121.

For the three and nine months ended September
 30, 2001, the reconciliation of reported net income and diluted income per share
 to adjusted net income and adjusted diluted net income per share reflecting the
 elimination of goodwill amortization is as follows:



|                                                                   |  | Three
 Months EndedSeptember 30, 2001 |       | Nine
 Months EndedSeptember 30, 2001
|------------------------------------------------------------------ |  | ------------------------------------- | ----- | ------------------------------------
|                                                                   |  |                                       |       |                                     
|Net income available to common stockholders, as reported           |  | $                                     | 1,426 |                                     
|Add back: Elimination of goodwill amortization (net of tax effect) |  |                                       | 125   |                                     
|                                                                   |  |                                       |       |                                     
|Net income available to common stockholders, as adjusted           |  | $                                     | 1,551 |                                     
|                                                                   |  |                                       |       |                                     
|Diluted income per share                                           |  |                                       |       |                                     
|Income per share, as reported                                      |  | $                                     | 0.23  |                                     
|Add back: Elimination of goodwill amortization (net of tax effect) |  |                                       | 0.02  |                                     
|                                                                   |  |                                       |       |                                     
|Income per share, as adjusted                                      |  | $                                     | 0.25  |                                     
|                                                                   |  |                                       |       |                                     

The change in the carrying amount of goodwill
 from $24,690 as of December 31, 2001 to $33,091 as of September 30, 2002 reflects:
 the acquisition of UPSHOT of $11,571, the USI goodwill impairment charge of $(4,000),
 a foreign currency translation adjustment of $924 and the adjustment to reflect
 the net reduction to goodwill for the Logistix acquisition of $(94) (see Note 7).
 The entire balance of the goodwill relates to the promotions segment.

Identifiable intangibles of $846 as of September
 30, 2002, and $749 as of December 31, 2001, a portion of which are subject to amortization,
 are included in other intangibles in the condensed consolidated balance sheets.

Under the provisions of SFAS No. 142, the
 carrying value of assets acquired, including goodwill, are reviewed annually. During
 such a review the Company will estimate the fair value of the reporting unit to
 which the assets were assigned by discounting the reporting units estimated
 future cash flows before interest. The Company will compare the discounted flows
 to the carrying value of the acquired net assets to determine if an impairment loss
 has occurred. If such assets are considered to be impaired, the impairment to be
 recognized is measured by the amount by which the carrying value of the assets exceeds
 their estimated fair values.

Royalties

The Company enters into agreements to license
 intellectual properties such as trademarks, copyrights, and patents. The agreements
 may call for minimum amounts of royalties to be paid in advance and throughout the
 term of the agreement, which are non-refundable in the

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event that product sales
 fail to meet certain minimum levels. Advance royalties resulting from such transactions
 are stated at the lower of the amounts paid or the amounts estimated to be recoverable
 from future sales of the related products. Furthermore, minimum guaranteed royalty
 commitments are reviewed on a periodic basis to ensure that amounts are recoverable
 based on estimates of future sales of the products under license. A loss provision
 will be recorded in the consolidated statements of operations to the extent that
 future minimum royalty guarantee commitments are not recoverable. Estimated future
 sales are projected based on historical experience, including that of similar products,
 and anticipated advertising and marketing support by the licensor.

Recent Accounting Pronouncements

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

In October 2001, the FASB issued SFAS No.
 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
 SFAS No. 144 requires that long-lived assets be measured at the lower of the carrying
 amount or fair value less cost to sell, whether reported in continuing operations
 or in discontinued operations. SFAS No. 144 is effective for 2002 and generally
 is to be applied prospectively. The Company adopted SFAS No. 144 beginning January
 1, 2002. The impact of such adoption did not have a material effect on the Companys financial statements.

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

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

Reclassifications

Certain reclassifications have been made
 to the 2001 condensed consolidated financial statements to conform with the 2002
 presentation. Such reclassifications did not change our previously reported net
 income or total common stockholders equity.

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NOTE 3  LINE OF CREDIT

On April 24, 2001, the Company signed a
 credit facility (the Facility) with Bank of America. The credit facility
 is secured by substantially all of the Companys assets and provides for a
 line of credit of up to $35,000 for three years from the date of closing with borrowing
 availability determined by a formula based on qualified assets. Interest on outstanding
 borrowings will be based on either a fixed rate equivalent to LIBOR plus an applicable
 spread of between 1.50 and 2.25 percent or a variable rate equivalent to the bank
s reference rate plus an applicable spread of between zero and 0.50 percent.
 The Company is also required to pay an unused line fee of between zero and 0.60
 percent per annum and certain letter of credit fees. The applicable spread is based
 on the achievement of certain financial ratios. The Facility also requires the
 Company to comply with certain restrictions and covenants as amended from time to
 time. On November 14, 2001, February 8, 2002 and September 30, 2002, certain covenants
 under the facility were amended. As of September 30, 2002, the Company was in compliance
 with the amended restrictions and covenants. The Facility may be used for working
 capital and acquisition financing purposes. As of September 30, 2002, there were
 no amounts outstanding under the Facility.

Letters of credit outstanding as of December
 31, 2001 and September 30, 2002 totaled $551 and $973, respectively.

NOTE 4  STOCK REPURCHASE

On July 21, 2000, the Companys Board
 of Directors authorized up to $10,000 for the repurchase of the Companys common
 stock over a twelve month period. In the period from July 21, 2000 to July 21,
 2001, the Company spent $6,448 to purchase an aggregate of 525,094 shares at an
 average price of $12.28 per share including commissions. On July 24, 2001, the
 Companys Board of Directors authorized up to an additional $10,000 for the
 repurchase of the Companys common stock over a twelve month period. In the
 period from August 2, 2001 through July 11, 2002, the Company spent $5,587 to purchase
 453,215 shares at an average price of $12.33 per share including commissions. On
 July 12, 2002, the Companys Board of Directors authorized up to an additional
 $10,000 for the repurchase of the Companys common stock. No shares have been
 repurchased as of September 30, 2002 under this authorization. The duration of
 the current buyback program is indefinite; provided, however, that the Companys
 Board of Directors intends to review the program quarterly. Purchases are conducted
 in the open market at prevailing prices, based on market conditions when the Company
 is not in a quiet period. The Company may also transact purchases effected as block
 trades, as well as certain negotiated, off-exchange purchases not in the open market.
 Since initiating the overall buyback program on July 20, 2000, the Company has
 spent $12,035 to purchase a total of 978,309 shares at an average price of $12.30
 per share including commissions. This repurchase program is being funded through
 working capital.

NOTE 5  SEGMENTS

Effective January 1, 1998, the Company adopted
 the provisions of SFAS No. 131, Disclosures about Segments of an Enterprise
 and Related Information. The Company has identified two reportable segments
 through which it conducts its continuing operations: 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 provides various services involving strategic planning, research, entertainment
 marketing, event marketing, environmental marketing and the design and execution
 of strategy-based marketing programs and produces promotional products used as free
 premiums or sold in conjunction with the purchase of other items. Promotional programs
 are used for marketing purposes by both the companies sponsoring the promotions
 and the licensors of the entertainment properties on which the promotional programs
 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 specialty
 retailers, who in turn sell the products to consumers.

