<PAGE>

                 SECURITIES AND EXCHANGE COMMISSION SECURITIES
                            Washington, D.C. 20549
                                  FORM 10-Q/A

                               (AMENDMENT No. 2)

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

                For the quarterly period ended November 1, 1998

                                       OR

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

             For the transition period from ________ to ___________

                                  __________
                        Commission file number: 0-21943
                                  __________

                               FOUR MEDIA COMPANY
             (Exact name of Registrant as specified in its charter)

              Delaware                                  95-4599440
       (State or other jurisdiction of                (I.R.S. Employer
       incorporation or organization)                Identification No.)

                  2813 West Alameda Avenue, Burbank, CA 91505
              (Address of principal executive offices)  (Zip code)

                                  818-840-7000
              (Registrant's telephone number including area code)
                                  __________
                                 Not applicable
  (Former name, former address, and former fiscal year, if changed since last
                                    report)

     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 period 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 ______
                                  ------



     Number of shares of common stock, par value $0.01 per share, of the
registrant outstanding as of December 1, 1998: 10,363,256 shares.
<PAGE>

                               FOUR MEDIA COMPANY

                                     Index

                         PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
                                                                                                Page
Item 1.      Financial Statements                                                              Number
                                                                                              -------
<S>                                                                                           <C>
             Consolidated Balance Sheets as of August 2, 1998
             and November 1, 1998.............................................................  4

             Consolidated Statements of Operations for the
             Three Months Ended November 2, 1997 and November 1, 1998.........................  5

             Consolidated Statements of Cash Flows for the
             Three Months Ended November 2, 1997 and November 1, 1998.........................  6

             Notes to Consolidated Financial Statements.......................................  7

Signatures   .................................................................................  10
</TABLE>

                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION


                                    ITEM 1.
                              FINANCIAL STATEMENTS

Item 1 of the registrant's Quarterly Report on Form 10-Q for the quarter ended
November 1, 1998, filed with the Securities and Exchange Commission on December
16, 1998 is hereby amended and restated in its entirety as follows:

                                       3
<PAGE>

                               FOUR MEDIA COMPANY
                          CONSOLIDATED BALANCE SHEETS
                       (In thousands, except share data)


<TABLE>
<CAPTION>
                                                                                          August 2,          November 1,
                                                                                            1998                1998
                                                                                            ----                ----
                                     ASSETS
Current assets:
<S>                                                                                        <C>                <C>
 Cash...................................................................................   $  3,301           $  6,616
 Trade accounts receivable, net of allowance for doubtful accounts of $1,258 and........     31,657             44,370
 $1,784 as of August 2, 1998 and November 1, 1998, respectively
 Inventory..............................................................................      1,263              1,426
 Prepaid expenses and other current assets  ............................................      5,624              6,379
                                                                                           --------           --------
  Total current assets..................................................................     41,845             58,791

Property, plant and equipment, net......................................................    124,230            154,613
Deferred taxes..........................................................................      6,572              6,572
Long-term receivable....................................................................      3,276              2,787
Goodwill, less accumulated amortization of $529 and $919 as of August 2, 1998...........     37,507             77,053
 and November 1, 1998, respectively
Other assets............................................................................      2,914              2,220
                                                                                           --------           --------
  Total assets..........................................................................   $216,344           $302,036
                                                                                           ========           ========

                     LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Current maturities of long-term debt and capital lease obligations.....................   $  6,184           $  7,378
 Accounts payable.......................................................................     10,781             13,428
 Accrued and other liabilities..........................................................      5,980              9,772
 Deferred income taxes..................................................................      1,615              1,615
                                                                                           --------           --------
  Total current liabilities.............................................................     24,560             32,193
Long-term debt and capital lease obligations............................................    124,671            198,109
                                                                                           --------           --------
  Total liabilities.....................................................................    149,231            230,302

