<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                  FORM 10-Q/A
                               (AMENDMENT No. 1)



(Mark One)

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

                For the quarterly period ended January 31, 1999

                                      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 March 16, 1999:  10,363,256 shares.

1
<PAGE>

-------------------------------------------------------------------------------
                              FOUR MEDIA COMPANY

                                     Index

                        PART I - FINANCIAL INFORMATION
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

Item 1.       Financial Statements                                                              Page
                                                                                               Number
                                                                                               ------
<S>          <C>                                                                                <C>
              Consolidated Balance Sheets as of August 2, 1998
              and January 31, 1999............................................................   4

              Consolidated Statements of Operations for the Six Months ended February 1, 1998
              and January 31, 1999 and the Three Months Ended February 1, 1998 and
              January 31, 1999................................................................   5

              Consolidated Statements of Cash Flows for the Six Months ended February 1, 1998
              and January 31, 1999............................................................   6

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

Signatures....................................................................................   8
</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
January 31, 1999, filed with the Securities and Exchange Commission on March 17,
1999 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,              January 31,
                                                                                              1998                    1999
                                                                                            ----------             -----------
<S>                                                                                        <C>                     <C>
                            ASSETS
Current assets:
 Cash..................................................................................     $    3,301             $     6,831
 Trade accounts receivable, net of allowance for doubtful accounts of $1,258 and
 $1,939 as of August 2, 1998 and January 31, 1999, respectively........................         42,809                  31,657
 Inventory.............................................................................          1,263                   1,610
 Prepaid expenses and other current assets.............................................          5,624                   5,270
                                                                                            ----------             -----------
   Total current assets................................................................         41,845                  56,520

Property, plant and equipment, net.....................................................        124,230                 153,529
Deferred taxes.........................................................................          6,572                   6,572
Long-term receivable...................................................................          3,276                   1,864
Goodwill, less accumulated amortization of $529 and $1,387 as of August 2, 1998
 and January 31, 1999, respectively....................................................         37,507                  76,387
Other assets...........................................................................          2,914                  2,014
                                                                                            ----------             ----------
   Total assets........................................................................     $  216,344             $  296,886
                                                                                            ==========             ==========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Current maturities of long-term debt and capital lease obligations....................     $   6,184              $   6,810
 Accounts payable......................................................................        10,781                 10,146
 Accrued and other liabilities.........................................................         5,980                  8,093
 Deferred income taxes.................................................................         1,615                  1,615
                                                                                            ---------              ---------
   Total current liabilities...........................................................        24,560                 26,664

Long-term debt and capital lease obligations...........................................       124,671                196,480
                                                                                            ---------              ---------
   Total liabilities...................................................................       149,231                223,144

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 January 31, 1999....            99                    104
 Additional paid-in capital............................................................        59,577                 61,702
 Foreign currency translation adjustment...............................................        (1,567)                (1,365)
 Retained earnings.....................................................................         9,002                 13,299
                                                                                            ---------              ---------
   Total stockholders' equity..........................................................        67,113                 73,742
                                                                                            ---------              ---------
   Total liabilities and stockholders' equity..........................................     $ 216,344              $ 296,886
                                                                                            =========              =========
</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>