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

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Industry Segments



|                                                          |  | As of and For the Three Months Ended September 30, 2001
|--------------------------------------------------------- |  | -------------------------------------------------------
|                                                          |  |                                                        
|                                                          |  | Promotions                                             
|                                                          |  |                                                        
|Total revenues                                            |  | $                                                      
|                                                          |  |                                                        
|Income (loss) before provision (benefit) for income taxes |  | $                                                      
|Provision (benefit) for income taxes                      |  |                                                        
|                                                          |  |                                                        
|Net income (loss)                                         |  | $                                                      
|                                                          |  |                                                        
|Fixed asset additions                                     |  | $                                                      
|                                                          |  |                                                        
|Depreciation and amortization                             |  | $                                                      
|                                                          |  |                                                        
|Total assets                                              |  | $                                                      
|                                                          |  |                                                        



|                                                          |  | As of and For the Three Months Ended September 30, 2002
|--------------------------------------------------------- |  | -------------------------------------------------------
|                                                          |  |                                                        
|                                                          |  | Promotions                                             
|                                                          |  |                                                        
|Total revenues                                            |  | $                                                      
|                                                          |  |                                                        
|Income (loss) before provision (benefit) for income taxes |  | $                                                      
|Provision (benefit) for income taxes                      |  |                                                        
|                                                          |  |                                                        
|Net income (loss)                                         |  | $                                                      
|                                                          |  |                                                        
|Fixed asset additions                                     |  | $                                                      
|                                                          |  |                                                        
|Depreciation and amortization                             |  | $                                                      
|                                                          |  |                                                        
|Total assets                                              |  | $                                                      
|                                                          |  |                                                        



|                                                          |  | As
 of and For the Nine Months Ended September 30, 2001
|--------------------------------------------------------- |  | -------------------------------------------------------
|                                                          |  |                                                        
|                                                          |  | Promotions                                             
|                                                          |  |                                                        
|Total revenues                                            |  | $                                                      
|                                                          |  |                                                        
|Income (loss) before provision (benefit) for income taxes |  | $                                                      
|Provision (benefit) for income taxes                      |  |                                                        
|                                                          |  |                                                        
|Net income (loss)                                         |  | $                                                      
|                                                          |  |                                                        
|Fixed asset additions                                     |  | $                                                      
|                                                          |  |                                                        
|Depreciation and amortization                             |  | $                                                      
|                                                          |  |                                                        
|Total assets                                              |  | $                                                      
|                                                          |  |                                                        



|                                                                                                                    |  | As of
 and For the Nine Months Ended September 30, 2002
|------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------
|                                                                                                                    |  |                                                        
|                                                                                                                    |  | Promotions                                             
|                                                                                                                    |  |                                                        
|Total revenues                                                                                                      |  | $                                                      
|                                                                                                                    |  |                                                        
|Income (loss) before provision (benefit) for income taxes and
 cumulative effect of change in accounting principles |  | $                                                      
|Provision (benefit) for income taxes                                                                                |  |                                                        
|                                                                                                                    |  |                                                        
|Income (loss) before cumulative effect of change in accounting principles                                           |  |                                                        
|Cumulative effect of change in accounting principles, net of tax                                                    |  |                                                        
|                                                                                                                    |  |                                                        
|Net income (loss)                                                                                                   |  | $                                                      
|                                                                                                                    |  |                                                        
|Fixed asset additions                                                                                               |  | $                                                      
|                                                                                                                    |  |                                                        
|Depreciation and amortization                                                                                       |  | $                                                      
|                                                                                                                    |  |                                                        
|Total assets                                                                                                        |  | $                                                      
|                                                                                                                    |  |                                                        

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NOTE 6  NOTE RECEIVABLE

The Company regularly extends credit to
 several distribution companies in connection with its business with Burger King
 Corporation (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 $28,774 in trade receivables.

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 $15,970 and satisfaction of certain
 contractual obligations owed by the Company to RSI. This agreement resulted in
 a net pre-tax charge of $1,014 for the quarter ended December 31, 1999. A note
 receivable of $10,515 was recorded on the consolidated balance sheet as of December
 31, 1999. $6,642 of the $28,774 pre-petition trade receivables related to sales
 made in January 2000. Accordingly, the remaining $5,455 portion of the note receivable
 was recorded in January 2000, and resulted in a net pre-tax charge of $482 for the
 year ended December 31, 2000. This charge was offset by $1,084 of imputed interest
 income, at 9% per annum, recorded on the note receivable for 2000.

In December 2001, the due date for the final
 payment on the note was extended from December 1, 2001 to September 30, 2002 due
 to ongoing discussions between the Company and RSI. On May 15, 2002, the Company
 agreed to forgive the remaining balance of $1,685 as consideration for a new interim
 Master Supply Agreement with RSI. The Company recorded the forgiveness in the condensed
 consolidated statement of operations for the quarter ended June 30, 2002. Simultaneously
 with the execution of the new interim Master Supply Agreement, the Company and RSI
 also executed a Release and Settlement Agreement pursuant to which the parties resolved
 certain outstanding issues that have arisen between the two organizations over the
 last three years. In connection with the Release and Settlement Agreement, the
 Company is released from any further liability incurred by RSI and associated with
 the December 1999 recall of Pokémon balls included with Burger King kids
 meals. The Company expects to negotiate a revised longer-term contract with RSI
 and Burger King before the end of the year.

As of July 2000, the Burger King system
 completed a transition to alternative distributors. The largest distribution company
 accounted for approximately 22.2% and 19.0% of the products purchased from the Company
 by the Burger King system for the three months ended September 30, 2001 and 2002,
 respectively.

NOTE 7  ACQUISITIONS

On July 31, 2001, the Company acquired 100%
 of the capital stock of Logistix in exchange for 8,500 British pounds ($12,144 as
 of July 31, 2001) in cash plus related transaction costs of $1,011. Potential additional
 cash consideration may be paid based upon the results of operations of Logistix
 during the three year period ended December 31, 2004. Any additional consideration
 paid will be recorded as additional purchase price. The acquisition was financed
 through the Companys existing cash reserves.

The Logistix acquisition has been accounted
 under the purchase method of accounting. The financial statements reflect the allocation
 of the purchase price to the acquired net assets based on their estimated fair values
 as of the acquisition date. During the nine months ended September 30, 2002,
 the preliminary allocation of the purchase price was adjusted to revise the estimated
 value of the deferred tax liabilities and certain accrued liabilities. These adjustments
 resulted in a net reduction to goodwill of $94. The Companys allocation of
 purchase price for the acquisition, based upon estimated fair values is as follows:



|Net current assets                        |  | $ | 6,280  |  
|----------------------------------------- |  | - | ------ | -
|Property, plant and equipment             |  |   | 430    |  
|Other non-current assets                  |  |   | 11     |  
|Net current liabilities                   |  |   | (6,246 | )
|Non-current liabilities                   |  |   | (285   | )
|                                          |  |   |        |  
|Estimated fair value, net assets acquired |  |   | 190    |  
|Goodwill                                  |  |   | 12,083 |  
|Other intangible assets                   |  |   | 882    |  
|                                          |  |   |        |  
|Total purchase price                      |  | $ | 13,155 |  
|                                          |  |   |        |  

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The above amounts are reported using the
 exchange rate in effect as of July 31, 2001. $522 of the $882 of acquired intangible
 assets was assigned to the Logistix trademark, which is not subject to amortization.
 The remaining $360 of intangible assets is being amortized over estimated useful
 lives ranging from 0.4 to 3 years. Intangible assets associated with the Logistix
 acquisition are accounted for in accordance with SFAS No. 142, Goodwill and Other
 Intangible Assets. Goodwill has an indefinite life and is not amortized.