Commitments and contingencies

Stockholders' equity:
 Preferred stock, $.01 par value; 5,000,000 shares authorized, 150,000 Series A
  Convertible shares issued and outstanding; liquidation preference $15,000,000.........          2                  2
 Common stock, $.01 par value; 50,000,000 shares authorized, 9,876,770 shares
  issued and outstanding as of August 2, 1998 and 10,363,256 as of November 1,
  1998..................................................................................         99                104
 Additional paid-in capital  ...........................................................     59,577             61,702
 Foreign currency translation adjustment  ..............................................     (1,567)            (1,060)
 Retained earnings  ....................................................................      9,002             10,986
                                                                                           --------           --------
  Total stockholders' equity  ..........................................................     67,113             71,734
                                                                                           --------           --------
  Total liabilities and stockholders' equity  ..........................................   $216,344           $302,036
                                                                                           ========           ========
</TABLE>

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

                                       4
<PAGE>

                               FOUR MEDIA COMPANY
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (In thousands, except per share data)


<TABLE>
<CAPTION>
                                                                           Three Months Ended
                                                                      November 2,      November 1,
                                                                         1997              1998
                                                                       ---------       ----------
<S>                                                                     <C>             <C>
Revenues:
 Manufacturing and distribution...............................         $ 8,129            $11,322
 Broadcast and syndication....................................           5,582              5,331
 Television...................................................          12,654             31,631
 Film and animation...........................................             901              1,312
                                                                       -------            -------
 Total revenues...............................................          27,266             49,596
                                                                       -------            -------
Cost of services:
 Personnel....................................................          11,157             18,557
 Material.....................................................           2,254              3,086
 Facilities...................................................           1,416              2,466
 Other........................................................           2,913              5,275
                                                                       -------            -------
 Total cost of services.......................................          17,740             29,384
                                                                       -------            -------
  Gross profit................................................           9,526             20,212
                                                                       -------            -------
Operating expenses:
 Sales, general and administrative............................           3,937              8,351
 Depreciation and amortization................................           4,016              6,356
                                                                       -------            -------
 Total operating expenses.....................................           7,953             14,707
                                                                       -------            -------
  Income from operations......................................           1,573              5,505
Interest expense, net.........................................           1,348              3,521
                                                                       -------            -------
  Income before income tax....................................             225              1,984
Provision for income tax......................................              --                 --
                                                                       -------            -------
  Net income..................................................         $   225            $ 1,984
                                                                       =======            =======

Earnings per common share:
 Basic........................................................           $0.02              $0.19
                                                                       =======            =======
 Diluted......................................................            0.02               0.16
                                                                       =======            =======
Weighted average common and common equivalent shares
 outstanding:
 Basic........................................................           9,553             10,203
                                                                       =======            =======
 Diluted......................................................          10,169             12,275
                                                                       =======            =======
</TABLE>

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

                                       5
<PAGE>

                               FOUR MEDIA COMPANY
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                                   November 2,        November 1,
                                                                                      1997               1998
                                                                                ----------------   ----------------
Cash flows from operating activities:
<S>                                                                             <C>                <C>
 Net income.........................................................................  $   225           $  1,984
 Adjustments to reconcile net income to net cash provided by operating
  activities:
  Depreciation and amortization.....................................................    4,016              6,356
  Provision for doubtful accounts...................................................      141                284
  Changes in operating assets and liabilities:
    (Increase) in trade and long term receivables...................................   (5,304)            (6,129)
    (Increase) decrease in inventory................................................      (78)                90
    (Increase) decrease in prepaid expenses and other current assets................   (1,236)               241
    (Decrease) in accounts payable..................................................   (1,430)              (350)
    Increase (decrease) in accrued and other liabilities............................      974               (695)
                                                                                      -------           --------
     Net cash provided by (used in) operating activities............................   (2,692)             1,781

Cash flows from investing activities:
 Purchases of property, plant and equipment.........................................   (4,784)           (10,708)
 Acquisition of business, net of cash acquired......................................       --            (42,991)
                                                                                      -------           --------
     Net cash used in investing activities..........................................   (4,784)           (53,699)

Cash flows from financing activities:
 Repayments of mortgage loans.......................................................       --                (28)
 Proceeds from term loans...........................................................       --             45,000
 Repayments of term loans...........................................................       --               (188)
 Proceeds from revolving credit facility............................................    3,328             29,000
 Proceeds from equipment notes......................................................    1,799                 --
 Repayment of equipment notes and capital lease obligations.........................   (2,612)           (18,701)
                                                                                      -------           --------
     Net cash provided by financing activities......................................    2,515             55,083
Effect of exchange rate changes on cash.............................................     (249)               150
                                                                                      -------           --------
Net increase (decrease) in cash.....................................................   (5,210)             3,315
Cash at beginning of period.........................................................    6,089              3,301
                                                                                      -------           --------
Cash at end of period...............................................................  $   879           $  6,616
                                                                                      =======           ========

