SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   -----------

                                    FORM 10-Q


(Mark One)

 X   Quarterly report pursuant to Section 13 or 15(d) of the Securities
 -   Exchange Act of 1934.

For the quarterly period ended March 31, 2003 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 0-21917
                                    --------

                                    Point.360
             (Exact Name of Registrant as Specified in its Charter)

                                   California
              -----------------------------------------------------
                                   95-4272619
                  (State or Other Jurisdiction of (IRS Employer
                  Incorporation or Organization) Identification
                                     Number)

               California                                95-4272619
(State of or other jurisdiction of          (I.R.S. Employer Identification No.)
 incorporation or organization)

7083 Hollywood Boulevard, Suite 200, Hollywood, CA          90028
(Address of principal executive offices)                 (Zip Code)


                                 (323) 957-7990
              (Registrant's Telephone Number, Including Area Code)


                -----------------------------------------------
              (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
    -------      -------

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes           No    X
    -------      -------

As of April 20, 2003,  there were 9,035,482  shares of the  registrant's  common
stock outstanding.

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

ITEM 1. FINANCIAL STATEMENTS

                                    POINT.360
                           CONSOLIDATED BALANCE SHEETS

                                   ASSETS
                                                                  December 31,            March 31,
                                                                     2002                   2003
                                                                     ----                   ----
Current assets:
<S>                                                                 <C>                  <C>
Current assets:
Cash and cash equivalents                                          $   5,372,000         $   6,680,000
Accounts receivable, net of allowances for doubtful
  accounts of $801,000 and $862,000, respectively                     12,218,000            11,549,000
Income tax receivable                                                    398,000               631,000
Inventories                                                              903,000               816,000
Prepaid expenses and other current assets                                857,000             1,031,000
Deferred income taxes                                                  1,383,000             1,463,000
                                                                  --------------         -------------
Total current assets                                                  21,131,000            22,170,000

Property and equipment, net                                           19,965,000            19,162,000
Other assets, net                                                        843,000               604,000
Goodwill and other intangibles, net                                   27,212,000            27,200,000
Investment in acquisitions                                               929,000             1,206,000
                                                                  --------------         -------------
Total assets                                                      $   70,080,000         $  70,342,000
                                                                  ==============         =============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable                                                  $    3,974,000         $   4,329,000
Accrued expenses                                                       3,885,000             4,055,000
Current portion of notes payable                                       5,000,000             5,250,000
Current portion of capital lease obligations                              87,000                88,000
                                                                  --------------         -------------
Total current liabilities                                             12,946,000            13,722,000
                                                                  --------------         -------------

Deferred income taxes                                                  3,857,000             4,091,000
Notes payable, less current portion                                   18,000,000            16,499,000
Capital lease obligations, less current portion                           65,000                45,000
Derivative valuation liability                                           701,000               531,000

Shareholders' equity
Preferred stock - no par value; 5,000,000 authorized;
   none outstanding                                                            -                     -
Common stock - no par value; 50,000,000 authorized; 9,014,232
   and 9,035,482 shares issued and outstanding, respectively          17,359,000            17,385,000
Additional paid-in capital                                             1,272,000             1,182,000
Accumulated other comprehensive income                                   (90,000)              (75,000)
Retained earnings                                                     15,970,000            16,962,000
                                                                  --------------         -------------
Total shareholders' equity                                            34,511,000            35,454,000
                                                                  --------------         -------------
Total liabilities and shareholders' equity                        $   70,080,000         $  70,342,000
                                                                  ==============         =============
</TABLE>
          See accompanying notes to consolidated financial statements.