On July 17, 2002, the Company consummated
 the acquisition of UPSHOT, a marketing agency with expertise in promotion, event,
 collaborative and environmental marketing. The Company financed the acquisition
 through its existing cash reserves. The acquisition was consummated pursuant
 to an Asset Purchase Agreement, dated May 22, 2002, by and among the Company, Promotional
 Marketing, LLC (Promotional Marketing) and HA-LO Industries, Inc. (HA-LO)
 (the Purchase Agreement). Under the terms of the Purchase Agreement, the Company
 acquired the principal assets of Promotional Marketing (consisting of the principal assets
 used in connection with the operation of the UPSHOT business) for $9,312 in cash
 plus related transaction costs of $685. The Company assumed the principal current
 liabilities of the UPSHOT business in connection with the acquisition. In addition
 to the cash purchase price paid at the closing, the Company may be obligated to
 pay additional consideration to Promotional Marketing contingent upon the results
 of certain performance targets attained in the twelve month period ending July 31,
 2003. The additional consideration, if any, will be recorded as
 goodwill. HA-LO, which is the parent company of Promotional Marketing, is currently
 in Chapter 11 bankruptcy proceedings, and the Companys acquisition of the
 UPSHOT business was approved by the United States bankruptcy court.

The foregoing description of the Purchase
 Agreement and related transactions does not purport to be complete and is qualified
 in its entirety by reference to the Purchase Agreement and the press release issued
 by the Company on July 18, 2002 which were attached as exhibits to a Current Report
 on Form 8-K filed with the SEC on July 24, 2002.

The UPSHOT acquisition has been accounted
 under the purchase method of accounting. The financial statements reflect the preliminary
 allocation of the purchase price to the acquired net assets based on their estimated
 fair values as of the acquisition date. The Company is in the process of finalizing
 valuations of the individual assets and liabilities, which could result in adjustments
 to goodwill and other intangibles. The allocation of the purchase price may change
 based upon these valuations. The Companys preliminary allocation of purchase
 price for the acquisition, based upon estimated fair values is as follows:



|Net current assets                            |  | $ | 5,096  |  
|--------------------------------------------- |  | - | ------ | -
|Property, plant and equipment                 |  |   | 700    |  
|Other non-current assets                      |  |   | 1      |  
|Net current liabilities                       |  |   | (7,558 | )
|Non-current liabilities                       |  |   |       |  
|                                              |  |   |        |  
|Estimated fair value, net liabilities assumed |  |   | (1,761 | )
|Goodwill                                      |  |   | 11,571 |  
|Other intangible assets                       |  |   | 187    |  
|                                              |  |   |        |  
|Total purchase price                          |  | $ | 9,997  |  
|                                              |  |   |        |  

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

In connection with the UPSHOT acquisition,
 the Company formulated and implemented an integration plan and incurred integration
 costs, including travel and training costs. Such costs totaled $161 and $219 for
 the three months and for the nine months ended September 30, 2002, respectively,
 and were recorded as integration costs in the condensed consolidated statements
 of operations for the respective periods. The Company expects to
 incur some additional integration costs during the three months ended December 31, 2002.

The following selected unaudited pro forma
 consolidated results of operations are presented as if the Logistix
 and UPSHOT acquisitions had occurred
 as of the beginning of the period immediately preceding the period of acquisition
 after giving effect to certain adjustments for the amortization of intangibles,
 reduced interest income and related income tax effects. The pro forma data is for
 informational purposes only and does not necessarily reflect the results of operations
 had the businesses operated as one during the period. No effect has been given for
 synergies, if any, that may have been realized through the acquisitions.

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##### Table of Contents



|                                   |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |         |  
|---------------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                                   |  | Three Months Ended |        | Nine Months Ended
|                                   |  | September 30,      |        | September 30,    
|                                   |  |                    |        |                  
|                                   |  | 2001               |        | 2002              |  | 2001 |        | 2002
|                                   |  |                    |        |                   |  |      |        |     
|Pro forma revenues                 |  | $                  | 53,003 |                   |  | $    | 54,867 |      |  | $ | 133,147 |   |  | $ | 150,386 |  
|Pro forma net income               |  | $                  | (1,940 | )                 |  | $    | 2,071  |      |  | $ | (6,470  | ) |  | $ | (39     | )
|Pro forma basic income per share   |  | $                  | (0.39  | )                 |  | $    | .30    |      |  | $ | (1.26   | ) |  | $ | (0.20   | )
|Pro forma diluted income per share |  | $                  | (0.39  | )                 |  | $    | .27    |      |  | $ | (1.26   | ) |  | $ | (0.20   | )

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

As of September 30, 2002,
accrued liabilities increased $9,031 to $20,422 from $11,391 at
December 31, 2001. This increase is primarily attributable to
additional accruals subsequent to the acquisition of UPSHOT as well
as administrative fees collected from distribution companies during
the third quarter of 2002 on behalf of promotional customers and an
accrual for employee performance bonuses.

NOTE 8  RESTRUCTURING

During the quarter ended September 30, 2002,
 the Company formulated and implemented a restructuring plan in connection with the
 UPSHOT acquisition in order to combine and streamline the operations of the Company
 and UPSHOT. The Company evaluated the current cost structure of both
 businesses.
 In connection with this plan the Company recorded a restructuring charge of $178
 for the three months ended September 30, 2002. This charge represents severance
 for a workforce reduction of seven employees in the Companys Los Angeles office,
 who were terminated as of September 30, 2002, and is reflected as a restructuring
 charge in the accompanying condensed consolidated statement of operations for the
 three months ended September 30, 2002. The workforce reduction included employees
 from the Companys promotions division as well as other support services.
 $61 of the restructuring charge was paid as of September 30, 2002.

In connection with the restructuring plan,
 the Company also decided to close UPSHOTs Richmond, Virginia office and eliminate
 certain positions at UPSHOTs Chicago, Illinois office. The liabilities assumed
 in connection with this plan were not material to the Companys balance sheet
 as of September 30, 2002.

NOTE 9  WEST COAST PORT DISPUTE

In September 2002, the Pacific Maritime
 Association locked out the Longshore and Warehouse Union workers from the West Coast
 ports causing a cargo backlog. The impact of this West Coast port dispute caused
 a reduction of the Companys full year 2002 revenue expectations, due to delayed
 shipments of both custom promotional products and consumer products, and altered
 production schedules in the Companys overseas facilities. The Companys
 estimate of this fourth quarter revenue impact is approximately $8.0 million. Most
 of the revenue impacted by the port dispute that the Company previously expected
 to recognize in the fourth quarter of 2002 is expected to be deferred into 2003.

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ITEM 2. MANAGEMENTS DISCUSSION
 AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement

Certain expectations and projections regarding
 the future performance of Equity Marketing, Inc. (the Company) discussed
 in this quarterly report are forward-looking and are made under the safe harbor
 provisions of the Private Securities Litigation Reform Act of 1995. These
 expectations and projections are based on currently available competitive, financial
 and economic data along with the Companys operating plans and are subject
 to future events and uncertainties. Forward-looking statements can be identified
 by the use of forward looking terminology, such as may, will, should, expect, anticipate,
 estimate, continue, plans, intends or other similar terminology. Management cautions
 you that the following factors, among others, could cause the Companys actual
 consolidated results of operations and financial position in 2002 and thereafter
 to differ significantly from those expressed in forward-looking statements:

Marketplace Risks



| | Dependence
 on a single customer, Burger King, which may adversely affect the Companys
 financial condition and results of operations.                                                   
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| | Increased
 competitive pressure, which may affect the sales of the
Companys products and services.                                                                                       
| 
| | Dependence
 on nonrenewable product orders by Burger King, which promotions are in effect for
 a limited period of time.                                                                  
| 
| | Dependence
 on the popularity of licensed entertainment properties, which may adversely affect
 the Companys financial condition and results of operations.                              
| 
| | Concentration
 risk associated with accounts receivable. The Company regularly extends credit
 to several distribution companies in connection with its business with Burger King.        
| 
| | Significant
 quarter-to-quarter variability in the Companys revenues and net income, which
 may result in operating results below the expectations of securities analysts and
 investors.
| 
| | Dependence
 on foreign manufacturers, which may increase the costs of the Companys products
 and affect the demand for such products.                                                    