                                                    Six Months Ended                        Three Months Ended
                                                    ----------------                        ------------------
                                              February 1,          January 31,           February 1,      January 31,
                                                1998                 1999                  1998             1999
                                             -----------          -----------           -----------       -----------
<S>                                           <C>                  <C>                  <C>               <C>
Revenues:
   Manufacturing and distribution.........       $16,607               $22,024              $8,478             $10,702
   Broadcast and syndication..............        11,084                11,068               5,502               5,737
   Television.............................        25,422                62,043              12,768              30,459
   Film and animation.....................         2,802                 2,294               1,901                 982
                                                 -------               -------             -------             -------
      Total revenues......................        55,915                97,429              28,649              47,880
                                                 -------               -------             -------             -------
Cost of services:
   Personnel..............................        22,274                36,591              11,117              18,035
   Material...............................         4,579                 5,574               2,325               2,488
   Facilities.............................         2,882                 4,958               1,466               2,486
   Other..................................         6,653                 9,888               3,740               4,613
                                                 -------               -------             -------             -------
      Total cost of services..............        36,388                57,011              18,648              27,622
                                                 -------               -------             -------             -------
        Gross profit......................        19,527                40,418              10,001              20,258
                                                 -------               -------             -------             -------
Operating expenses:
   Sales, general and administrative......         7,749                16,174               3,812               7,875
   Depreciation and amortization..........         7,983                12,691               3,967               6,335
                                                 -------               -------             -------             -------
      Total operating expenses............        15,732                28,865               7,779              14,210
                                                 -------               -------             -------             -------
        Income from operations............         3,795                11,553               2,222               6,048
Interest expense, net.....................         2,877                 7,256               1,529               3,735
                                                 -------               -------             -------             -------
        Income before income tax..........           918                 4,297                 693               2,313
Provision for income tax..................           __                    __                  __                 __
                                                 -------               -------             -------             -------
        Net income........................       $   918               $ 4,297             $   693             $ 2,313
                                                 =======               =======             =======             =======
Earnings per common share:
   Basic..................................       $  0.10               $  0.42             $  0.07             $  0.22
                                                 =======               =======             =======             =======
   Diluted................................          0.09                  0.35                0.07                0.19
                                                 =======               =======             =======             =======
Weighted average common and common
   equivalent shares outstanding:
   Basic..................................         9,553                10,283               9,553              10,363
                                                 =======               =======             =======             =======
   Diluted................................        10,183                12,362              10,196              12,450
                                                 =======               =======             =======             =======
</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>
                                                                                          Six Months Ended
                                                                                          ----------------
                                                                                    February 1,      January 31,
                                                                                       1998             1999
                                                                                       ----             ----
<S>                                                                                    <C>              <C>
Cash flows from operating activities:
 Net income.......................................................................   $    918         $  4,297
Adjustments to reconcile net income to net cash provided by operating
 activities:
  Depreciation and amortization...................................................      7,983           12,691
  Provision for doubtful accounts.................................................        219              531

Changes in operating assets and liabilities:
    Trade and long term receivables...............................................     (5,981)          (3,914)
    Inventory.....................................................................       (232)             (95)
    Prepaid expenses and other current assets.....................................       (210)           1,447
    Accounts payable..............................................................     (1,287)          (3,633)
    Accrued and other liabilities.................................................     (2,540)          (2,366)
                                                                                     --------          -------
     Net cash (used in) provided by operating activities..........................     (1,130)           8,958

Cash flows from investing activities:
 Purchases of property, plant and equipment.......................................    (16,111)         (15,299)
 Acquisition of business, net of cash acquired....................................         --          (42,991)
                                                                                     --------          -------
     Net cash used in investing activities........................................    (16,111)         (58,290)

Cash flows from financing activities:
 Repayments of mortgage loans.....................................................         --              (57)
 Proceeds from term loans.........................................................      8,100           45,000
 Repayments of term loans.........................................................         --             (375)
 Proceeds from revolving credit facility..........................................      3,928           29,000
 Proceeds from equipment notes....................................................      5,599               --
 Repayment of equipment notes and capital lease obligations.......................     (5,321)         (20,682)
                                                                                     --------          -------
     Net cash provided by financing activities....................................     12,306           52,886
Effect of exchange rate changes on cash...........................................       (427)             (24)
                                                                                     --------          -------
Net (decrease) increase in cash...................................................     (5,362)           3,530
Cash at beginning of period.......................................................      6,089            3,301
                                                                                     --------          -------
Cash at end of period.............................................................   $    727         $  6,831
                                                                                     ========         ========

Supplemental disclosure of cash flow information:
Cash paid during the period for:
  Interest........................................................................   $  2,877         $  6,286

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, Universal City, and San
Francisco, California, manages, formats and distributes content worldwide. The
broadcast and syndication division, located in Burbank and the Republic of
Singapore, assembles and distributes television programming via satellite to
viewers in the United States, Canada and Asia. The television division, located
in Burbank, Hollywood, Universal City, Santa Monica, and San Francisco,
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 (in
thousands):

<TABLE>
<CAPTION>
                                                Six Months Ended

                                      February 1, 1998   January 31, 1999
                                      ----------------   -----------------
<S>                                      <C>                <C>
Revenues........................          $103,494           $101,552
Net income......................             4,258              4,502

Earnings per common share
 Basic..........................          $   0.41           $   0.43

 Diluted........................              0.39               0.36
</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 January 31,
1999 and for the six and three month periods ended February 1, 1998 and January
31, 1999 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
January 31, 1999 and for the six and three month periods ended February 1, 1998
and January 31, 1999 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 Company's 1998 Form 10-K.

     The accompanying financial statements as of August 2, 1998 and for the six
and three months ended February 1, 1998 and January 31, 1999 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 in thousands except per share data.