                                       2
<PAGE>
<TABLE>
<CAPTION>
                                   POINT.360
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                                  (Unaudited)
                                                                           Three Months Ended
                                                                                March 31,
                                                                                ---------
                                                                        2002                  2003
                                                                        ----                  ----
<S>                                                                 <C>                  <C>
Revenues                                                           $  16,846,000        $  17,293,000
Cost of goods sold                                                   (10,594,000)         (10,854,000)
                                                                   -------------       --------------
Gross profit                                                           6,252,000            6,439,000
Selling, general and administrative expense                           (4,607,000)          (4,382,000)
                                                                   -------------       --------------
Operating income                                                       1,645,000            2,057,000
Interest expense, net                                                   (678,000)            (521,000)
Derivative fair value change                                             176,000              145,000
                                                                   -------------       --------------
Income before income taxes                                             1,143,000            1,681,000
Provision for income taxes                                              (492,000)            (689,000)
                                                                   -------------       --------------
Net income                                                         $     651,000       $      992,000
                                                                   =============       ==============
Other comprehensive income:
Derivative fair value change                                       $     (15,000)      $      (15,000)
                                                                   -------------       --------------
Comprehensive income                                               $     636,000       $      977,000
                                                                   =============       ===============
Earnings per share:
Basic
Net income                                                         $        0.07       $         0.11
Weighted average number of shares                                      9,011,324            9,023,440
                                                                   =============       ==============
Diluted
Net income                                                         $        0.07       $         0.11
Weighted average number of shares including
  the dilutive effect of stock options                                 9,069,172            9,289,476
                                                                   =============       ==============
</TABLE>
          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>
<TABLE>
<CAPTION>
                                    POINT.360
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                                                           Three Months Ended
                                                                                March 31,
                                                                                ---------
                                                                        2002                  2003
                                                                        ----                  ----
<S>                                                                 <C>                  <C>
Cash flows from operating activities:
Net income (loss)                                                  $     651,000        $    992,000
Adjustments to reconcile net income (loss)
  to net cash provided by operating activities:
Depreciation and amortization                                          1,507,000           1,286,000
Provision for doubtful accounts                                          169,000              92,000
Deferred income taxes                                                    235,000             154,000
Other non cash item                                                     (187,000)            (41,000)
Write-off of note receivable                                             148,000                   -
Changes in assets and liabilities:
(Increase) decrease in accounts receivable                              (711,000)            577,000
(Increase) decrease in inventories                                       (13,000)             87,000
(Increase) in prepaid expenses and other current assets                 (177,000)           (174,000)
Decrease (increase) in other assets                                       29,000             (95,000)
(Decrease) increase in accounts payable                               (1,010,000)            355,000
Increase in accrued expenses                                             775,000             390,000
Increase (decrease) in income taxes                                      267,000            (233,000)
                                                                   -------------        ------------
Net cash provided by operating activities                              1,683,000           3,390,000
                                                                   -------------        ------------
Cash used in investing activities:
Capital expenditures                                                    (287,000)           (466,000)
Proceeds from sale of equipment                                           27,000                   -
Net cash paid for acquisitions                                            (5,000)           (282,000)
                                                                   -------------        ------------
Net cash used in investing activities                                   (265,000)           (748,000)
                                                                   -------------        ------------
Cash flows used in financing activities:
Repurchase of common stock                                                     -                   -
Exercise of stock options                                                      -              26,000
Repayment of notes payable                                                     -          (1,251,000)
Repayment of capital lease obligations                                   (15,000)            (19,000)
Contract settlement                                                            -             (90,000)
                                                                   -------------        ------------
Net cash used in financing activities                                    (15,000)         (1,334,000)
                                                                   -------------        ------------
Net increase in cash                                                   1,403,000           1,308,000
Cash and cash equivalents at beginning of period                       3,758,000           5,372,000
                                                                   -------------        ------------
Cash and cash equivalents at end of period                             5,161,000           6,680,000
                                                                   =============        ============
Supplemental disclosure of cash flow information -
Cash paid for:
Interest                                                                 663,000             512,000
                                                                   =============        ============
Income tax                                                         $           -        $    917,000
                                                                   =============        ============
</TABLE>
          See accompanying notes to consolidated financial statements.