Financing Risks



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

Other Risks



| | Products that
 we develop or sell may expose us to liability from claims by users of such products
 for damages including, but not limited to, bodily injury or property damage. We
 currently maintain product liability insurance coverage in amounts that we believe
 are adequate. There can be no assurance that we will be able to maintain such coverage
 or obtain additional coverage on acceptable terms in the future, or that such insurance
 will provide adequate coverage against all potential claims.                                                                                                                                                                                                                                                                                                                   
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| | Exposure to
 liability for the costs related to product recalls. These costs can include legal
 expenses, advertising, collection and destruction of product, and free goods. The
 Companys product liability insurance coverage generally excludes such costs
 and damages resulting from product recall.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| 
| | Potential
 negative impact of past or future acquisitions, which may disrupt the Companys
 ongoing business, distract senior management and increase expenses (including risks
 associated with the financial condition and integration of UPSHOT which was recently
 acquired by the Company).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| 
| | Adverse results
 of litigation, governmental proceedings or environmental matters, which may lead
 to increased costs or interruption in normal business operations of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| 
| | Changes in
 laws or regulations, both domestically and internationally, including those affecting
 consumer products or environmental activities or trade restrictions, which may lead
 to increased costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| 
| | Strike and
 other labor disputes which may negatively impact the distribution channels for the
 Companys products. In September 2002, the Pacific Maritime Association locked
 out the Longshore and Warehouse Union workers from the West Coast ports causing
 a cargo backlog. The impact of this West Coast port dispute caused a reduction of
 the Companys full year 2002 revenue expectations, due to delayed shipments
 of both custom promotional products and consumer products, and altered production
 schedules in the Companys overseas facilities. The Companys estimate
 of this fourth quarter revenue impact is approximately $8.0 million. Most of the
 revenue impacted by the port dispute that the Company previously expected to recognize
 in the fourth quarter of 2002 is expected to be deferred into 2003.
| 
| | Exposure to
 liabilities for minimum royalty commitments in connection with license agreements
 for entertainment properties. The Company enters into significant minimum royalty
 commitments from time to time in connection with its consumer products business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

The Company undertakes no obligation to
 publicly release the results of any revisions to forward-looking statements, which
 may be made to reflect events or circumstance after the date hereof or to reflect
 the occurrence of unanticipated events. The risks highlighted herein should not
 be assumed to be the only items that could affect future performance of the Company.
 In addition to the information contained in this document, readers are advised
 to review the Companys Form 10-K for the year ended December 31, 2001, under
 the heading Managements Discussion and Analysis of Financial Condition
 and Results of Operations - Cautionary Statements and Risk Factors.

18



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##### Table of Contents



Organization and Business

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

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.

On July 31, 2001, the
 Company acquired 100%
 of the capital stock of Logistix Limited, a United Kingdom corporation, (Logistix). Logistix is a marketing services agency which focuses primarily on assisting
 consumer packaged goods companies in their efforts to market to children between
 the ages of seven and fourteen by developing and executing premium-based promotions
 and by providing marketing consulting services. Logistix also derives a portion
 of its revenues from a consumer products business which holds the license for the
 Robot Wars® entertainment property, among others.

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

Results of Operations

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



|                                                                   |  | Three
 MonthsEnded September 30, |       | Nine
 MonthsEnded September 30,
|------------------------------------------------------------------ |  | -------------------------------- | ----- | -------------------------------
|                                                                   |  |                                  |       |                                
|                                                                   |  | 2001                             |       | 2002                           
|                                                                   |  |                                  |       |                                
|Revenues                                                           |  |                                  | 100.0 | %                              
|Cost of sales                                                      |  |                                  | 71.5  |                                
|Forgiveness of note receivable                                     |  |                                  |      |                                
|                                                                   |  |                                  |       |                                
|Gross profit                                                       |  |                                  | 28.5  |                                
|                                                                   |  |                                  |       |                                
|Operating expenses:                                                |  |                                  |       |                                
|Salaries, wages and benefits                                       |  |                                  | 10.1  |                                
|Selling, general and administrative                                |  |                                  | 11.6  |                                
|Integration costs                                                  |  |                                  | 0.2   |                                
|Restructuring charge                                               |  |                                  |      |                                
|                                                                   |  |                                  |       |                                
|Total operating expenses                                           |  |                                  | 21.9  |                                
|                                                                   |  |                                  |       |                                
|Income from operations                                             |  |                                  | 6.6   |                                
|Other income, net                                                  |  |                                  | 0.5   |                                
|                                                                   |  |                                  |       |                                
|Income before provision for income taxes                           |  |                                  | 7.1   |                                
|Provision for income taxes                                         |  |                                  | 2.7   |                                
|                                                                   |  |                                  |       |                                
|Income before cumulative effect of change in accounting principles |  |                                  | 4.4   |                                
|                                                                   |  |                                  |       |                                
|Cumulative effect of change in accounting principles, net of tax   |  |                                  |      |                                
|                                                                   |  |                                  |       |                                
|Net income                                                         |  |                                  | 4.4   | %                              
|                                                                   |  |                                  |       |                                

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EBITDA

While many in the financial community consider
 earnings before other income, taxes, depreciation and amortization (EBITDA) to be an important measure of comparative operating performance and an indicator
 of an entitys debt capacity, 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 Companys calculation of EBITDA excludes the impact of: forgiveness
 of note receivable, integration costs, restructuring charge and cumulative effect
 of change in accounting principles, net of tax. The following table sets forth
 EBITDA for the periods indicated:



|                                                                  | For Three
 Months Ended September 30, |       | For Nine Months Ended September 30,
|----------------------------------------------------------------- | ------------------------------------- | ----- | -----------------------------------
|                                                                  |                                       |       |                                    
|                                                                  |                                       | 2001  |                                    
|                                                                  |                                       |       |                                    
|Net income                                                        | $                                     | 1,801 |                                    
|Add:   Forgiveness of note receivable                             |                                       |      |                                    
|Depreciation and amortization                                     |                                       | 668   |                                    
|Other income, net                                                 |                                       | (206  | )                                  
|Integration costs                                                 |                                       | 81    |                                    
|Restructuring charge                                              |                                       |      |                                    
|Provision for income taxes                                        |                                       | 1,088 |                                    
|Cumulative effect of change in accounting
 principles, net of tax |                                       |      |                                    
|                                                                  |                                       |       |                                    
|EBITDA                                                            | $                                     | 3,432 |                                    
|                                                                  |                                       |       |                                    

Three Months Ended September 30, 2002 Compared to Three Months Ended
 September 30, 2001 (In Thousands):

Revenues for the three months ended September
 30, 2002 increased $12,291, or 30.1%, to $53,119 from $40,828 in the comparable
 period in 2001. Promotions revenues increased $11,753, or 38.0%, to $42,711 primarily
 as a result of increased revenues associated with Burger King and Logistix programs
 in 2002 compared to the same period in 2001. This increase was also attributable
 to additional promotions revenues generated by UPSHOT following its acquisition
 by the Company in July 2002. Consumer Product revenues increased $538, or 5.5%,
 to $10,408 primarily due to increased sales of Robot Wars® product generated by
 Logistix. The revenue increase was also partially attributable to increased revenues
 from Scooby-Doo product internationally, and was partially offset by
 decreased sales of Tub Tints® product. The results for 2001 include Logistix
 from August 1, 2001 (acquired July 31, 2001) and exclude UPSHOT (acquired July 17,
 2002). Excluding the impact of these acquisitions, revenues increased 9.4% for
 the three months ended September 30, 2002 compared to the same period in 2001.

