##### Table of Contents



United States
Securities and Exchange Commission
Washington, D.C. 20549
 FORM 10-Q

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

For the quarterly period ended September 30, 2001
 or

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

Commission File Number: 23346
 EQUITY MARKETING, INC.
(Exact name of registrant as specified in its charter.)

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

|                                         |  |           
|---------------------------------------- |  | ----------
|6330 San Vicente Blvd.
Los Angeles, CA   |  | 90048     
|(Address of principal executive offices) |  | (Zip Code)

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

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

Yes [X]    No [   ]

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

Common Stock, $.001 Par Value, 5,878,093 shares as
of November 9, 2001.



---

TABLE OF CONTENTS



|                              |                                                                                                 |                                                           |  |  |  |  |  | 
|----------------------------- | ----------------------------------------------------------------------------------------------- | --------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS                                                                   
|                              |                                                                                                 | CONDENSED CONSOLIDATED BALANCE SHEETS                    
|                              |                                                                                                 | CONDENSED CONSOLIDATED STATEMENTS OF INCOME              
|                              |                                                                                                 | CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|                              |                                                                                                 | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS          
|                              |                                                                                                 | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS     
|                              | ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|PART II. OTHER INFORMATION   
|                              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                    
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                       
|SIGNATURES                   
|EXHIBIT INDEX                



---



##### Table of Contents



EQUITY MARKETING, INC.
 Index To Quarterly Report on Form 10-Q
Filed with the Securities and Exchange Commission
September 30, 2001

|         |                       |                                                                                       |  |    |  | 
|-------- | --------------------- | ------------------------------------------------------------------------------------- |  | -- |  | 
|         | Page                 
|         |                      
|Part I.  | Financial Information |                                                                                       |  |   
|        
|         | Item 1.               | Financial Statements                                                                  |  | 3  | 
|        
|         | Item 2.               | Managements Discussion and Analysis of Financial
Condition and Results of Operations |  | 16 | 
|        
|Part II. | Other Information    
|        
|         | Item 4.               | Submission of Matters to a Vote of Security Holders                                   |  | 23 | 
|        
|         | Item 6.               | Exhibits and Reports on Form 8-K                                                      |  | 23 | 



2



---



##### Table of Contents






PART I. FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




EQUITY MARKETING, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS(IN THOUSANDS)
 ASSETS

|                                          |                                                                                                                           |                      |        |              |         |               |        |             |         | 
|----------------------------------------- | ------------------------------------------------------------------------------------------------------------------------- | -------------------- | ------ | ------------ | ------- | ------------- | ------ | ----------- | ------- | 
|                                          |                                                                                                                           |                      |        | December 31, |         | September 30,
|                                          |                                                                                                                           |                      |        | 2000         |         | 2001         
|                                          |                                                                                                                           |                      |        |              |         |              
|                                          |                                                                                                                           |                      |        |              |         |               |        | (Unaudited)
|CURRENT ASSETS:                           |                                                                                                                           |                      |        |              |         |               |        |            
|                                          | Cash and cash equivalents                                                                                                 |                      | $      | 32,405       |         |               | $      | 23,998      |        
|                                          | Marketable securities                                                                                                     |                      |        | 5,100        |         |               |        |            |        
|                                          | Accounts receivable (net of allowances of $3,090 and
$2,805 as of December 31, 2000 and September 30, 2001, respectively) |                      |        | 30,137       |         |               |        | 29,282      |        
|                                          | Note receivable                                                                                                           |                      |        | 8,322        |         |               |        | 2,151       |        
|                                          | Inventory                                                                                                                 |                      |        | 11,744       |         |               |        | 14,618      |        
|                                          | Prepaid expenses and other current assets                                                                                 |                      |        | 4,828        |         |               |        | 5,591       |        
|                                          |                                                                                                                           |                      |        |              |         |               |        |            
|                                          |                                                                                                                           | Total current assets |        |              | 92,536  |               |        |             | 75,640  | 
|FIXED ASSETS, net                         |                                                                                                                           |                      | 4,263  |              |         |               | 4,478  |            
|GOODWILL
AND OTHER INTANGIBLE ASSETS, net |                                                                                                                           |                      | 12,459 |              |         |               | 25,612 |            
|OTHER ASSETS                              |                                                                                                                           |                      | 1,284  |              |         |               | 1,960  |            
|                                          |                                                                                                                           |                      |        |              |         |               |        |            
|                                          |                                                                                                                           | Total assets         |        | $            | 110,542 |               |        | $           | 107,690 | 
|                                          |                                                                                                                           |                      |        |              |         |               |        |            

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



3



---



##### Table of Contents



EQUITY MARKETING, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS
 LIABILITIES AND STOCKHOLDERS EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

|                                                                                                                                                                                                                                  |                                                                                                                                                                                |  |        |                                            |   |              |         |               |   |             |         | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------ | ------------------------------------------ | - | ------------ | ------- | ------------- | - | ----------- | ------- | 
|                                                                                                                                                                                                                                  |                                                                                                                                                                                |  |        |                                            |   | December 31, |         | September 30,
|                                                                                                                                                                                                                                  |                                                                                                                                                                                |  |        |                                            |   | 2000         |         | 2001         
|                                                                                                                                                                                                                                  |                                                                                                                                                                                |  |        |                                            |   |              |         |              
|                                                                                                                                                                                                                                  |                                                                                                                                                                                |  |        |                                            |   |              |         |               |   | (Unaudited)
|CURRENT LIABILITIES:                                                                                                                                                                                                              |                                                                                                                                                                                |  |        |                                            |   |              |         |              
|                                                                                                                                                                                                                                  | Accounts payable                                                                                                                                                               |  | $      | 18,421                                     |   |              | $       | 20,530        |  
|                                                                                                                                                                                                                                  | Accrued liabilities                                                                                                                                                            |  |        | 21,975                                     |   |              |         | 18,015        |  
|                                                                                                                                                                                                                                  |                                                                                                                                                                                |  |        |                                            |   |              |         |              
|                                                                                                                                                                                                                                  |                                                                                                                                                                                |  |        | Total current liabilities                  |   |              | 40,396  |               |   |             | 38,545  | 
|LONG-TERM LIABILITIES                                                                                                                                                                                                             |                                                                                                                                                                                |  | 1,856  |                                            |   |              | 1,917   |              
|                                                                                                                                                                                                                                  |                                                                                                                                                                                |  |        |                                            |   |              |         |              
|                                                                                                                                                                                                                                  |                                                                                                                                                                                |  |        | Total liabilities                          |   |              | 42,252  |               |   |             | 40,462  | 
|                                                                                                                                                                                                                                  |                                                                                                                                                                                |  |        |                                            |   |              |         |              
|COMMITMENTS AND CONTINGENCIES                                                                                                                                                                                                     |                                                                                                                                                                                |  |        |                                            |   |              |         |              
|Mandatory redeemable preferred stock, Series A senior cumulative participating
convertible, $.001 par value, 25,000 issued and outstanding, stated at liquidation
preference of $1,000 per share ($25,000), net of issuance costs |                                                                                                                                                                                |  | 23,049 |                                            |   |              | 23,049  |              
|                                                                                                                                                                                                                                  |                                                                                                                                                                                |  |        |                                            |   |              |         |              
|STOCKHOLDERS EQUITY:                                                                                                                                                                                                             |                                                                                                                                                                                |  |        |                                            |   |              |         |              
|                                                                                                                                                                                                                                  | Preferred stock, $.001 par value per share, 1,000,000
shares authorized, 25,000 Series A issued and outstanding                                                                |  |        |                                           |   |              |         |              |  
|                                                                                                                                                                                                                                  | Common stock, par value $.001 per share, 20,000,000
shares authorized, 6,141,396 and 5,858,208 shares outstanding
as of December 31, 2000 and September 30, 2001, respectively |  |        |                                           |   |              |         |              |  
|                                                                                                                                                                                                                                  | Additional paid-in capital                                                                                                                                                     |  |        | 18,209                                     |   |              |         | 19,682        |  
|                                                                                                                                                                                                                                  | Retained earnings                                                                                                                                                              |  |        | 32,863                                     |   |              |         | 35,314        |  
|                                                                                                                                                                                                                                  | Accumulated other comprehensive income                                                                                                                                         |  |        |                                           |   |              |         | 377           |  
|                                                                                                                                                                                                                                  |                                                                                                                                                                                |  |        |                                            |   |              |         |              
|                                                                                                                                                                                                                                  |                                                                                                                                                                                |  | 51,072 |                                            |   |              | 55,373  |              
|Less                                                                                                                                                                                                                             |                                                                                                                                                                                |  |        |                                            |   |              |         |              
|                                                                                                                                                                                                                                  | Treasury stock, 2,207,083 and 2,649,793 shares, at cost, as of
December 31, 2000 and September 30, 2001, respectively                                                          |  |        | (5,777                                     | ) |              |         | (11,140       | )
|                                                                                                                                                                                                                                  | Stock subscription receivable                                                                                                                                                  |  |        | (11                                        | ) |              |         | (11           | )
|                                                                                                                                                                                                                                  | Unearned compensation                                                                                                                                                          |  |        | (43                                        | ) |              |         | (43           | )
|                                                                                                                                                                                                                                  |                                                                                                                                                                                |  |        |                                            |   |              |         |              
|                                                                                                                                                                                                                                  |                                                                                                                                                                                |  |        | Total stockholders equity                 |   |              | 45,241  |               |   |             | 44,179  | 
|                                                                                                                                                                                                                                  |                                                                                                                                                                                |  |        |                                            |   |              |         |              
|                                                                                                                                                                                                                                  |                                                                                                                                                                                |  |        | Total liabilities and stockholders equity |   | $            | 110,542 |               |   | $           | 107,690 | 
|                                                                                                                                                                                                                                  |                                                                                                                                                                                |  |        |                                            |   |              |         |              