<TABLE>
<CAPTION>
                             ----------------------------------  -------------------------------------------------------------
                                       Six Months Ended                                        Six Months Ended
                                       February 1, 1998                                        January 31, 1999
                             ---------------------------------   -------------------------------------------------------------
                                  Income            Shares        Per            Income              Shares          Per Share
                                (Numerator)      (Denominator)   Share         (Numerator)        (Denominator)       Amount
                                                                 Amount
                             --------------------------------    -------    -------------      -------------------------------
<S>                               <C>              <C>                            <C>                <C>               <C>

Net income.....................   $918                   -                        $4,297                    -
Basic EPS......................    918               9,553       $0 .10            4,297               10,283            $0 .42
                                                                 ======                                                  ======
Effects of Dilutive Securities:
Options and convertible
    preferred stock............      -                 630                             -                2,070
                                ------              ------                        ------               ------

Diluted EPS....................   $918              10,183        $0.09           $4,297               12,362             $0.35
                                  ====              ======        =====           ======               ======             =====

Options omitted................                        700                                              1,210
                                                       ===                                              =====
</TABLE>

8
<PAGE>

                                FOUR MEDIA COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



2.    Earnings Per Share (continued)



<TABLE>
<CAPTION>
                                            -------------------------------------------------------------------------------------
                                                    Three Months Ended                              Three Months Ended
                                                     February 1, 1998                                January 31, 1999
                                            ---------------------------------------      ----------------------------------------
                                              Income          Shares      Per Share        Income          Shares      Per Share
                                            (Numerator)    (Denominator)    Amount       (Numerator)    (Denominator)    Amount
                                            -----------    -------------  ---------      -----------    -------------   ---------
<S>                                         <C>            <C>            <C>            <C>            <C>             <C>

Net income..............................     $693                  -                      $2,313                 -
Basic EPS...............................      693              9,553         $0.07         2,313            10,363        $0.22
                                                                             =====                                        =====
Effects of Dilutive Securities:
Options and convertible preferred stock.        -                643                           -             2,087
                                             ----             ------                      ------            ------

Diluted EPS.............................     $693             10,196         $0.07        $2,313            12,450        $0.19
                                             ====             ======         =====        ======            ======        =====
Options omitted.........................                         885                                         1,210
                                                              ======                                        ======
</TABLE>

     Certain options were omitted in 1998 and 1999 because the exercise prices
(between $7 and $10) exceeded the average price during the periods.

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>
                                            --------------------------------------------------------------
                                                 Six Months Ended                  Three Months Ended
                                            ---------------------------        ---------------------------
                                             February 1,   January 31,         February 1,    January 31,
                                              1998            1999                1998           1999
                                            ---------------------------        ---------------------------
<S>                                         <C>            <C>                 <C>            <C>
Net income...............................    $ 918          $4,297              $ 693           2,313
Foreign currency translation Adjustments.     (961)            202               (476)           (305)
                                             -----          ------              -----          ------
Comprehensive income (loss)..............    $ (43)         $4,499              $ 217          $2,008
                                             =====          ======              =====           ======
</TABLE>

4.   Definitive Agreement with Warburg, Pincus Equity Partners, L.P.

     In January 1999, the Company signed a definitive agreement with Warburg,
Pincus Equity Partners, L.P. and certain affiliates ("Warburg, Pincus") in which
Warburg, Pincus will acquire 10.2 million shares of the Company's common stock,
comprised of both newly issued shares and existing shares, for approximately
$80.0 million.

Under the terms of the Agreement, Warburg, Pincus will acquire 3.1 million of
the outstanding shares currently held by Technical Services Partners, L.P.,
("TSP"), a limited partnership controlled by Steinhardt Management Company,
Inc., for approximately $23.4 million.  In addition, Warburg, Pincus will
acquire approximately 6.6 million common shares from the Company for $52.7
million and will receive a warrant to purchase 1.1 million shares with an
exercise price of $15.00 per share.  An additional 498,000 shares will be
purchased for approximately $4.0 million from the Company's founders, who have
agreed to enter into new long-term employment contracts and who will continue to
have a significant equity interest in the Company.  Concurrently with the
closing of the transaction, the holder of all outstanding shares of the
Company's preferred stock has agreed to convert all of its preferred shares into
2,250,000 shares of common stock.

     Proceeds from the new equity investment will be used to enhance the
Company's ability to serve and support customers in the process of creating and
distributing entertainment programming and to continue to make strategic
acquisitions. The transaction is subject to shareholder, regulatory, and bank
approval, and is expected to be completed during the third quarter of fiscal
1999.

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