Cost of sales increased $8,897 to $38,084
 (71.7% of revenues) for the three months ended September 30, 2002 from $29,187 (71.5%
 of revenues) in the comparable period in 2001 due to the higher sales volume in
 2002. The gross margin percentage decreased to 28.3% for the three months ended
 September 30, 2002 from 28.5% in the comparable period for 2001. This decrease
 is primarily the result of lower Consumer Product margins as a result of an increased
 mix of lower margin product, partially offset by higher margin revenues from UPSHOT
 and Logistix.

Salaries, wages and benefits increased $1,902,
 or 45.8%, to $6,054 (11.4% of revenues) for the three months ended September 30,
 2002 from $4,152 (10.1% of revenues) in the comparable period for 2001. This increase
 was primarily attributable to the addition of employees from the acquisition of
 UPSHOT and to an accrual for employee performance bonuses.

Selling, general and administrative expenses
 increased $765, or 16.2%, to $5,490 (10.4% of revenues) for the three months ended
 September 30, 2002 from $4,725 (11.6% of revenues) in the comparable period for
 2001. The increase is primarily the result of higher selling expenses associated
 with increased sales in 2002. This increase was also attributable to additional
 operating expenses resulting from the acquisition of UPSHOT, partially offset by
 a decrease in amortization expense. Selling, general and administrative expenses
 decreased as a percentage of revenues from 11.6% to 10.4% as a result of revenues
 increasing at a greater rate.

Integration costs increased $80, or 98.8%,
 to $161 (0.3% of revenues) for the three months ended September 30, 2002 from $81
 (0.2%

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##### Table of Contents



of revenues) in the comparable period for 2001.
 The costs for the quarter
 ended September 30, 2002 are associated with the acquisition of UPSHOT, while the
 costs for the quarter ended September 30, 2001 are associated with the acquisition
 of Logistix.

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

Net other income decreased $85 to $121 for
 the three months ended September 30, 2002 from $206 in the comparable period for
 2001. This decrease was attributable to a decline in interest rates as well as
 to the reduced level of cash, cash equivalents and marketable securities as a result
 of cash utilized for the acquisition of UPSHOT. The decrease was partially offset
 by gains on foreign currency transactions.

The effective tax rate for the three months
 ended September 30, 2002 was 34.9% compared to 37.7% for the same period in 2001.
 The reduction in the effective tax rate is the result of a lower tax rate resulting
 from an increased percentage of the Companys earnings being generated internationally,
 in territories which have more favorable tax rates, partially offset by significantly
 lower non-taxable interest income from municipal securities.

Net income increased $330, or 18.3%, to
 $2,131 (4.0% of revenues) from $1,801 (4.4% of revenues) in 2001 due to the increase
 in gross profit earned on higher revenues in 2002. The increase was partially offset
 by the increased salaries, wages and benefits, selling, general and administrative
 expenses, as well as decreased net other income in 2002.

For the three months ended September 30,
 2002, EBITDA increased $567, or 16.5%, to $3,999 from $3,432 in 2001 primarily due
 to the increase in gross profit, partially offset by the increase in salaries, wages
 and benefits and selling, general and administrative expenses in 2002.

Nine Months Ended September 30, 2002 Compared
 to Nine Months Ended September 30, 2001 (In Thousands):

Revenues for the nine months ended September
 30, 2002 increased $39,293, or 40.5%, to $136,385 from $97,092 in the comparable
 period in 2001. Promotions revenues increased $34,059 to $112,608 primarily as
 a result of increased revenues associated with Burger King programs in 2002 compared
 to the same period in 2001. This increase was also attributable to additional promotions
 revenues generated by Logistix and UPSHOT following their acquisition by the Company
 in July 2001 and July 2002, respectively. Consumer Product revenues increased $5,234,
 or 28.2%, to $23,777 primarily due to increased sales of Robot Wars® product generated
 by Logistix. The revenue increase was also partially attributable to increased
 revenues from Scooby-Doo product internationally, partially offset by
 decreased sales of Tub Tints® product. The results for the nine months ended
 September 30, 2001 include Logistix from August 1, 2001 (acquired July 31, 2001)
 and exclude UPSHOT (acquired July 17, 2002). Excluding the impact of these acquisitions,
 revenues increased 16.5% for the nine months ended September 30, 2002 compared to
 the same period in 2001.

Cost of sales increased $30,607 to $99,865
 (73.3% of revenues) for the nine months ended September 30, 2002 from $69,258 (71.3%
 of revenues) in the comparable period in 2001 primarily due to the higher sales
 volume in 2002. The gross margin percentage decreased to 25.5% for the nine months
 ended September 30, 2002 from 28.7% in the comparable period for 2001. This decrease
 is primarily the result of a charge for the forgiveness of the note receivable from
 RSI for $1,685 (1.2% of revenues) (see Note Receivable
below) and margin
 pressure in the promotions business as a result of shorter program lead times in
 the first half of 2002 which resulted in increased tooling and freight costs. This
 decrease was partially offset by improved promotional program lead times in the
 third quarter of 2002 which resulted in decreased tooling and freight costs and
 by higher margin revenues from UPSHOT and Logistix. This decrease was also partially
 the result of lower Consumer Product margins as a result of an increased mix of
 lower margin product.

Salaries, wages and benefits increased $3,551,
 or 31.1%, to $14,979 (11.0% of revenues) for the nine months ended September 30,
 2002 from $11,428 (11.8% of revenues) in the comparable period in 2001. This increase
 was primarily attributable to the addition of employees from the acquisitions of
 Logistix and UPSHOT, as well as an accrual for employee performance bonuses. Salaries,
 wages and benefits decreased as a percentage of revenues from 11.8% to 11.0% as
 a result of revenues increasing at a greater rate.

Selling, general and administrative expenses
 increased $2,551, or 21.3%, to $14,552 (10.6% of revenues) for the nine months ended
 September 30, 2002 from $12,001 (12.3% of revenues) in the comparable period in
 2001. The increase is primarily the result of higher selling expenses associated
 with increased sales in 2002. This increase was also attributable to additional
 operating expenses resulting from the acquisitions of Logistix and UPSHOT, partially
 offset by a decrease in amortization expense. Selling, general and

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administrative expenses decreased as a percentage
 of revenues from 12.3% to 10.6% as a result of revenues increasing at a greater rate.

Integration costs increased $138, or 170.4%,
 to $219 (0.2% of revenues) for the nine months ended September 30, 2002 from $81
 (0.1% of revenues) in the comparable period for 2001. The costs for the nine months
 ended September 30, 2002 are associated with the acquisition of UPSHOT, while the
 costs for the nine months ended September 30, 2001 are associated with the acquisition
 of Logistix

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

Net other income decreased $1,209, or 86.4%,
 to $191 for the nine months ended September 30, 2002 from $1,400 in the comparable
 period for 2001. This decrease was attributable to a decline in interest rates
 as well as to the reduced level of cash, cash equivalents and marketable securities
 as a result of cash utilized for the acquisitions of Logistix and UPSHOT and the
 stock buyback program.

The effective tax rate for the nine months
 ended September 30, 2002 was 34.4% compared to 37.5% for the same period in 2001.
 The decrease was primarily due to an increased percentage of the Companys
 earnings being generated internationally in territories which have more favorable
 tax rates, partially offset by significantly lower tax free municipal interest income.