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



4



---



##### Table of Contents






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

|                                            |                                        |   |           |                                          |  |                    |           |                   |  |      |           |        |  |   |           |        |  |   |        | 
|------------------------------------------- | -------------------------------------- | - | --------- | ---------------------------------------- |  | ------------------ | --------- | ----------------- |  | ---- | --------- | ------ |  | - | --------- | ------ |  | - | ------ | 
|                                            |                                        |   |           |                                          |  | Three Months Ended |           | Nine Months Ended
|                                            |                                        |   |           |                                          |  | September 30,      |           | September 30,    
|                                            |                                        |   |           |                                          |  |                    |           |                  
|                                            |                                        |   |           |                                          |  | 2000               |           | 2001              |  | 2000 |           | 2001  
|                                            |                                        |   |           |                                          |  |                    |           |                   |  |      |           |       
|REVENUES                                    |                                        | $ | 56,026    |                                          |  | $                  | 40,828    |                   |  | $    | 154,817   |        |  | $ | 97,092    |       
|COST OF SALES                               |                                        |   | 39,589    |                                          |  |                    | 29,187    |                   |  |      | 114,279   |        |  |   | 69,258    |       
|                                            |                                        |   |           |                                          |  |                    |           |                   |  |      |           |        |  |   |           |       
|                                            |                                        |   |           | Gross profit                             |  |                    | 16,437    |                   |  |      | 11,641    |        |  |   | 40,538    |        |  |   | 27,834 | 
|                                            |                                        |   |           |                                          |  |                    |           |                   |  |      |           |        |  |   |           |       
|OPERATING EXPENSES:                         |                                        |   |           |                                          |  |                    |           |                   |  |      |           |        |  |   |           |       
|                                            | Salaries, wages and benefits           |   |           | 5,730                                    |  |                    |           | 4,152             |  |      |           | 12,877 |  |   |           | 11,428 | 
|                                            | Selling, general and administrative    |   |           | 5,233                                    |  |                    |           | 4,806             |  |      |           | 14,812 |  |   |           | 12,082 | 
|                                            | AmeriServe bankruptcy bad debt expense |   |           |                                         |  |                    |           |                  |  |      |           | 482    |  |   |           |       | 
|                                            |                                        |   |           |                                          |  |                    |           |                   |  |      |           |        |  |   |           |       
|                                            |                                        |   |           | Total operating expenses                 |  |                    | 10,963    |                   |  |      | 8,958     |        |  |   | 28,171    |        |  |   | 23,510 | 
|                                            |                                        |   |           |                                          |  |                    |           |                   |  |      |           |        |  |   |           |       
|                                            |                                        |   |           | Income from operations                   |  |                    | 5,474     |                   |  |      | 2,683     |        |  |   | 12,367    |        |  |   | 4,324  | 
|INTEREST INCOME, net                        |                                        |   | 391       |                                          |  |                    | 206       |                   |  |      | 746       |        |  |   | 1,400     |       
|                                            |                                        |   |           |                                          |  |                    |           |                   |  |      |           |        |  |   |           |       
|                                            |                                        |   |           | Income before provision for income taxes |  |                    | 5,865     |                   |  |      | 2,889     |        |  |   | 13,113    |        |  |   | 5,724  | 
|PROVISION FOR INCOME TAXES                  |                                        |   | 2,346     |                                          |  |                    | 1,088     |                   |  |      | 5,234     |        |  |   | 2,148     |       
|                                            |                                        |   |           |                                          |  |                    |           |                   |  |      |           |        |  |   |           |       
|                                            |                                        |   |           | Net income                               |  | $                  | 3,519     |                   |  | $    | 1,801     |        |  | $ | 7,879     |        |  | $ | 3,576  | 
|                                            |                                        |   |           |                                          |  |                    |           |                   |  |      |           |        |  |   |           |       
|NET INCOME                                  |                                        | $ | 3,519     |                                          |  | $                  | 1,801     |                   |  | $    | 7,879     |        |  | $ | 3,576     |       
|PREFERRED STOCK DIVIDENDS                   |                                        |   | 375       |                                          |  |                    | 375       |                   |  |      | 582       |        |  |   | 1,125     |       
|                                            |                                        |   |           |                                          |  |                    |           |                   |  |      |           |        |  |   |           |       
|NET INCOME AVAILABLE TO COMMON STOCKHOLDERS |                                        | $ | 3,144     |                                          |  | $                  | 1,426     |                   |  | $    | 7,297     |        |  | $ | 2,451     |       
|                                            |                                        |   |           |                                          |  |                    |           |                   |  |      |           |        |  |   |           |       
|BASIC NET INCOME PER SHARE                  |                                        | $ | 0.50      |                                          |  | $                  | 0.24      |                   |  | $    | 1.16      |        |  | $ | 0.41      |       
|                                            |                                        |   |           |                                          |  |                    |           |                   |  |      |           |        |  |   |           |       
|BASIC WEIGHTED AVERAGE SHARES OUTSTANDING   |                                        |   | 6,307,650 |                                          |  |                    | 5,978,322 |                   |  |      | 6,278,516 |        |  |   | 6,048,926 |       
|                                            |                                        |   |           |                                          |  |                    |           |                   |  |      |           |        |  |   |           |       
|DILUTED NET INCOME PER SHARE                |                                        | $ | 0.42      |                                          |  | $                  | 0.23      |                   |  | $    | 1.06      |        |  | $ | .39       |       
|                                            |                                        |   |           |                                          |  |                    |           |                   |  |      |           |        |  |   |           |       
|DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING |                                        |   | 8,288,741 |                                          |  |                    | 7,877,538 |                   |  |      | 7,403,427 |        |  |   | 6,223,071 |       
|                                            |                                        |   |           |                                          |  |                    |           |                   |  |      |           |        |  |   |           |       

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



5



---



##### Table of Contents






EQUITY MARKETING, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
(UNAUDITED)

|                            |                                          |   |                    |   |                   |   |       |     |      |   |       |   |  |   |       |     | 
|--------------------------- | ---------------------------------------- | - | ------------------ | - | ----------------- | - | ----- | --- | ---- | - | ----- | - |  | - | ----- | --- | 
|                            |                                          |   | Three Months Ended |   | Nine Months Ended
|                            |                                          |   | September 30,      |   | September 30,    
|                            |                                          |   |                    |   |                  
|                            |                                          |   | 2000               |   | 2001              |   | 2000  |     | 2001
|                            |                                          |   |                    |   |                   |   |       |     |     
|NET INCOME                  |                                          | $ | 3,519              |   |                   | $ | 1,801 |     |      | $ | 7,879 |   |  | $ | 3,576 |    
|OTHER COMPREHENSIVE INCOME: |                                          |   |                    |   |                   |   |       |     |      |   |       |   |  |   |       |    
|                            | Foreign currency translation adjustments |   |                    |  |                   |   |       | 377 |      |   |       |  |  |   |       | 377 | 
|                            |                                          |   |                    |   |                   |   |       |     |      |   |       |   |  |   |       |    
|COMPREHENSIVE INCOME        |                                          | $ | 3,519              |   |                   | $ | 2,178 |     |      | $ | 7,879 |   |  | $ | 3,953 |    
|                            |                                          |   |                    |   |                   |   |       |     |      |   |       |   |  |   |       |    