Supplemental disclosure of cash flow information:
 Cash paid during the period for:
  Interest..........................................................................  $ 1,348           $  3,245
 Non cash investing and financing activities:
  Capital lease obligations incurred................................................  $ 9,050           $     --
  Stock issued in connection with Encore acquisition................................  $    --           $  2,131
</TABLE>


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

                                       6
<PAGE>

                              FOUR MEDIA COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Business, Organization and Basis of Presentation

     Four Media Company (the "Company") is a provider of technical and creative
services to owners, producers and distributors of television programming,
feature films and other entertainment content. The Company's services integrate
and apply a variety of systems and processes to enhance the creation and
distribution of entertainment content.

     While the Company believes that it operates in one business segment, which
is providing services to the entertainment industry, the Company has organized
its activities into four divisions: manufacturing and distribution, broadcast
and syndication, television, and film and animation services. The manufacturing
and distribution division, located in Burbank and Universal City, California,
manages, formats and distributes content worldwide. The broadcast and
syndication division, located in Burbank and the Republic of Singapore,
assembles and distributes television networks and programming via satellite to
viewers in the United States, Canada and Asia. The television division, located
in Burbank, Hollywood, Universal City and Santa Monica, California, assembles
film or video principal photography into a form suitable for network,
syndicated, cable or foreign television. The film and animation division,
located in Santa Monica, digitally creates and manipulates images in high-
resolution formats for use in feature films.

     Organization. On February 2, 1998, the Company acquired all the outstanding
shares of capital stock of Visualize d/b/a Pacific Ocean Post ("POP").  The
purchase price of the transaction was $30.1 million, of which $25.4 million was
paid in cash, $1.2 million was represented by promissory notes, and $3.5 million
represented transaction costs.

     On May 4, 1998, the Company, through its wholly owned subsidiary VSDD
Acquisition Corp., acquired all of the outstanding ownership interests in
Symphonic Video LLC and Digital Doctors LLC from their parent companies Video
Symphony, Inc. and Digital Doctors, Inc. (collectively "VSI").  In this
transaction, the Company effectively acquired all of the operations of VSI.  The
purchase price of the transaction was $3.3 million, of which $3.1 million was
paid in the Company's common stock and $0.2 million represented transaction
costs.

     On September 18, 1998, the Company acquired all the outstanding shares of
capital stock of MSCL, Inc. ("Encore") and the real estate occupied by Encore.
The purchase price of the transaction was approximately $46.0 million.  This
amount includes $41.9 million paid in cash to the Encore shareholders (including
$11.2 million for the purchase of real estate), $2.0 million in estimated
transaction costs, and the issuance of 486,486 shares of Company common stock
valued at $4.38 per share.

     The following unaudited pro forma summary combines the consolidated results
of operations of the Company, POP, VSI and Encore as if the acquisitions had
occurred at the beginning of fiscal 1998 after giving effect to certain
adjustments, including amortization of goodwill, revised depreciation based on
estimated fair market values, utilization of net operating losses, revised
interest expense based on the terms of the acquisition debt and elimination of
certain acquisition related costs.  The pro forma summary does not necessarily
reflect the results of operations as they would have been if the Company and
POP, VSI and Encore had constituted a single entity during such periods:


<TABLE>
<CAPTION>
                                                                                                  (in thousands)
                                                                                     Three Months                 Three Months
                                                                                        Ended                        Ended
                                                                                   November 2, 1997              November 1, 1998
<S>                                                                                 <C>                           <C>

Revenues.............................................................................. $52,892                       $53,672
Net income............................................................................   2,936                         2,189

Earnings per common share
     Basic............................................................................ $  0.28                       $  0.21
     Diluted..........................................................................    0.27                          0.18
</TABLE>

                                       7
<PAGE>

                              FOUR MEDIA COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Business, Organization and Basis of Presentation (continued)