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

Net income decreased $2,726, or 76.2%, to
 $850 (0.6% of revenues) from $3,576 (3.7% of revenues) in 2001. The decrease was
 primarily due to the cumulative effect of change in accounting principles of $2,496,
 net of tax, a charge for the forgiveness of the note receivable from RSI, increased
 salaries, wages and benefits and selling, general and administrative expenses and
 decreased net other income, partially offset by the increased gross profit earned
 on higher revenues and a reduced effective tax rate in 2002.

For the nine months ended September 30,
 2002, EBITDA increased $2,125, or 34.4 %, to $8,300 from $6,175 in 2001. The increase
 is primarily due to the increase in gross profit offset by the increase in salaries,
 wages and benefits and selling, general and administrative expenses in 2002.

Financial Condition and Liquidity

The Companys financial position remained
 strong in the third quarter of 2002. At September 30, 2002, the Company had no
 debt and its cash, cash equivalents and marketable securities were $23,347, compared
 to $29,135 as of December 31, 2001.

As of September 30, 2002, the Companys
 net accounts receivable increased $6,768 to $29,463 from $22,695 at December 31,
 2001. This increase was attributable to increased Promotions and Consumer Product
 revenues in September 2002 as compared to December 2001 as well as
additional receivables subsequent to the acquisition of UPSHOT. As of September 30, 2002,
 inventories increased $4,244 to $13,581 from $9,337 at December 31, 2001. This
 increase in inventories is primarily the result of increased promotional programs
 expected to be delivered in the fourth quarter of 2002 relative to the first quarter
 of 2002. Promotions inventories represent 90% and 80% of total inventories as of
 September 30, 2002 and December 31, 2001, respectively.

As of September 30, 2002, accounts payable
 increased $1,887 to $24,001 from $22,114 at December 31, 2001. This increase is
 primarily associated with the increase in inventories as well as additional accounts
 payable subsequent to the acquisition of UPSHOT.

As of September 30, 2002, accrued liabilities
 increased $9,031 to $20,422 from $11,391 at December 31, 2001. This increase is
 primarily attributable to additional accruals subsequent to the acquisition
 of UPSHOT as well as administrative fees collected from distribution
companies during the third quarter of 2002 on behalf of promotional
customers and an accrual for employee performance bonuses.

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As of September 30, 2002,
working capital was $28,575 compared to $36,620 at December 31, 2001.
Cash flows from operations for the nine months ended September 30,
2002 were $5,952 compared to $4,294 in the prior year. This increase
is the result of higher revenues and net income before non-cash
charges such as the cumulative effect of change in accounting
principles and forgiveness of note receivable. Cash flows used in
investing activities for the nine months ended September 30, 2002
were $3,788 compared to $7,753 in the prior year. In 2002, the
Company acquired the principal assets of UPSHOT for $9,997 including
related transaction costs. In 2001, the Company acquired Logistix for
$11,408 including related transaction costs. Both acquisitions were
financed through the Companys existing cash reserves. The use of
cash and cash equivalents for these acquisitions was partially offset
by proceeds from the sale of marketable securities of $5,100 and
$6,700 for the nine months ended September 30, 2001 and 2002,
respectively. Cash flows used in financing activities for the nine
months ended September 30, 2002 were $1,386 compared to $4,976 in the
prior year. This decrease is the result of significantly reduced
purchases of treasury stock. As of the date hereof, the Company
believes that its cash from operations, cash, cash equivalents and
marketable securities at September 30, 2002 and its credit facility
will be sufficient to fund its working capital needs for at least the
next twelve months. The statements set forth herein are
forward-looking and actual results may differ materially.

Credit Facilities

On April 24, 2001, the Company signed a
 credit facility (the Facility) with Bank of America. The credit facility
 is secured by substantially all of the Companys assets and provides for a
 line of credit of up to $35,000 for three years from the date of closing with borrowing
 availability determined by a formula based on qualified assets. Interest on outstanding
 borrowings will be based on either a fixed rate equivalent to LIBOR plus an applicable
 spread of between 1.50 and 2.25 percent or a variable rate equivalent to the bank
s reference rate plus an applicable spread of between zero and 0.50 percent.
 The Company is also required to pay an unused line fee of between zero and 0.60
 percent per annum and certain letter of credit fees. The applicable spread is based
 on the achievement of certain financial ratios. The Facility also requires the
 Company to comply with certain restrictions and covenants as amended from time to
 time. On November 14, 2001, February 8, 2002 and September 30, 2002 certain covenants
 under the facility were amended. As of September 30, 2002, the Company was in compliance
 with the amended restrictions and covenants. The Facility may be used for working
 capital and acquisition financing purposes. As of September 30, 2002, there were
 no amounts outstanding under the Facility.

Acquisition

On July 17, 2002, the Company consummated
 the acquisition of UPSHOT, a marketing agency with expertise in promotion, event,
 collaborative and environmental marketing. The Company financed the acquisition
 through its existing cash reserves. The acquisition was consummated pursuant to
 an Asset Purchase Agreement, dated May 22, 2002, by and among the Company, Promotional
 Marketing, LLC (Promotional Marketing) and HA-LO Industries, Inc. (HA-LO) (the
 Purchase Agreement). Under the terms of the Purchase Agreement, the Company acquired
 the principal assets of Promotional Marketing (consisting of the principal assets
 used in connection with the operation of the UPSHOT business) for $9,312 in cash
 plus related transaction costs of $685. The Company assumed the principal current
 liabilities of the UPSHOT business in connection with the acquisition. In addition
 to the cash purchase price paid at the closing, the Company may be obligated to
 pay additional consideration to Promotional Marketing contingent upon the results
 of certain performance targets attained in the twelve month period ending July 31,
 2003. The additional consideration, if any, will be recorded as
goodwill. HA-LO, which is the parent company of Promotional Marketing, is currently
 in Chapter 11 bankruptcy proceedings, and the Companys acquisition of the
 UPSHOT business was approved by the United States bankruptcy court.

The foregoing description of the Purchase
 Agreement and related transactions does not purport to be complete and is qualified
 in its entirety by reference to the Purchase Agreement and the press release issued
 by the Company on July 18, 2002 which were attached as exhibits to a Current Report
 on Form 8-K filed with the SEC on July 24, 2002.

Restructuring

During the quarter ended September 30, 2002,
 the Company formulated and implemented a restructuring plan in connection with the
 UPSHOT acquisition in order to combine and streamline the operations of the Company
 and UPSHOT. The Company evaluated the current cost structure of both
businesses.
 In connection with this plan the Company recorded a restructuring charge of $178
 for the three months ended September 30, 2002. This charge represents severance
 for a workforce reduction of seven employees in the Companys Los Angeles office,
 who were terminated as of September 30, 2002, and is reflected as a restructuring
 charge in the accompanying condensed consolidated statement of operations for the
 three months ended September 30, 2002. The workforce reduction included employees
 from the Companys promotions division as well as other support services.
 $61 of the restructuring charge was paid as of September 30, 2002.

In connection with the restructuring plan,
 the Company also decided to close UPSHOTs Richmond, Virginia office and eliminate
 certain positions at UPSHOTs Chicago, Illinois office. The liabilities assumed
 in connection with this plan were not material to the Companys balance sheet
 as of September 30, 2002.