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



6



---



##### Table of Contents






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

|                                                              |                                                                                   |                                                                                                                 |                                                      |                                           |         |                   |         |       |         |        |        |  
|------------------------------------------------------------- | --------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ----------------------------------------- | ------- | ----------------- | ------- | ----- | ------- | ------ | ------ | -
|                                                              |                                                                                   |                                                                                                                 |                                                      |                                           |         | Nine Months Ended
|                                                              |                                                                                   |                                                                                                                 |                                                      |                                           |         | September 30,    
|                                                              |                                                                                   |                                                                                                                 |                                                      |                                           |         |                  
|                                                              |                                                                                   |                                                                                                                 |                                                      |                                           |         | 2000              |         | 2001 
|                                                              |                                                                                   |                                                                                                                 |                                                      |                                           |         |                   |         |      
|CASH FLOWS FROM OPERATING ACTIVITIES:                         |                                                                                   |                                                                                                                 |                                                      |                                           |         |                   |         |      
|                                                              | Net income                                                                        |                                                                                                                 | $                                                    | 7,879                                     |         |                   | $       | 3,576 |        
|                                                              | Adjustments to reconcile net income to net cash
provided by operating activities: |                                                                                                                 |                                                      |                                           |         |                   |         |       |        
|                                                              |                                                                                   | Depreciation and amortization                                                                                   |                                                      |                                           | 1,972   |                   |         |       | 1,770   |       
|                                                              |                                                                                   | Provision for doubtful accounts                                                                                 |                                                      |                                           | 867     |                   |         |       | 163     |       
|                                                              |                                                                                   | Loss on asset disposal                                                                                          |                                                      |                                           |        |                   |         |       | 3       |       
|                                                              |                                                                                   | Tax benefit from exercise of stock options                                                                      |                                                      |                                           | 295     |                   |         |       | 246     |       
|                                                              |                                                                                   | Changes in operating assets and liabilities:                                                                    |                                                      |                                           |         |                   |         |       |         |       
|                                                              |                                                                                   |                                                                                                                 | Increase (decrease) in cash and cash equivalents:    |                                           |         |                   |         |       |         |        |       
|                                                              |                                                                                   |                                                                                                                 |                                                      | Accounts receivable                       |         |                   | (6,525  | )     |         |        | 3,228  |  
|                                                              |                                                                                   |                                                                                                                 |                                                      | Note receivable                           |         |                   | 227     |       |         |        | 6,171  |  
|                                                              |                                                                                   |                                                                                                                 |                                                      | Inventory                                 |         |                   | (15,063 | )     |         |        | (1,409 | )
|                                                              |                                                                                   |                                                                                                                 |                                                      | Prepaid expenses and other current assets |         |                   | (586    | )     |         |        | (277   | )
|                                                              |                                                                                   |                                                                                                                 |                                                      | Other assets                              |         |                   | (425    | )     |         |        | (665   | )
|                                                              |                                                                                   |                                                                                                                 |                                                      | Accounts payable                          |         |                   | 16,123  |       |         |        | (1,291 | )
|                                                              |                                                                                   |                                                                                                                 |                                                      | Accrued liabilities                       |         |                   | 10,076  |       |         |        | (7,149 | )
|                                                              |                                                                                   |                                                                                                                 |                                                      | Long-term liabilities                     |         |                   | 105     |       |         |        | (72    | )
|                                                              |                                                                                   |                                                                                                                 |                                                      |                                           |         |                   |         |      
|                                                              |                                                                                   |                                                                                                                 | Net cash provided by operating activities            |                                           |         | 14,945            |         |       |         | 4,294  |       
|                                                              |                                                                                   |                                                                                                                 |                                                      |                                           |         |                   |         |      
|CASH FLOWS FROM INVESTING ACTIVITIES:                         |                                                                                   |                                                                                                                 |                                                      |                                           |         |                   |         |      
|                                                              |                                                                                   | Purchases of fixed assets                                                                                       |                                                      |                                           | (453    | )                 |         |       | (889    | )     
|                                                              |                                                                                   | Proceeds from sale of fixed assets                                                                              |                                                      |                                           | 21      |                   |         |       |        |       
|                                                              |                                                                                   | Proceeds from sale of marketable securities                                                                     |                                                      |                                           |        |                   |         |       | 5,100   |       
|                                                              |                                                                                   | Payment
for purchase of Logistix Limited, net of $1,747 cash acquired                                           |                                                      |                                           |        |                   |         |       | (11,408 | )     
|                                                              |                                                                                   | Payment for purchase of Contract Marketing, Inc. and U.S. Import and Promotions Co.                             |                                                      |                                           | (349    | )                 |         |       | (556    | )     
|                                                              |                                                                                   |                                                                                                                 |                                                      |                                           |         |                   |         |      
|                                                              |                                                                                   |                                                                                                                 | Net cash provided by (used in) investing activities  |                                           |         | (781              | )       |       |         | (7,753 | )     
|                                                              |                                                                                   |                                                                                                                 |                                                      |                                           |         |                   |         |      
|CASH FLOWS FROM FINANCING ACTIVITIES:                         |                                                                                   |                                                                                                                 |                                                      |                                           |         |                   |         |      
|                                                              |                                                                                   | Repayments on line of credit                                                                                    |                                                      |                                           | (12,500 | )                 |         |       |        |       
|                                                              |                                                                                   | Proceeds from issuance of preferred stock and warrants, including $1,004 of
accrued offering costs not yet paid |                                                      |                                           | 24,305  |                   |         |       |        |       
|                                                              |                                                                                   | Purchase of treasury stock                                                                                      |                                                      |                                           | (1,148  | )                 |         |       | (5,078  | )     
|                                                              |                                                                                   | Preferred stock dividends paid                                                                                  |                                                      |                                           | (582    | )                 |         |       | (1,125  | )     
|                                                              |                                                                                   | Proceeds from exercise of stock options                                                                         |                                                      |                                           | 1,108   |                   |         |       | 1,227   |       
|                                                              |                                                                                   |                                                                                                                 |                                                      |                                           |         |                   |         |      
|                                                              |                                                                                   |                                                                                                                 | Net cash provided by (used in) financing activities  |                                           |         | 11,183            |         |       |         | (4,976 | )     
|                                                              |                                                                                   |                                                                                                                 |                                                      |                                           |         |                   |         |      
|Effects
of exchange rate changes on cash and cash equivalents |                                                                                   |                                                                                                                 |                                                     |                                           |         |                   | 28      |      
|                                                              |                                                                                   |                                                                                                                 |                                                      |                                           |         |                   |         |      
|                                                              |                                                                                   |                                                                                                                 | Net (decrease) increase in cash and cash equivalents |                                           |         | 25,347            |         |       |         | (8,407 | )     
|CASH AND CASH EQUIVALENTS, beginning of period                |                                                                                   |                                                                                                                 | 7,131                                                |                                           |         |                   | 32,405  |      
|                                                              |                                                                                   |                                                                                                                 |                                                      |                                           |         |                   |         |      
|CASH AND CASH EQUIVALENTS, end of period                      |                                                                                   | $                                                                                                               | 32,478                                               |                                           |         | $                 | 23,998  |      
|                                                              |                                                                                   |                                                                                                                 |                                                      |                                           |         |                   |         |      
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:             |                                                                                   |                                                                                                                 |                                                      |                                           |         |                   |         |      
|                                                              | CASH PAID FOR:                                                                    |                                                                                                                 |                                                      |                                           |         |                   |         |       |        
|                                                              |                                                                                   | Interest                                                                                                        |                                                      | $                                         | 444     |                   |         | $     | 157     |       
|                                                              |                                                                                   |                                                                                                                 |                                                      |                                           |         |                   |         |      
|                                                              |                                                                                   | Income taxes                                                                                                    |                                                      | $                                         | 5,756   |                   |         | $     | 2,179   |       
|                                                              |                                                                                   |                                                                                                                 |                                                      |                                           |         |                   |         |      

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



7



---



##### Table of Contents






EQUITY MARKETING, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
(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 London, Paris, New York, and Hong Kong. The Company
designs and produces custom promotional programs that build sales and brand
value for retailers, restaurant chains and consumer goods companies such as
Burger King Corporation, Cadbury, The Coca-Cola Company, CVS/pharmacy,
Kelloggs, Procter & Gamble and 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.

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

In July 1998, the Company acquired substantially all of the assets of Contract
Marketing, Inc. (CMI), a Massachusetts corporation, and U.S. Import and
Promotions Co. (USI), a Florida corporation, (CMI and USI are collectively
referred to herein as USI). USI focuses primarily on promotions for oil and
gas and other retailers. In May 2001, the Company paid $556 to the former
stockholders of USI as additional cash consideration related to the Companys
purchase of USI. This amount was allocated to goodwill.

On July 31, 2001, the Company acquired 100% of the common stock of Logistix
Limited, a United Kingdom corporation, (Logistix) (see
Note 8  Acquisition).
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 licenses for Robot Wars® and Rugrats entertainment
properties, among others.

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, 2000.

Certain reclassifications have been made to the accompanying 2000 financials
statements to conform them to the current period presentation.

NET INCOME PER SHARE

Basic net income per share (EPS) is computed by dividing net income available
to common stockholders by the weighted average number of common shares
outstanding during each period. Net income available to common stockholders
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
1,296,666, and 1,481,666 shares of common stock, $.001 par value per share (the
Common Stock), as of September 30, 2000 and 2001, respectively, were excluded
from the computation of diluted EPS as they would have been anti-dilutive. For
the nine months ended



8



---



##### Table of Contents



September 30, 2001, 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 stockholders
and other disclosures required by Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings per Share:

|                                        |                                                                |                             |       |                                          |   |               |           |           |           |             |     |               |  |           |       |       |   |  |           |           |           |   |     |     |  | 
|--------------------------------------- | -------------------------------------------------------------- | --------------------------- | ----- | ---------------------------------------- | - | ------------- | --------- | --------- | --------- | ----------- | --- | ------------- |  | --------- | ----- | ----- | - |  | --------- | --------- | --------- | - | --- | --- |  | 
|                                        |                                                                |                             |       | For the Three Months Ended September 30,
|                                        |                                                                |                             |       |                                         
|                                        |                                                                |                             |       | 2000                                     |   | 2001         
|                                        |                                                                |                             |       |                                          |   |              
|                                        |                                                                |                             |       | Income                                   |   | Shares        |           | Per Share |           | Income      |     | Shares        |  | Per Share
|                                        |                                                                |                             |       | (Numerator)                              |   | (Denominator) |           | Amount    |           | (Numerator) |     | (Denominator) |  | Amount   
|                                        |                                                                |                             |       |                                          |   |               |           |           |           |             |     |               |  |          
|Basic EPS:                              |                                                                |                             |       |                                          |   |               |           |           |           |             |     |               |  |           |       |       |   |  |           |           |           |   |     |    
|Income available to common stockholders |                                                                | $                           | 3,144 |                                          |   |               | 6,307,650 |           |           | $           | .50 |               |  | $         | 1,426 |       |   |  | 5,978,322 |           |           | $ | .24 |    
|                                        |                                                                |                             |       |                                          |   |               |           |           |           |             |     |               |  |           |       |       |   |  |           |           |           |   |     |    
|Preferred stock dividends               |                                                                |                             | 375   |                                          |   |               |          |           |           |             |     |               |  |           | 375   |       |   |  |          |           |           |   |     |    
|Effect of Dilutive Securities:          |                                                                |                             |       |                                          |   |               |           |           |           |             |     |               |  |           |       |       |   |  |           |           |           |   |     |    
|                                        |                                                                | Options and warrants        |       |                                          |  |               |           |           | 286,176   |             |     |               |  |           |       |       |  |  |           |           | 204,301   |   |     |     |  | 
|                                        |                                                                | Convertible preferred stock |       |                                          |  |               |           |           | 1,694,915 |             |     |               |  |           |       |       |  |  |           |           | 1,694,915 |   |     |     |  | 
|                                        |                                                                |                             |       |                                          |   |               |           |           |           |             |     |               |  |           |       |       |   |  |           |           |           |   |     |    
|Dilutive EPS:                           |                                                                |                             |       |                                          |   |               |           |           |           |             |     |               |  |           |       |       |   |  |           |           |           |   |     |    
|                                        | Income available to common
stockholders and assumed conversion |                             | $     | 3,519                                    |   |               |           | 8,288,741 |           |             | $   | .42           |  |           | $     | 1,801 |   |  |           | 7,877,538 |           |   | $   | .23 | 
|                                        |                                                                |                             |       |                                          |   |               |           |           |           |             |     |               |  |           |       |       |   |  |           |           |           |   |     |    