     Basis of Presentation.   The accompanying consolidated financial statements
of Four Media Company and its subsidiaries as of August 2, 1998 and November 1,
1998 and for the three month periods ended November 2, 1997 and November 1, 1998
have been prepared in accordance with generally accepted accounting principles
and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The
balance sheet at August 2, 1998 was derived from audited financial statements
included in the Company's Form 10-K.  The financial statements  at November 1,
1998 and for the three month periods ended November 2, 1997 and November 1, 1998
have not been audited by independent accountants, but include all adjustments
(consisting of normal recurring adjustments) which are, in management's opinion,
necessary for a fair presentation of the financial condition, results of
operations and cash flows for such periods.  However, these results are not
necessarily indicative of results for any other interim period or for the full
year.

     Certain information and footnote disclosures normally included in financial
statements in accordance with generally accepted accounting principles have been
omitted pursuant to requirements of the Securities and Exchange Commission.
Management believes that the disclosures included in the accompanying interim
financial statements and footnotes are adequate to make the information not
misleading, but should be read in conjunction with the consolidated financial
statements and notes thereto included in the Form 10-K dated August 2, 1998.

     The accompanying financial statements as of August 2, 1998 and for the
three months ended November 2, 1997 and November 1, 1998 are presented on a
consolidated basis and include the accounts of Four Media Company and its wholly
owned subsidiaries 4MC-Burbank, Inc., Digital Magic Company, Four Media Company
Asia PTE Ltd, Anderson Video Company, Co3, Visualize (dba POP), POP Animation,
VSDD Acquisition Corp. and MSCL, Inc. (dba Encore).  All material inter-company
accounts and transactions have been eliminated in consolidation.


2.   Earnings Per Share

     Effective with the period ended February 1, 1998, the Company adopted the
earnings per share calculation and disclosure requirements of SFAS No. 128,
"Earnings per Share".  The table below demonstrates the earnings per share
calculations for the periods presented:

<TABLE>
<CAPTION>
                                                               (in thousands except per share data)
                                                      Three  Months Ended                            Three Months Ended
                                                      November  2, 1997                             November 1, 1998
                                       Income          Shares        Per Share        Income            Shares          Per Share
                                     (Numerator)    (Denominator)     Amount        (Numerator)      (Denominator)       Amount
<S>                                   <C>              <C>            <C>            <C>              <C>                <C>
Net income....................         $225            --                             $1,984                 --
Basic EPS.....................          225         9,553             $0.02            1,984             10,203           $0.19
                                                    =====                                                                 =====
Effects of Dilutive Securities:
Options and convertible preferred
   stock......................           --           616                                 --              2,072
                                       ----        ------                             ------             ------
Diluted EPS...................         $225        10,169             $0.02           $1,984             12,275           $0.16
                                       ====        ======             =====           ======             ======           =====
Options omitted...............                        700                                                 1,510
                                                   ======                                                ======
</TABLE>

     Certain options were omitted in 1997 and 1998 because the exercise prices
(between $7 and $10) exceeded the average price during the periods.

                                       8
<PAGE>

                               FOUR MEDIA COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


3.   Comprehensive Income

     In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income
(SFAS No. 130").  The Company adopted SFAS No. 130 beginning in the first
quarter of fiscal 1999.  Comprehensive income is defined as all changes in
shareholders' equity, except those resulting from investments by or
distributions to shareholders.  The Company's comprehensive income is as follows
(in thousands):

<TABLE>
<CAPTION>
                                                               Three Months Ended
                                                   November 2, 1997          November 1, 1998

<S>                                                  <C>                       <C>
          Net income.............................     $ 225                      $1,984
          Foreign currency translation...........      (485)                        507
            adjustments..........................     -----                      ------
         Comprehensive income (loss).............     $(260)                     $2,491
                                                      =====                      ======
</TABLE>

                                       9
<PAGE>

                                   SIGNATURES

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

                                      FOUR MEDIA COMPANY



Date: June 24, 1999                   By:  /s/ Christopher M.R. Phillips
                                           -------------------------------------
                                           Christopher M.R. Phillips
                                           Executive Vice President and
                                           Chief Financial Officer

                                      10