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Stock Repurchase

On July 21, 2000, the Companys Board
 of Directors authorized up to $10,000 for the repurchase of the Companys common
 stock over a twelve month period. In the period from July 21, 2000 to July 21,
 2001, the Company spent $6,448 to purchase an aggregate of 525,094 shares at an
 average price of $12.28 per share including commissions. On July 24, 2001, the
 Companys Board of Directors authorized up to an additional $10,000 for the
 repurchase of the Companys common stock over a twelve month period. In the
 period from August 2, 2001 through July 11, 2002, the Company spent $5,587 to purchase
 453,215 shares at an average price of $12.33 per share including commissions. On
 July 12, 2002, the Companys Board of Directors authorized up to an additional
 $10,000 for the repurchase of the Companys common stock. No shares have been
 repurchased as of September 30, 2002 under this authorization. The duration of
 the current buyback program is indefinite; provided, however, that the Companys
 Board of Directors intends to review the program quarterly. Purchases are conducted
 in the open market at prevailing prices, based on market conditions when the Company
 is not in a quiet period. The Company may also transact purchases effected as block
 trades, as well as certain negotiated, off-exchange purchases not in the open market.
 Since initiating the overall buyback program on July 20, 2000, the Company has
 spent $12,035 to purchase a total of 978,309 shares at an average price of $12.30
 per share including commissions. This repurchase program is being funded through
 working capital.

Note Receivable

The Company regularly extends credit to
 several distribution companies in connection with its business with Burger King
 Corporation (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 $28,774 in trade receivables.

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 $15,970 and satisfaction of certain
 contractual obligations owed by the Company to RSI. This agreement resulted in
 a net pre-tax charge of $1,014 for the quarter ended December 31, 1999. A note
 receivable of $10,515 was recorded on the consolidated balance sheet as of December
 31, 1999. $6,642 of the $28,774 pre-petition trade receivables related to sales
 made in January 2000. Accordingly, the remaining $5,455 portion of the note receivable
 was recorded in January 2000, and resulted in a net pre-tax charge of $482 for the
 year ended December 31, 2000. This charge was offset by $1,084 of imputed interest
 income, at 9% per annum, recorded on the note receivable for 2000.

In December 2001, the due date for the final
 payment on the note was extended from December 1, 2001 to September 30, 2002 due
 to ongoing discussions between the Company and RSI. On May 15, 2002, the Company
 agreed to forgive the remaining balance of $1,685 as consideration for a new interim
 Master Supply Agreement with RSI. The Company recorded the forgiveness in the condensed
 consolidated statement of operations for the quarter ended June 30, 2002. Simultaneously
 with the execution of the new interim Master Supply Agreement, the Company and RSI
 also executed a Release and Settlement Agreement pursuant to which the parties resolved
 certain outstanding issues that have arisen between the two organizations over the
 last three years. In connection with the Release and Settlement Agreement, the
 Company is released from any further liability incurred by RSI and associated with the December
 1999 recall of Pokémon balls included with Burger King kids meals. The
 Company expects to negotiate a longer-term contract with RSI and
Burger King before the end of the
 year.

As of July 2000, the Burger King system
 completed a transition to alternative distributors. The largest distribution company
 accounted for approximately 22.2% and 19.0% of the products purchased from the Company
 by the Burger King system for the three months ended September 30, 2001 and 2002,
 respectively.

Recent Accounting Pronouncements

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

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In October 2001, the FASB issued SFAS No.
 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
 SFAS No. 144 requires that long-lived assets be measured at the lower of the carrying
 amount or fair value less cost to sell, whether reported in continuing operations
 or in discontinued operations. SFAS No. 144 is effective for 2002 and generally
 is to be applied prospectively. The Company adopted SFAS No. 144
beginning January  1, 2002. The impact of such adoption did not have a material effect on the Companys financial statements.

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

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

Selected Significant Accounting Policies

Revenue Recognition
For product related sales, the Company records
 revenues when title and risk of loss pass to the customer. When a right of return
 exists, the Companys practice is to estimate and provide for any future returns
 at the time of sale, in accordance with SFAS No. 48, Revenue Recognition When
 Right of Return Exists. Accruals for customer discounts and rebates and defective
 returns are recorded as the related revenues are recognized.

Service revenues include all amounts that
 are billable to clients under service contracts. Service related revenues are recognized
 on a time and materials basis, or on a straight-line basis, depending on the contract.
 Revenues from time and materials service contracts are recognized as the services
 are rendered. Revenues from fixed price retainer contracts are recognized on a straight-line
 basis over the contract term. Losses on contracts are recognized during the period
 in which the loss first becomes probable and reasonably estimable. Reimbursements,
 including those relating to travel and other out-of-pocket expenses, and other similar
 third-party costs, such as printing costs, are included in revenues, and an equivalent
 amount of reimbursable expenses are included in cost of sales. Service revenues
 for the three months ended September 30, 2001 and 2002 totaled
$1,339 and $5,944,
 respectively. Service revenues for the nine months ended September 30, 2001 and
 2002 totaled $2,445 and $6,435, respectively. Unbilled revenues
represent revenues
 recognized in advance of billings rendered based on work performed to date on certain
 service contracts. Unbilled revenues as of December 31, 2001 and September 30,
 2002 totaled $0 and $1,067, respectively. Unbilled revenues are recorded in accounts
 receivable in the accompanying condensed consolidated balance sheet as of September
 30, 2002. Unbilled revenues are expected to be billed and collected
within the next six months.

The Companys revenue recognition policies
 are in compliance with the Securities and Exchange Commissions Staff Accounting
 Bulletin No. 101: Revenue Recognition in Financial Statements.

Goodwill and Other IntangiblesSFAS No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible Assets were approved
 by FASB effective June 30, 2001 for business combinations consummated
 after June 30, 2001. SFAS No. 141 eliminates the pooling-of-interests method for
 business combinations and requires use of the purchase method. SFAS No. 142 changes
 the accounting for goodwill and certain other intangible assets from an amortization
 approach to a non-amortization (impairment) approach. The statement requires amortization
 of goodwill recorded in connection with previous business combinations to cease
 upon adoption of the statement by calendar year companies on January 1, 2002. The
 statement required the Company to perform a transitional goodwill impairment test,
 using values as of the beginning of the fiscal year that SFAS No. 142 is adopted.
 The Company completed the goodwill transitional impairment test in the second quarter
 of 2002. As a result, the Company determined that a non-cash charge in the amount
 of $2,496, net of tax, is required in connection with the goodwill resulting from
 the 1998 acquisition of Contract Marketing, Inc. and U.S. Import and Promotions
 Co., collectively referred to as USI. The transition charge is reflected
 as a

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cumulative effect of change in accounting
 principles effective January 1, 2002,
 and therefore, results for the quarter ended March 31, 2002 have been adjusted retroactively.
 The Company has adopted the provisions of these statements for the acquisition
 of Logistix effective July 1, 2001 and for all other acquisitions effective January
 1, 2002. Accordingly, beginning on January 1, 2002, the Company has foregone all
 related goodwill amortization expense, which totaled $125 and $367, net of tax effect,
 for the three and nine months ended September 30, 2001, respectively.

Prior to implementing SFAS No. 142, the
 Company reviewed all goodwill assets for impairment under the methodology of SFAS
 No. 121, Accounting for the Impairment of Long-Lived Assets and for the Long-Lived
 Assets to be Disposed of. The undiscounted cash flows associated with all
 goodwill assets were in excess of the book value of the related goodwill assets,
 including USI goodwill. Therefore, no goodwill assets, including USI goodwill, were
 considered impaired under SFAS No. 121.



Under the provisions of SFAS No. 142, the
 carrying value of assets acquired, including goodwill, are reviewed annually. During
 such a review the Company will estimate the fair value of the reporting unit to
 which the assets were assigned by discounting the reporting units estimated
 future cash flows before interest. The Company will compare the discounted flows
 to the carrying value of the acquired net assets to determine if an impairment loss
 has occurred. If such assets are considered to be impaired, the impairment to be
 recognized is measured by the amount by which the carrying value of the assets exceeds
 their estimated fair values.