|                                        |                                                                |                             |       |                                         |   |               |           |           |         |             |      |               |  |           |       |       |   |  |           |           |         |   |     |     |  | 
|--------------------------------------- | -------------------------------------------------------------- | --------------------------- | ----- | --------------------------------------- | - | ------------- | --------- | --------- | ------- | ----------- | ---- | ------------- |  | --------- | ----- | ----- | - |  | --------- | --------- | ------- | - | --- | --- |  | 
|                                        |                                                                |                             |       | For the Nine Months Ended September 30,
|                                        |                                                                |                             |       |                                        
|                                        |                                                                |                             |       | 2000                                    |   | 2001         
|                                        |                                                                |                             |       |                                         |   |              
|                                        |                                                                |                             |       | Income                                  |   | Shares        |           | Per Share |         | Income      |      | Shares        |  | Per Share
|                                        |                                                                |                             |       | (Numerator)                             |   | (Denominator) |           | Amount    |         | (Numerator) |      | (Denominator) |  | Amount   
|                                        |                                                                |                             |       |                                         |   |               |           |           |         |             |      |               |  |          
|Basic EPS:                              |                                                                |                             |       |                                         |   |               |           |           |         |             |      |               |  |           |       |       |   |  |           |           |         |   |     |    
|Income available to common stockholders |                                                                | $                           | 7,297 |                                         |   |               | 6,278,516 |           |         | $           | 1.16 |               |  | $         | 2,451 |       |   |  | 6,048,926 |           |         | $ | .41 |    
|                                        |                                                                |                             |       |                                         |   |               |           |           |         |             |      |               |  |           |       |       |   |  |           |           |         |   |     |    
|Preferred stock dividends               |                                                                |                             | 582   |                                         |   |               |          |           |         |             |      |               |  |           |      |       |   |  |          |           |         |   |     |    
|Effect of Dilutive Securities:          |                                                                |                             |       |                                         |   |               |           |           |         |             |      |               |  |           |       |       |   |  |           |           |         |   |     |    
|                                        |                                                                | Options and warrants        |       |                                         |  |               |           |           | 246,623 |             |      |               |  |           |       |       |  |  |           |           | 174,145 |   |     |     |  | 
|                                        |                                                                | Convertible preferred stock |       |                                         |  |               |           |           | 878,288 |             |      |               |  |           |       |       |  |  |           |           |        |   |     |     |  | 
|                                        |                                                                |                             |       |                                         |   |               |           |           |         |             |      |               |  |           |       |       |   |  |           |           |         |   |     |    
|Dilutive EPS:                           |                                                                |                             |       |                                         |   |               |           |           |         |             |      |               |  |           |       |       |   |  |           |           |         |   |     |    
|                                        | Income available to common
stockholders and assumed conversion |                             | $     | 7,879                                   |   |               |           | 7,403,427 |         |             | $    | 1.06          |  |           | $     | 2,451 |   |  |           | 6,223,071 |         |   | $   | .39 | 
|                                        |                                                                |                             |       |                                         |   |               |           |           |         |             |      |               |  |           |       |       |   |  |           |           |         |   |     |    

INVENTORY

Inventory consists of (a) production-in-process which primarily represents
tooling costs which are deferred and amortized over the life of the products
and (b) purchased finished goods held for sale to customers and purchased
finished goods in transit to customers distribution centers. Inventory is
stated at the lower of average cost or market. As of December 31, 2000 and
September 30, 2001, inventory consisted of the following:

|                      |  |              |        |               |  |   |        | 
|--------------------- |  | ------------ | ------ | ------------- |  | - | ------ | 
|                      |  | December 31, |        | September 30,
|                      |  | 2000         |        | 2001         
|                      |  |              |        |              
|Production-in-process |  | $            | 1,742  |               |  | $ | 5,509  | 
|Finished goods        |  |              | 10,002 |               |  |   | 9,109  | 
|                      |  |              |        |               |  |   |        | 
|                      |  | $            | 11,744 |               |  | $ | 14,618 | 
|                      |  |              |        |               |  |   |        | 

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
accounts at average exchange rates during the period.

For subsidiaries with
transactions denominated in currencies other than their functional currency,
net foreign exchange transaction gains or losses are included in determining
net income.



9



---



##### Table of Contents



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 (loss) 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 and payables. The gains and losses on the foreign
exchange forward contracts offset the transaction gains and losses on the
foreign currency receivables 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 interest and other
income, net, in the Companys Condensed Consolidated Statements of Income 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 three months in original maturity.

The fair values of derivative instruments as of September 30, 2001 and changes
in fair values during 2001 were not material. The adoption of SFAS No. 133 did
not have a material impact on the Companys operating results. During 2001,
there were no significant gains or losses recognized in earnings for hedge
ineffectiveness.

RECENT ACCOUNTING PRONOUNCEMENTS

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 which are
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 Company has adopted the
provisions of these statements for the acquisition of Logistix (see
Note 8).
Management believes that the adoption of SFAS No. 142 in 2002 will result in a
significant decrease in amortization of goodwill on the consolidated statement
of income, and is in the process of assessing other impacts from SFAS
No. 142. Total after tax amount of goodwill amortization was $109 for the
three months ending September 30, 2001 and $318 for the nine months
ending September 30, 2001.

In August 2001, the FASB issued 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 Company is currently
reviewing the requirements of SFAS 143 and has not yet determined its impact,
if any, 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 carrying amount or fair value less cost to
sell, whether reported in continuing operations or in discontinued operations.
SFAS 144 is effective for 2002 and generally is to be applied prospectively.
The Company is currently reviewing the requirements of SFAS 144 and has not yet
determined its impact, if any, on the Companys financial position and results
of operations.

NOTE 3    SHORT-TERM DEBT

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



10



---



##### Table of Contents



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 September 30, 2001 certain covenants under the
facility were amended. 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, 2001, there were no amounts
outstanding under the Facility.

Letters of credit outstanding as of December 31, 2000 and September 30, 2001
totaled $414 and $401, respectively.

NOTE 4  MANDATORY REDEEMABLE PREFERRED STOCK

On March 29, 2000, Crown EMAK Partners, LLC, a Delaware limited liability
company (Crown), invested $11,900 in the Company in exchange for preferred
stock and warrants to purchase additional preferred stock. Under the terms of
the investment, Crown acquired 11,900 shares of Series A mandatory redeemable
senior cumulative participating convertible preferred stock, par value $.001
per share, of the Company (the Series A Stock) with a conversion price of
$14.75 per share. In connection with such purchase, the Company granted to
Crown five year warrants (collectively, the Warrants) to purchase 5,712
shares of Series B senior cumulative participating convertible preferred stock,
par value $.001 per share, of the Company (the Series B Stock) at an exercise
price of $1,000 per share, and 1,428 shares of Series C senior cumulative
participating convertible preferred stock, par value $.001 per share, of the
Company (the Series C Stock) at an exercise price of $1,000 per share. The
Warrants are immediately exercisable. The conversion prices of the Series B
Stock and the Series C Stock are $16.00 and $18.00, respectively. On June 20,
2000, Crown paid an additional $13,100 to the Company in exchange for an
additional 13,100 shares of Series A Stock with a conversion price of $14.75
per share. In connection with such purchase, the Company granted to Crown
Warrants to purchase an additional 6,288 shares of Series B Stock and an
additional 1,572 shares of Series C Stock. Each share of Series A Stock is
convertible into 67.7966 shares of Common Stock, representing 1,694,915 shares
of Common Stock in aggregate. Each share of Series B Stock and Series C Stock
is convertible into 62.5 and 55.5556 shares of Common Stock, respectively,
representing 916,666 shares of Common Stock in aggregate. Also in connection
with such purchase, the Company agreed to pay Crown a commitment fee in the
aggregate amount of $1,250, paid in equal quarterly installments of $62.5
commencing on June 30, 2000 and ending on March 30, 2005. A payment of $62.5
was made for the quarter ended September 30, 2001.

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

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

Crown has voting rights equivalent to the number of shares of Common Stock into
which their preferred stock is convertible on the relevant record date. Crown
is also entitled to receive a quarterly dividend equal to 6% of the Liquidation
Preference per share outstanding, payable in cash. The dividends for the
quarter ended September 30, 2001 totaled $375 and were paid in October 2001.
These dividends were recorded in accounts payable in the accompanying
consolidated balance sheets.

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

The Series A Stock is recorded in the accompanying condensed consolidated
balance sheets at its Liquidation Preference net of issuance costs. The
issuance costs totaled approximately $1,951 and included an accrual of
approximately $700 for the present value of the commitment fee discussed above.

NOTE 5    STOCK REPURCHASE

The Companys Board of Directors has authorized up to $10,000 for the
repurchase of the Companys common stock over a twelve month period. The
repurchase program commenced on July 21, 2000 and expired July 21, 2001.
During this period, the Company purchased 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



11



---



##### Table of Contents



twelve month period. In the period from August 2, 2001 through September 30,
2001, the Company has purchased 203,400 shares at an average price of $12.60 per
share including commissions. Since initiating the overall buyback program on
July 20, 2000, the Company has purchased a total of 728,494 shares at an
average price of $12.37 per share including commissions. Purchases will be
conducted in the open market at prevailing prices, based on market conditions
when the Company is not in a quiet period. The Company may also transact
purchases effected as block trades, as well as certain negotiated, off-exchange
purchases not in the open market. This repurchase program will be funded
through a combination of working capital and bank debt.

NOTE 6    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 and produces promotional products used as
free premiums or sold in conjunction with the purchase of other items at a
retailer or quick service restaurant. 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 and geographic areas 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 inventory, receivables, goodwill and other
intangibles. Corporate assets consist of cash, certain corporate receivables,
fixed assets, and certain trademarks.



12



---



##### Table of Contents



Industry Segments

|                                                          |  |                                                         |        |          |  |           |        |       |  |   |        |   |  |   |         | 
|--------------------------------------------------------- |  | ------------------------------------------------------- | ------ | -------- |  | --------- | ------ | ----- |  | - | ------ | - |  | - | ------- | 
|                                                          |  | As of and For the Three Months Ended September 30, 2000
|                                                          |  |                                                        
|                                                          |  |                                                         |        |          |  | Consumer  |        |       |  |   |        |   |  |  
|                                                          |  | Promotions                                              |        | Products |  | Corporate |        | Total
|                                                          |  |                                                         |        |          |  |           |        |      
|Total revenues                                            |  | $                                                       | 47,652 |          |  | $         | 8,374  |       |  | $ |       |   |  | $ | 56,026  | 
|                                                          |  |                                                         |        |          |  |           |        |       |  |   |        |   |  |   |         | 
|Income (loss) before provision (benefit)
for income taxes |  | $                                                       | 10,066 |          |  | $         | 1,703  |       |  | $ | (5,904 | ) |  | $ | 5,865   | 
|Provision (benefit) for income taxes                      |  |                                                         | 4,026  |          |  |           | 681    |       |  |   | (2,361 | ) |  |   | 2,346   | 
|                                                          |  |                                                         |        |          |  |           |        |       |  |   |        |   |  |   |         | 
|Net income (loss)                                         |  | $                                                       | 6,040  |          |  | $         | 1,022  |       |  | $ | (3,543 | ) |  | $ | 3,519   | 
|                                                          |  |                                                         |        |          |  |           |        |       |  |   |        |   |  |   |         | 
|Fixed asset additions, net                                |  | $                                                       |       |          |  | $         |       |       |  | $ | 109    |   |  | $ | 109     | 
|                                                          |  |                                                         |        |          |  |           |        |       |  |   |        |   |  |   |         | 
|Depreciation and amortization                             |  | $                                                       | 183    |          |  | $         | 119    |       |  | $ | 355    |   |  | $ | 657     | 
|                                                          |  |                                                         |        |          |  |           |        |       |  |   |        |   |  |   |         | 
|Total assets                                              |  | $                                                       | 80,901 |          |  | $         | 17,480 |       |  | $ | 44,524 |   |  | $ | 142,905 | 
|                                                          |  |                                                         |        |          |  |           |        |       |  |   |        |   |  |   |         | 

|                                                          |  |                                                         |        |          |  |           |       |       |  |   |        |   |  |   |         | 
|--------------------------------------------------------- |  | ------------------------------------------------------- | ------ | -------- |  | --------- | ----- | ----- |  | - | ------ | - |  | - | ------- | 
|                                                          |  | As of and For the Three Months Ended September 30, 2001
|                                                          |  |                                                        
|                                                          |  |                                                         |        |          |  | Consumer  |       |       |  |   |        |   |  |  
|                                                          |  | Promotions                                              |        | Products |  | Corporate |       | Total
|                                                          |  |                                                         |        |          |  |           |       |      
|Total revenues                                            |  | $                                                       | 30,958 |          |  | $         | 9,870 |       |  | $ |       |   |  | $ | 40,828  | 
|                                                          |  |                                                         |        |          |  |           |       |       |  |   |        |   |  |   |         | 
|Income (loss) before provision (benefit)
for income taxes |  | $                                                       | 4,811  |          |  | $         | 1,953 |       |  | $ | (3,875 | ) |  | $ | 2,889   | 
|Provision (benefit) for income taxes                      |  |                                                         | 1,812  |          |  |           | 735   |       |  |   | (1,459 | ) |  |   | 1,088   | 
|                                                          |  |                                                         |        |          |  |           |       |       |  |   |        |   |  |   |         | 
|Net income (loss)                                         |  | $                                                       | 2,999  |          |  | $         | 1,218 |       |  | $ | (2,416 | ) |  | $ | 1,801   | 
|                                                          |  |                                                         |        |          |  |           |       |       |  |   |        |   |  |   |         | 
|Fixed asset additions, net                                |  | $                                                       |       |          |  | $         |      |       |  | $ | 306    |   |  | $ | 306     | 
|                                                          |  |                                                         |        |          |  |           |       |       |  |   |        |   |  |   |         | 
|Depreciation and amortization                             |  | $                                                       | 274    |          |  | $         |      |       |  | $ | 394    |   |  | $ | 668     | 
|                                                          |  |                                                         |        |          |  |           |       |       |  |   |        |   |  |   |         | 
|Total assets                                              |  | $                                                       | 68,202 |          |  | $         | 3,457 |       |  | $ | 36,031 |   |  | $ | 107,690 | 
|                                                          |  |                                                         |        |          |  |           |       |       |  |   |        |   |  |   |         | 

|                                                          |  |                                                        |         |          |  |           |        |       |  |   |         |   |  |   |         | 
|--------------------------------------------------------- |  | ------------------------------------------------------ | ------- | -------- |  | --------- | ------ | ----- |  | - | ------- | - |  | - | ------- | 
|                                                          |  | As of and For the Nine Months Ended September 30, 2000
|                                                          |  |                                                       
|                                                          |  |                                                        |         |          |  | Consumer  |        |       |  |   |         |   |  |  
|                                                          |  | Promotions                                             |         | Products |  | Corporate |        | Total
|                                                          |  |                                                        |         |          |  |           |        |      
|Total revenues                                            |  | $                                                      | 138,482 |          |  | $         | 16,335 |       |  | $ |        |   |  | $ | 154,817 | 
|                                                          |  |                                                        |         |          |  |           |        |       |  |   |         |   |  |   |         | 
|Income (loss) before provision (benefit)
for income taxes |  | $                                                      | 24,398  |          |  | $         | 2,470  |       |  | $ | (13,755 | ) |  | $ | 13,113  | 
|Provision (benefit) for income taxes                      |  |                                                        | 9,738   |          |  |           | 986    |       |  |   | (5,490  | ) |  |   | 5,234   | 
|                                                          |  |                                                        |         |          |  |           |        |       |  |   |         |   |  |   |         | 
|Net income (loss)                                         |  | $                                                      | 14,660  |          |  | $         | 1,484  |       |  | $ | (8,265  | ) |  | $ | 7,879   | 
|                                                          |  |                                                        |         |          |  |           |        |       |  |   |         |   |  |   |         | 
|Fixed asset additions, net                                |  | $                                                      |        |          |  | $         |       |       |  | $ | 453     |   |  | $ | 453     | 
|                                                          |  |                                                        |         |          |  |           |        |       |  |   |         |   |  |   |         | 
|Depreciation and amortization                             |  | $                                                      | 548     |          |  | $         | 356    |       |  | $ | 1,068   |   |  | $ | 1,972   | 
|                                                          |  |                                                        |         |          |  |           |        |       |  |   |         |   |  |   |         | 
|Total assets                                              |  | $                                                      | 80,901  |          |  | $         | 17,480 |       |  | $ | 44,524  |   |  | $ | 142,905 | 
|                                                          |  |                                                        |         |          |  |           |        |       |  |   |         |   |  |   |         | 

|                                                          |  |                                                        |        |          |  |           |        |       |  |   |         |   |  |   |         | 
|--------------------------------------------------------- |  | ------------------------------------------------------ | ------ | -------- |  | --------- | ------ | ----- |  | - | ------- | - |  | - | ------- | 
|                                                          |  | As of and For the Nine Months Ended September 30, 2001
|                                                          |  |                                                       
|                                                          |  |                                                        |        |          |  | Consumer  |        |       |  |   |         |   |  |  
|                                                          |  | Promotions                                             |        | Products |  | Corporate |        | Total
|                                                          |  |                                                        |        |          |  |           |        |      
|Total revenues                                            |  | $                                                      | 78,549 |          |  | $         | 18,543 |       |  | $ |        |   |  | $ | 97,092  | 
|                                                          |  |                                                        |        |          |  |           |        |       |  |   |         |   |  |   |         | 
|Income (loss) before provision (benefit)
for income taxes |  | $                                                      | 13,014 |          |  | $         | 3,063  |       |  | $ | (10,353 | ) |  | $ | 5,724   | 
|Provision (benefit) for income taxes                      |  |                                                        | 4,863  |          |  |           | 1,142  |       |  |   | (3,857  | ) |  |   | 2,148   | 
|                                                          |  |                                                        |        |          |  |           |        |       |  |   |         |   |  |   |         | 
|Net income (loss)                                         |  | $                                                      | 8,151  |          |  | $         | 1,921  |       |  | $ | (6,496  | ) |  | $ | 3,576   | 
|                                                          |  |                                                        |        |          |  |           |        |       |  |   |         |   |  |   |         | 
|Fixed asset additions, net                                |  | $                                                      |       |          |  | $         |       |       |  | $ | 889     |   |  | $ | 889     | 
|                                                          |  |                                                        |        |          |  |           |        |       |  |   |         |   |  |   |         | 
|Depreciation and amortization                             |  | $                                                      | 641    |          |  | $         |       |       |  | $ | 1,129   |   |  | $ | 1,770   | 
|                                                          |  |                                                        |        |          |  |           |        |       |  |   |         |   |  |   |         | 
|Total assets                                              |  | $                                                      | 68,202 |          |  | $         | 3,457  |       |  | $ | 36,031  |   |  | $ | 107,690 | 
|                                                          |  |                                                        |        |          |  |           |        |       |  |   |         |   |  |   |         | 



13



---



##### Table of Contents



NOTE 7  AMERISERVE BANKRUPTCY

The Company regularly extends credit to several distribution companies in
connection with its business with Burger King. One of these distribution
companies, AmeriServe, accounted for more than 50 percent of the products
purchased from the Company by the Burger King system in 1999. AmeriServe filed
a voluntary petition under Chapter 11 of the United States Bankruptcy Code on
January 31, 2000. As of January 31, 2000, AmeriServe owed the Company $28,774
in trade receivables. AmeriServe was able to secure temporary debtor in
possession funding to enable it to continue operating in the short-term post
bankruptcy.