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




ITEM 4. CONTROLS AND PROCEDURES

Based on their evaluation, as of a date
 within 90 days of the filing of this Form 10-Q, the Companys Chief Executive
 Officer and Chief Financial Officer have concluded the Companys disclosure
 controls and procedures (as defined in Rules 13a-14 and 15d-14 under the Securities
 Exchange Act of 1934) are effective. There have been no significant changes in internal
 controls or in other factors that could significantly affect these controls subsequent
 to the date of their evaluation, including any corrective actions with regard to
 significant deficiencies and material weaknesses.

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##### Table of Contents






PART II. OTHER INFORMATION



|                                         |              |                                                                                                                                                                        | 
|---------------------------------------- | ------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
|                                        
|                                         | (a)          | Exhibits:                                                                                                                                                              | 
|                                         |              |                                                                                                                                                                        | 
|                                         | Exhibit 99.1 | Certification
 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes
Oxley Act of 2002 - Donald A. Kurz, Chief Executive Officer.   
|                                         |              |                                                                                                                                                                        | 
|                                         | Exhibit 99.2 | Certification pursuant
 to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the SarbanesOxley Act of
 2002 - Lawrence J. Madden, Chief Financial Officer
|                                         |              |                                                                                                                                                                        | 
|                                         | (b)          | Reports on
 Form 8-K:                                                                                                                                                 
|                                         |              |                                                                                                                                                                        | 
|                                         |              | Report
on Form 8-K filed with the Securities and Exchange Commission on July
24, 2002 (Items 2 and 7)                                                                 
|                                         |              |                                                                                                                                                                        | 
|                                         |              | Report
on Form 8-K filed with the Securities and Exchange Commission on July
29, 2002 (Item 7)                                                                        
|                                         |              |                                                                                                                                                                        | 
|                                         |              | Report on
 Form 8-K filed with the Securities and Exchange Commission on August 14, 2002 (Item
 9).                                                                   

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##### Table of Contents






SIGNATURES

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



|                        | EQUITY
 MARKETING, INC.                              
|----------------------- | -----------------------------------------------------
|                        |                                                      
|                        |                                                      
|Date November
 14, 2002 | /s/ LAWRENCE J. MADDEN                               
|                        |                                                      
|                        | Lawrence
 J. Madden                                  
|                        | Executive
 Vice President and Chief Financial Officer
|                        | (Principal
 Financial and Accounting Officer)        

28



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##### Table of Contents

\

CERTIFICATION PURSUANT TO
RULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Donald A. Kurz, certify that:

1. I have reviewed this quarterly report
 on Form 10-Q of Equity Marketing, Inc.;

2. Based on my knowledge, this quarterly
 report does not contain any untrue statement of a material fact or omit to state
 a material fact necessary to make the statements made, in light of the circumstances
 under which such statements were made, not misleading with respect to the period
 covered by this quarterly report;

3. Based on my knowledge, the financial
 statements, and other financial information included in this quarterly report, fairly
 present in all material respects the financial condition, results of operations
 and cash flows of the registrant as of, and for, the periods presented in this quarterly
 report;

4. The registrants other certifying
 officer and I are responsible for establishing and maintaining disclosure controls
 and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
 and we have:



| |                                                                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. designed
 such disclosure controls and procedures to ensure that material information related
 to the registrant, including its consolidated subsidiaries, is made known to us
 by others within those entities, particularly during the period in which this quarterly
 report is being prepared;
| |                                                                                                                                                                                                                                                                                                      
| | b. evaluated
 the effectiveness of the registrants disclosure controls and procedures as
 of a date within 90 days prior to the filing date of this quarterly report (the
 Evaluation Date); and                                                                                                  
| |                                                                                                                                                                                                                                                                                                      
| | c. presented
 in this quarterly report our conclusions about the effectiveness of the disclosure
 controls and procedures based on our evaluation as of the Evaluation Date;                                                                                                                         

5. The registrants other certifying
 officer and I have disclosed, based on our most recent evaluation, to the registrant
s auditors and the audit committee of the registrants board of directors
 (or persons performing the equivalent function):



| | a. all
 significant deficiencies in the design or operation of internal controls which could
 adversely affect the registrants ability to record, process, summarize and
 report financial data and have identified for the registrants auditors any
 material weaknesses in internal controls; and
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                      
| | b. any
 fraud, whether or not material, that involves management or other employees who
 have a significant role in the registrants internal controls; and                                                                                                                                          

6. The registrants other certifying
 officer and I have indicated in this quarterly report whether or not there were
 significant changes in internal controls or in other factors that could significantly
 affect internal controls subsequent to the date of our most recent evaluation, including
 any corrective actions with regard to significant deficiencies and material weaknesses.



|                          |                                                   
|------------------------- | --------------------------------------------------
|                          | /s/ Donald
 A. Kurz                               
|                          | Donald A.
 Kurz.                                  
|                          | Chairman
 of the Board and Chief Executive Officer
|                          | (Principal
 Executive Officer)                    
|                          |                                                   
|Dated: November
 14, 2002 |                                                   

29



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##### Table of Contents



CERTIFICATION PURSUANT
 TORULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934AS ADOPTED PURSUANT
 TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Lawrence J. Madden, certify that:

1. I have reviewed this quarterly report
 on Form 10-Q of Equity Marketing, Inc.;

2. Based on my knowledge, this quarterly
 report does not contain any untrue statement of a material fact or omit to state
 a material fact necessary to make the statements made, in light of the circumstances
 under which such statements were made, not misleading with respect to the period
 covered by this quarterly report;

3. Based on my knowledge, the financial
 statements, and other financial information included in this quarterly report, fairly
 present in all material respects the financial condition, results of operations
 and cash flows of the registrant as of, and for, the periods presented in this quarterly
 report;

4. The registrants other certifying
 officer and I are responsible for establishing and maintaining disclosure controls
 and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
 and we have:



| | a. designed
 such disclosure controls and procedures to ensure that material information related
 to the registrant, including its consolidated subsidiaries, is made known to us
 by others within those entities, particularly during the period in which this quarterly
 report is being prepared;
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                      
| | b. evaluated
 the effectiveness of the registrants disclosure controls and procedures as
 of a date within 90 days prior to the filing date of this quarterly report (the
 Evaluation Date); and                                                                                                  
| |                                                                                                                                                                                                                                                                                                      
| | c. presented
 in this quarterly report our conclusions about the effectiveness of the disclosure
 controls and procedures based on our evaluation as of the Evaluation Date;                                                                                                                         

5. The registrants other certifying
 officer and I have disclosed, based on our most recent evaluation, to the registrant
s auditors and the audit committee of the registrants board of directors
 (or persons performing the equivalent function):



| | a. all
 significant deficiencies in the design or operation of internal controls which could
 adversely affect the registrants ability to record, process, summarize and
 report financial data and have identified for the registrants auditors any
 material weaknesses in internal controls; and
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                      
| | b. any
 fraud, whether or not material, that involves management or other employees who
 have a significant role in the registrants internal controls; and                                                                                                                                          

6. The registrants other certifying
 officer and I have indicated in this quarterly report whether or not there were
 significant changes in internal controls or in other factors that could significantly
 affect internal controls subsequent to the date of our most recent evaluation, including
 any corrective actions with regard to significant deficiencies and material weaknesses.



|                          |                                                      
|------------------------- | -----------------------------------------------------
|                          | /s/ Lawrence
 J. Madden                              
|                          | Lawrence J.
 Madden.                                 
|                          | Executive
 Vice President and Chief Financial Officer
|                          | (Principal
 Financial and Accounting Officer)        
|                          |                                                      
|Dated: November
 14, 2002 |                                                      

30