Restaurant Services, Inc. (RSI), a not-for-profit purchasing cooperative that
has as its members Burger King franchisees and Burger King, is the exclusive
purchasing agent for the Burger King system of franchisee-owned and
company-owned restaurants located in the United States. Subsequent to January
31, 2000, the Company reached an agreement with RSI in which RSI purchased all
pre-petition trade receivables owed to the Company by AmeriServe in exchange
for a two-year non-interest-bearing note valued at $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 nine months ended September
30, 2000. This charge was offset by $607 of imputed interest income, at 9% per
annum, recorded on the note receivable for the same period in 2000. The
balance of the note receivable as of September 30, 2001 was $2,151, which was
recorded as a current asset as the note is due by December 2001. For the
quarter ended September 30, 2000 and 2001, the Company recorded $260 and $81,
respectively, of imputed interest income on the note receivable.

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

NOTE 8  ACQUISITION

On July 31, 2001, the Company acquired 100% of the common 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
each fiscal year
through July 31, 2004. Management believes that this acquisition
will provide the company with a strong presence in Europe, contribute
to the company's growth internationally, and help diversify the
company's revenue mix. The acquisition was financed through the
Companys existing cash reserves.

The 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. 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                                 |  | $ | 6,086  |  
|Property, plant and equipment                      |  |   | 440    |  
|Other
non-current assets                           |  |   | 11     |  
|Net current liabilities                            |  |   | (6,124 | )
|Non-current liabilities                            |  |   | (134   | )
|                                                   |  |   |        |  
|Estimated
fair value, net tangible assets acquired |  |   | 279    |  
|Goodwill                                           |  |   | 12,510 |  
|Other intangible assets                            |  |   | 366    |  
|                                                   |  |   |        |  
|Total Purchase Price                               |  | $ | 13,155 |  
|                                                   |  |   |        |  

The intangible assets other than goodwill associated with the Logistix
acquisition are being amortized over their estimated useful lives ranging from
1 to 3 years. The weighted average amortization period for
intangible assets excluding  goodwill is 1.3 years. There are no
assumed residual values associated with the intangible assets. None
of the goodwill is expected to be deducted for tax purposes. Goodwill
as well as other intangible assets have been allocated to the Promotions
segment (see Note 6 - Segments). 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.



14



---



##### Table of Contents



The following selected unaudited pro forma consolidated results of operations
are presented as if the acquisition 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 companies operated as one during the period. No effect has been given for
synergies, if any, that may have been realized through the acquisitions.

|                            |         |   |                    |      |                   |   |               |      |               |   |         |      |  |   |         |      | 
|--------------------------- | ------- | - | ------------------ | ---- | ----------------- | - | ------------- | ---- | ------------- | - | ------- | ---- |  | - | ------- | ---- | 
|                            |         |   | Three Months Ended |      | Nine Months Ended
|                            |         |   |                    |      |                  
|                            |         |   | September 30,      |      | September 30,     |   | September 30, |      | September 30,
|                            |         |   | 2000               |      | 2001              |   | 2000          |      | 2001         
|                            |         |   |                    |      |                   |   |               |      |              
|Revenues                    |         | $ | 59,654             |      |                   | $ | 44,627        |      |               | $ | 169,333 |      |  | $ | 108,488 |     
|Net income                  |         | $ | 3,547              |      |                   | $ | 1,516         |      |               | $ | 7,991   |      |  | $ | 2,475   |     
|Net income per common share
|                            | Basic   |   | $                  | 0.50 |                   |   | $             | 0.19 |               |   | $       | 1.18 |  |   | $       | 0.22 | 
|                            | Diluted |   | $                  | 0.43 |                   |   | $             | 0.18 |               |   | $       | 1.08 |  |   | $       | 0.22 | 

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



15



---



##### Table of Contents






|         |                                                                                      
|-------- | -------------------------------------------------------------------------------------
|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
2001 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                                                  
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Significant quarter-to-quarter variability in the Companys revenues and net income, which may result in operating
results below the expectations of securities analysts and investors
| 
| |  | Dependence on the popularity of licensed entertainment properties, which may adversely affect the Companys financial
condition and results of operations                             
| 
| |  | Dependence on the ability to license, develop and market new products, which may adversely affect the Companys
financial condition and results of operations                         
| 
| |  | Increased competitive pressure, which may affect the sales of the Companys products                                                                                                  
| 
| |  | Dependence on foreign manufacturers, which may increase the costs of the Companys products and affect the demand for
such products                                                   
| 
| |  | Concentration risk associated with accounts receivable. The Company regularly extends credit to several distribution
companies in connection with its business with Burger King.      

Financing Risks



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

Other Risks



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

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, 2000, under the
heading Managements Discussion and Analysis of Financial Condition and
Results of Operations  Cautionary Statements and Risk Factors.

ORGANIZATION AND BUSINESS

Equity Marketing, Inc., a Delaware corporation and subsidiaries (the
Company), is a leading global marketing services company based in Los
Angeles, with offices in London, Paris, New York, and Hong Kong. The Company
designs and produces custom promotional programs that build sales and brand
value for retailers, restaurant chains and consumer goods companies such as
Burger



16



---



##### Table of Contents



King Corporation, Cadbury, The Coca-Cola Company, CVS/pharmacy, Kelloggs,
Procter & Gamble and 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.

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), in exchange for 8,500
British pounds (approximately $12,144 as of July 31, 2001) in cash plus
potential additional cash consideration based upon the results of operations of
Logistix during each fiscal year through July 31, 2004. 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 licenses for Robot Wars® and
Rugrats entertainment properties, among others.

RESULTS OF OPERATIONS

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

|                           |                                        |                                          |              |      |                     |      |                     |      |      |      |       |     |      |      |       |      |      |      |  
|-------------------------- | -------------------------------------- | ---------------------------------------- | ------------ | ---- | ------------------- | ---- | ------------------- | ---- | ---- | ---- | ----- | --- | ---- | ---- | ----- | ---- | ---- | ---- | -
|                           |                                        |                                          |              |      | Three Months        |      | Nine Months        
|                           |                                        |                                          |              |      | Ended September 30, |      | Ended September 30,
|                           |                                        |                                          |              |      |                     |      |                    
|                           |                                        |                                          |              |      | 2000                |      | 2001                |      | 2000 |      | 2001 
|                           |                                        |                                          |              |      |                     |      |                     |      |      |      |      
|Revenues                   |                                        |                                          | 100.0        | %    |                     |      | 100.0               | %    |      |      | 100.0 | %   |      |      | 100.0 | %   
|Cost of sales              |                                        |                                          | 70.7         |      |                     |      | 71.5                |      |      |      | 73.8  |     |      |      | 71.3  |     
|                           |                                        |                                          |              |      |                     |      |                     |      |      |      |       |     |      |      |       |     
|                           |                                        |                                          | Gross profit |      |                     | 29.3 |                     |      |      | 28.5 |       |     |      | 26.2 |       |      |      | 28.7 |  
|                           |                                        |                                          |              |      |                     |      |                     |      |      |      |       |     |      |      |       |     
|Operating Expenses:        |                                        |                                          |              |      |                     |      |                     |      |      |      |       |     |      |      |       |     
|                           | Salaries, wages and benefits           |                                          |              | 10.2 |                     |      |                     | 10.1 |      |      |       | 8.3 |      |      |       | 11.8 |     
|                           | Selling, general and administrative    |                                          |              | 9.3  |                     |      |                     | 11.8 |      |      |       | 9.4 |      |      |       | 12.4 |     
|                           | AmeriServe bankruptcy bad debt expense |                                          |              |     |                     |      |                     |     |      |      |       | 0.5 |      |      |       |     |     
|                           |                                        |                                          |              |      |                     |      |                     |      |      |      |       |     |      |      |       |     
|                           |                                        | Total operating expenses                 |              |      | 19.5                |      |                     |      | 21.9 |      |       |     | 18.2 |      |       |      | 24.2 |     
|                           |                                        |                                          |              |      |                     |      |                     |      |      |      |       |     |      |      |       |     
|                           |                                        | Income from operations                   |              |      | 9.8                 |      |                     |      | 6.6  |      |       |     | 8.0  |      |       |      | 4.5  |     
|Interest income, net       |                                        |                                          | 0.7          |      |                     |      | 0.5                 |      |      |      | 0.5   |     |      |      | 1.4   |     
|                           |                                        |                                          |              |      |                     |      |                     |      |      |      |       |     |      |      |       |     
|                           |                                        | Income before provision for income taxes |              |      | 10.5                |      |                     |      | 7.1  |      |       |     | 8.5  |      |       |      | 5.9  |     
|Provision for income taxes |                                        |                                          | 4.2          |      |                     |      | 2.7                 |      |      |      | 3.4   |     |      |      | 2.2   |     
|                           |                                        |                                          |              |      |                     |      |                     |      |      |      |       |     |      |      |       |     
|                           |                                        |                                          | Net income   |      |                     | 6.3  | %                   |      |      | 4.4  | %     |     |      | 5.1  | %     |      |      | 3.7  | %
|                           |                                        |                                          |              |      |                     |      |                     |      |      |      |       |     |      |      |       |     



17



---



##### Table of Contents



EBITDA

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

|           |                                |   |       |                                      |   |                                     |       |       |   |      |       |        |   |   |       |        |   | 
|---------- | ------------------------------ | - | ----- | ------------------------------------ | - | ----------------------------------- | ----- | ----- | - | ---- | ----- | ------ | - | - | ----- | ------ | - | 
|           |                                |   |       | For Three Months Ended September 30, |   | For Nine Months Ended September 30,
|           |                                |   |       |                                      |   |                                    
|           |                                |   |       | 2000                                 |   | 2001                                |       | 2000  |   | 2001
|           |                                |   |       |                                      |   |                                     |       |       |   |     
|Net income |                                | $ | 3,519 |                                      |   | $                                   | 1,801 |       |   | $    | 7,879 |        |   | $ | 3,576 |       
|Add:       | Depreciation and amortization  |   |       | 657                                  |   |                                     |       | 668   |   |      |       | 1,972  |   |   |       | 1,770  |  
|           | Interest (income) expense, net |   |       | (391                                 | ) |                                     |       | (206  | ) |      |       | (746   | ) |   |       | (1,400 | )
|           | Provision for income taxes     |   |       | 2,346                                |   |                                     |       | 1,088 |   |      |       | 5,234  |   |   |       | 2,148  |  
|           |                                |   |       |                                      |   |                                     |       |       |   |      |       |        |   |   |       |        |  
|EBITDA     |                                |   | $     | 6,131                                |   |                                     | $     | 3,351 |   |      | $     | 14,339 |   |   | $     | 6,094  |  
|           |                                |   |       |                                      |   |                                     |       |       |   |      |       |        |   |   |       |        |  

THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2000
(000s omitted):

Revenues for the three months ended September 30, 2001 decreased $15,198, or
27.1%, to $40,828 from $56,026 in the comparable period in 2000. Promotions
revenues decreased $16,694, or 35.0%, to $30,958 primarily as a result of
decreased revenues associated with Burger King programs in 2001 compared to the
same period in 2000 (see below) as well as from the cancellation of a number of projects by our
client, Texaco, due to a merger with Chevron. This decrease was partially offset by
additional promotions revenue generated by Logistix. Consumer Product revenues
increased $1,496, or 17.9%, to $9,870 primarily due to revenue generated by
Robot Wars product subsequent to the acquisition of Logistix and due to
increased sales of Tub Tints® product.

Although the Company believes that its share of Burger Kings custom
promotional products business in 2001 will remain consistent with 2000 levels,
based on program awards received to date, the Company anticipates that the
dollar volume of custom promotional product purchases by Burger King from the
Company will decline in 2001 by approximately 40% to 50%. The Company believes
that sales to Burger King reached their low point for 2001 in the second
quarter. Based on its understanding of the factors contributing to the
decline, management believes it is likely that the dollar volume of purchases
by Burger King of custom promotional product in 2002 will return to levels
consistent with periods prior to 2001 and that its relationship with Burger
King and its purchasing cooperative, RSI, remains strong. The statements set
forth herein are forward looking and actual results could differ materially.

Cost of sales decreased $10,402 to $29,187 (71.5% of revenues) for the three
months ended September 30, 2001 from $39,589 (70.7% of revenues) in the
comparable period in 2000 due to the lower sales volume in 2001. The gross
margin percentage decreased to 28.5% for the three months ended September 30,
2001 from 29.3% in the comparable period for 2000. The higher margins for 2000
were due to a revenue mix that was more heavily weighted towards international
promotions which tend to carry higher gross margins.

Salaries, wages and benefits decreased $1,578, or 27.5%, to $4,152, (10.1% of
revenues) for the three months ended September 30, 2001 from $5,730 in the
comparable period for 2000. The decrease was primarily attributable to a
reduction in accruals for performance bonuses for employees in 2001. This
decrease was partially offset by the addition of employees from the acquisition
of Logistix.

Selling, general and administrative expenses
decreased $427, or 8.2%, to $4,806
(11.8% of revenues) for the three months ended September 30, 2001 from $5,233
in the comparable period for 2000. This decrease is due primarily to a decline
in warehousing and external design and development costs as a result of the
lower sales volume. This decrease is also attributable to a decline in travel
and entertainment expenses and outside services costs, partially offset by an
increase in insurance expense. The decrease was also attributable to a
reduction in amortization expense resulting from the write-off of the goodwill
and trademark in December 2000 associated with the acquisition of Corinthian
Marketing, Inc. in April 1998, partially offset by amortization expense for
intangible assets acquired in the purchase of Logistix. The decrease in
selling, general and administrative expenses was partially offset by increased
operating expenses incurred as a result of the acquisition of Logistix.
Selling, general and administrative expenses increased as a percentage of
revenues from 9.3% to 11.8% as a result of lower revenues, which decreased at a
greater rate.



18



---



##### Table of Contents



Net interest income decreased $185, or 47.3%, to $206 (0.5% of revenues) for
the three months ended September 30, 2001 from $391 in the comparable period
for 2000. This decrease was attributable to a decline in interest rates as
well as to the reduced level of cash and cash equivalents subsequent to the
acquisition of Logistix. The decrease was also attributable to a reduction in
imputed interest income on a note receivable (see AmeriServe Bankruptcy).

The effective tax rate for the three months ended
September 30, 2001 was 37.7%
compared to 40.0% for the same period in 2000. The reduction in the effective
tax rate is the result of non-taxable interest income generated in 2001 from
municipal securities.

Net income decreased $1,718, or 48.8%, to $1,801 (4.4% of revenues) from $3,519
(6.3% of revenues) in 2000 primarily due to lower gross margin earned on
decreased revenues as well as decreased net interest income and was partially
offset by a decrease in salaries, wages and benefits, selling, general and
administrative expenses, and a lower effective tax rate in 2001.

For the three months ended September 30, 2001,
EBITDA decreased $2,780, or
45.3%, to $3,351 from $6,131 in 2000 primarily due to lower gross margins
earned on decreased revenues, partially offset by the decrease in salaries,
wages and benefits and selling, general and administrative expenses in 2001.

NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2000
(000s omitted):

Revenues for the nine months ended September 30, 2001 decreased $57,725, or
37.3%, to $97,092 from $154,817 in the comparable period in 2000. Promotions
revenues decreased $59,933, or 43.3% to $78,549 primarily as a result of decreased
revenues associated with Burger King programs in 2001 compared to the same
period in 2000 (see below). Consumer Product revenues increased
$2,208, or 13.5%, to $18,543 primarily due to increased sales of
Tub Tints® product and due to revenue generated by Robot Wars
product subsequent to the acquisition of Logistix.

Although the Company believes that its share of Burger Kings custom
promotional products business in 2001 will remain consistent with 2000 levels,
based on program awards received to date, the Company anticipates that the
dollar volume of custom promotional product purchases by Burger King from the
Company will decline in 2001 by approximately 40% to 50%. The Company believes
that sales to Burger King reached their low point for 2001 in the second
quarter. Based on its understanding of the factors contributing to the
decline, management believes it is likely that the dollar volume of purchases
by Burger King of custom promotional product in 2002 will return to levels
consistent with periods prior to 2001 and that its relationship with Burger
King and its purchasing cooperative, RSI, remains strong. The statements set
forth herein are forward looking and actual results could differ materially.

Cost of sales decreased $45,021 to $69,258 (71.3% of revenues) for the nine
months ended September 30, 2001 from $114,279 (73.8% of revenues) in the
comparable period in 2000 due to the lower sales volume in 2001. The gross
margin percentage increased to 28.7% for the nine months ended September 30,
2001 from 26.2% in the comparable period for 2000. This increase was
primarily due to a shift in the Companys revenue
mix, resulting from a higher relative mix in 2001 of Consumer Product
revenues, and international promotion revenues, which tend to carry higher gross margins.

Salaries, wages and benefits decreased $1,449, or 11.3%, to $11,428, (11.8% of
revenues) for the nine months ended September 30, 2001 from $12,877 in the
comparable period in 2000. The decrease was primarily attributable to a
reduction in accruals for performance bonuses for employees in 2001. This
decrease was partially offset by the addition of employees from the acquisition
of Logistix and staffing additions resulting from the Companys growth
initiatives.

Selling, general and administrative expenses
decreased $2,730, or 18.4%, to
$12,082 (12.4% of revenues) for the nine months ended September 30, 2001 from
$14,812 in the comparable period in 2000. This decrease is due primarily to
decreases in freight out, warehousing costs and bad debt resulting from the
decrease in sales volume. This decrease is also attributable to a decline in
travel and entertainment expenses and outside services costs, partially offset
by an increase in advertising expense and insurance expense. The decrease was
also attributable to a reduction in amortization expense resulting from the
write-off of the goodwill and trademark in December 2000 associated with the
acquisition of Corinthian Marketing, Inc. in April 1998. Selling, general and
administrative expenses increased as a percentage of revenues from 9.4% to
12.4% as a result of lower revenues, which decreased at a greater rate.

The AmeriServe bad debt expense recorded in the nine months ended September 30,
2000 represents a charge resulting from the bankruptcy of AmeriServe. (see
AmeriServe Bankruptcy)

Net interest income increased $654, or 87.7%, to $1,400 (1.4% of revenues) for
the nine months ended September 30, 2001 from $746 in



19



---



##### Table of Contents



the comparable period for
2000. This increase was attributable to interest income generated by the
significantly increased level of cash and cash equivalents. This increase was
partially offset by a reduction in imputed interest income on a note receivable
(see AmeriServe Bankruptcy). The increase was also partially offset by a
decline in interest rates as well as to the reduced level of cash and cash
equivalents subsequent to the acquisition of Logistix.

The effective tax rate for the nine months ended
September 30, 2001 was 37.5%
compared to 39.9% for the same period in 2000. The reduction in the effective
tax rate is the result of non-taxable interest income generated in 2001 from
municipal securities.

Net income decreased $4,303, or 54.6%, to $3,576 (3.7% of revenues) from $7,879
(5.1% of revenues) in 2000 primarily due to lower gross margin earned on
decreased revenues and was partially offset by a decrease in both salaries and
benefits and selling, general and administrative expenses, as well as increased
net interest income, and a lower effective tax rate in 2001.

For the nine months ended September 30, 2001,
EBITDA decreased $8,245, or 57.5%, to $6,094 from $14,339 in 2000 primarily due to lower gross margins earned
on decreased revenues, partially offset by the decrease in both salaries and
benefits and selling, general and administrative expenses in 2001.

FINANCIAL CONDITION AND LIQUIDITY

The Companys financial position remained strong in the third quarter of 2001.
At September 30, 2001, the Company had no debt and its cash and cash
equivalents and marketable securities were $23,998, compared to $37,505 as of
December 31, 2000.

As of September 30, 2001, the Companys net accounts receivable decreased $855
to $29,282 from $30,137 at December 31, 2000. This decrease is a result of the
lower level of sales volume in the third quarter compared to the fourth quarter
of 2000. As of September 30, 2001, inventory increased $2,874 to $14,618 from
$11,744 from December 31, 2000. The increase in inventory is primarily a
result of both Burger King and Logistix programs which are expected to be
delivered in the fourth quarter.

As of September 30, 2001, accounts payable increased $2,109 to $20,530 from
$18,421 at December 31, 2000. This increase is associated with the increase in
inventory levels.

As of September 30, 2001, accrued liabilities decreased $3,960 to $18,015 from
$21,975 at December 31, 2000. This decrease is primarily attributable to the
payment of employee bonuses related to 2000, the payment of federal and state
income taxes related to 2000 net income, and payment of royalty and
administrative fees collected from distribution companies on behalf of
promotional customers related to the fourth quarter of 2000.

As of September 30, 2001, working capital was $37,095 compared to $52,140 at
December 31, 2000. The decrease in working capital was primarily a result of
cash used in the acquisition of Logistix and cash used to repurchase shares of
the Companys common stock (see Stock Repurchase), partially offset by cash
generated by operating activities during the nine months ended
September 30, 2001. The Company believes that its cash
from operations, cash on hand at September 30, 2001 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 entered into a credit facility (the Facility)
with Bank of America. The Facility is secured by substantially all of the
Companys assets and provides for borrowings up to $35,000 for three years
from the date of closing. Borrowing availability is determined by a formula
based on qualified assets. Interest on outstanding borrowings is based on
either a fixed rate equivalent to LIBOR plus an applicable spread of between
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 September 30, 2001 certain covenants under the facility were
amended. 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, 2001, there were no amounts outstanding under the Facility.

ISSUANCE OF PREFERRED STOCK

On March 29, 2000, Crown EMAK Partners, LLC, a Delaware limited liability
company (Crown), invested $11,900 in the Company in exchange for preferred
stock and warrants to purchase additional preferred stock. Under the terms of
the investment, Crown acquired 11,900 shares of Series A mandatory redeemable
senior cumulative participating convertible preferred stock, par value $.001
per share, of the Company (the Series A Stock) with a conversion price of
$14.75 per share. In connection with such



20



---



##### Table of Contents



purchase, the Company granted to
Crown five year warrants (collectively, the Warrants) to purchase 5,712
shares of Series B senior cumulative participating convertible preferred stock,
par value $.001 per share, of the Company (the Series B Stock) at an exercise
price of $1,000 per share, and 1,428 shares of Series C senior cumulative
participating convertible preferred stock, par value $.001 per share,
of the Company (the Series C Stock) at an exercise price of $1,000 per share.
The Warrants are immediately exercisable. The conversion prices of the Series
B Stock and the Series C Stock are $16.00 and $18.00, respectively. On June
20, 2000, Crown paid an additional $13,100 to the Company in exchange for an
additional 13,100 shares of Series A Stock with a conversion price of $14.75
per share. In connection with such purchase, the Company granted to Crown
Warrants to purchase an additional 6,288 shares of Series B Stock and an
additional 1,572 shares of Series C Stock. Each share of Series A Stock is
convertible into 67.7966 shares of Common Stock, representing 1,694,915 shares
of Common Stock in aggregate. Each share of Series B Stock and Series C Stock
is convertible into 62.5 and 55.5556 shares of Common Stock, respectively,
representing 916,666 shares of Common Stock in aggregate. Also in connection
with such purchase, the Company agreed to pay Crown a commitment fee in the
aggregate amount of $1,250, paid in equal quarterly installments of $62.5
commencing on June 30, 2000 and ending on March 30, 2005. A payment of $62.5
was made for the quarter ended September 30, 2001.

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

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

Crown has voting rights equivalent to the number of shares of Common Stock into
which their preferred stock is convertible on the relevant record date. Crown
is also entitled to receive a quarterly dividend equal to 6% of the Liquidation
Preference per share outstanding, payable in cash. The dividends for the
quarter ended September 30, 2001 totaled $375 and were paid in October 2001.
These dividends were recorded in accounts payable in the accompanying
consolidated balance sheets.

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

The Series A Stock is recorded in the accompanying condensed consolidated
balance sheets at its Liquidation Preference net of issuance costs. The
issuance costs totaled approximately $1,951 and included an accrual of
approximately $700 for the present value of the commitment fee discussed above.

STOCK REPURCHASE

The Companys Board of Directors has authorized up to $10,000 for the
repurchase of the Companys common stock over a twelve month period. The
repurchase program commenced on July 21, 2000 and expired July 21, 2001.
During this period, the Company purchased 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 September 30, 2001, the Company has
purchased 203,400 shares at an average price of $12.60 per share including
commissions. Since initiating the overall buyback program on July 20, 2000,
the Company has purchased a total of 728,494 shares at an average price of
$12.37 per share including commissions. Purchases will be conducted in the
open market at prevailing prices, based on market conditions when the Company
is not in a quiet period. The Company may also transact purchases effected as
block trades, as well as certain negotiated, off-exchange purchases not in the
open market. This repurchase program will be funded through a combination of
working capital and bank debt.

AMERISERVE BANKRUPTCY

The Company regularly extends credit to several distribution companies in
connection with its business with Burger King. One of these distribution
companies, AmeriServe, accounted for more than 50 percent of the products
purchased from the Company by the Burger King system in 1999. AmeriServe filed
a voluntary petition under Chapter 11 of the United States Bankruptcy Code on
January 31, 2000. As of January 31, 2000, AmeriServe owed the Company $28,774
in trade receivables. AmeriServe was able to secure temporary debtor in
possession funding to enable it to continue operating in the short-term post
bankruptcy.

Restaurant Services, Inc. (RSI), a not-for-profit purchasing cooperative that
has as its members Burger King franchisees and Burger King, is the exclusive
purchasing agent for the Burger King system of franchisee-owned and
company-owned restaurants located in the United States. Subsequent to January
31, 2000, the Company reached an agreement with RSI in which RSI purchased all
pre-



21



---



##### Table of Contents



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 nine months ended September 30, 2000. This
charge was offset by $607 of imputed interest income, at 9% per annum, recorded
on the note receivable for the same period in 2000. The balance of the note
receivable as of September 30, 2001 was $2,151, which was recorded as a current
asset as the note is due by December 2001. For the quarter ended September 30,
2000 and 2001, the Company recorded $260 and $81, respectively, of imputed
interest income on the note receivable.

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



22



---



##### Table of Contents






PART II. OTHER INFORMATION




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

The Annual Meeting of Stockholders of the Company was held on September 28,
2001. Proxies for the Annual Meeting were solicited pursuant to Regulation 14A
of the Securities Exchange Act of 1934, as amended, and there was no
solicitation in opposition to that of management. All of managements nominees
for directors as listed in the proxy statement were elected. At the Annual
Meeting, the following matters were approved by the Stockholders:

|   |                                                                          |  |           |           |                  |  |                  |        |  |  |  |       | 
|-- | ------------------------------------------------------------------------ |  | --------- | --------- | ---------------- |  | ---------------- | ------ |  |  |  | ----- | 
|   |                                                                          |  |           |           | Votes Against or |  | Abstentions and 
|   |                                                                          |  | Votes For |           | Withheld         |  | Broker Non-Votes
|   |                                                                          |  |           |           |                  |  |                 
|1. | Election of Directors by holders of Common Stock                         |  |           |           |                  |  |                  |        |  |  |  |       | 
|   | Stephen P. Robeck                                                        |  |           | 4,994,686 |                  |  |                  | 29,410 |  |  |  |      | 
|   | Donald A. Kurz                                                           |  |           | 4,971,841 |                  |  |                  | 52,255 |  |  |  |      | 
|   | Mitchell H. Kurz                                                         |  |           | 4,994,686 |                  |  |                  | 29,410 |  |  |  |      | 
|   | Bruce Raben                                                              |  |           | 4,994,586 |                  |  |                  | 29,510 |  |  |  |      | 
|   | Alfred E. Osborne Jr.                                                    |  |           | 4,994,386 |                  |  |                  | 29,710 |  |  |  |      | 
|   | Jonathan D. Kaufelt                                                      |  |           | 4,994,586 |                  |  |                  | 29,510 |  |  |  |      | 
|   | Sanford R. Climan                                                        |  |           | 4,994,686 |                  |  |                  | 29,410 |  |  |  |      | 
|  
|2. | Election of Directors by holders of Series A Preferred Stock             |  |           |           |                  |  |                  |        |  |  |  |       | 
|   | Peter Ackerman                                                           |  |           | 25,000    |                  |  |                  |       |  |  |  |      | 
|   | Jeffrey S. Deutschman                                                    |  |           | 25,000    |                  |  |                  |       |  |  |  |      | 
|  
|3. | Ratification of Arthur Andersen LLP as the Companys Independent Auditor |  |           | 6,705,491 |                  |  |                  | 12,270 |  |  |  | 1,250 | 




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits:



| | 10.1 |  | First Amendment to Credit Agreement by and between Bank of
America, N.A. and Equity Marketing, Inc., dated September 30,
2001.*
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------



| | (*) |  | To be filed on a
Current Report on Form 8-K.
| | --- |  | --------------------------------------------

(b)  Reports on Form 8-K:

Report on Form 8-K filed with the Securities and Exchange Commission on
August 6, 2001 (Item 5).



23



---



##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles and State of California on the 14th day of November, 2001



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



24



---



##### Table of Contents






EXHIBIT INDEX

EXHIBIT



|10.1 |  | First Amendment to Credit Agreement by and between Bank of America, N.A.
and Equity Marketing, Inc., dated September 30, 2001.*
|---- |  | -------------------------------------------------------------------------------------------------------------------------------



|(*) |  | To be filed on a Current Report on
Form 8-K.
|--- |  | --------------------------------------------



25