                                       4
<PAGE>

                                    POINT.360

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                                 March 31, 2003

NOTE 1 - THE COMPANY

        Point.360  ("Point.360" or the "Company")  provides video and film asset
management  services to owners,  producers and distributors of entertainment and
advertising  content.  The Company  provides  the  services  necessary  to edit,
master, reformat,  archive and distribute its clients' video content,  including
television  programming,  spot  advertising  and  movie  trailers.  The  Company
provides worldwide electronic  distribution,  using fiber optics and satellites.
The  Company  delivers  commercials,  movie  trailers,  electronic  press  kits,
infomercials and syndicated programming,  by both physical and electronic means,
to  thousands  of  broadcast  outlets  worldwide.  The  Company  operates in one
reportable segment.

        The Company  seeks to  capitalize  on growth in demand for the  services
related to the  distribution  of  entertainment  content,  without  assuming the
production or ownership risk of any specific television program, feature film or
other  form  of  content.  The  primary  users  of the  Company's  services  are
entertainment   studios  and  advertising  agencies  that  generally  choose  to
outsource  such services due to the sporadic  demand of any single  customer for
such services and the fixed costs of maintaining a high-volume physical plant.

        Since  January 1, 1997,  the Company has  successfully  completed  eight
acquisitions of companies providing similar services.  The Company will continue
to  evaluate   acquisition   opportunities   to  enhance  its   operations   and
profitability. As a result of these acquisitions, the Company believes it is one
of the largest and most  diversified  providers  of technical  and  distribution
services to the entertainment and advertising industries,  and is therefore able
to offer its  customers a single source for such services at prices that reflect
the Company's scale economies.

        The accompanying  unaudited  financial  statements have been prepared in
accordance with generally accepted accounting  principles and the Securities and
Exchange  Commission's  rules and  regulations for reporting  interim  financial
statements  and  footnotes.  In  the  opinion  of  management,  all  adjustments
(consisting of normal  recurring  adjustments)  considered  necessary for a fair
presentation  have been included.  Operating  results for the three month period
ended March 31, 2003 are not  necessarily  indicative of the results that may be
expected  for the year ending  December  31, 2003.  These  financial  statements
should be read in  conjunction  with the financial  statements and related notes
contained in the Company's Form 10-K for the year ended December 31, 2002.

NOTE 2 - ACCOUNTING PRONOUNCEMENTS

        Effective  January 1, 2001, the Company  adopted  Statement of Financial
Accounting Standards No. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES"  (SFAS  No.  133).  The  standard,  as  amended,  requires  that all
derivative  instruments  be recorded  on the balance  sheet at their fair value.
Changes in the fair  value of  derivatives  are  recorded  each  period in other
income.

        In June 2001, the Financial  Accounting Standards Board issued SFAS Nos.
141 and 142, "BUSINESS COMBINATIONS" and "GOODWILL AND OTHER INTANGIBLE ASSETS,"
respectively.  SFAS No. 141 replaces Accounting Principles Board ("APB") Opinion
No.  16.  It also  provides  guidance  on  purchase  accounting  related  to the
recognition of intangible assets and accounting for negative goodwill.  SFAS No.
142  changes  the  accounting  for  goodwill  and other  intangible  assets with
indefinite  useful  lives  ("goodwill")  from  an  amortization   method  to  an
impairment-only  approach.  Under SFAS No. 142, goodwill will be tested annually
and whenever  events or  circumstances  occur  indicating that goodwill might be
impaired.  SFAS  No.  141 and  SFAS  No.  142  are  effective  for all  business
combinations  completed  after June 30,  2001.  Upon  adoption  of SFAS No. 142,
amortization of goodwill recorded for business combinations consummated prior to
July 1, 2001 ceases,  and intangible  assets acquired prior to July 1, 2001 that
do not meet the criteria for recognition under SFAS No. 141 will be reclassified
to goodwill. The Company implemented SFAS No. 142 in the first quarter of fiscal
2002 which required no goodwill impairment.  The Company also tested goodwill as
of September 30, 2002 with no impairment indicated.

                                       5
<PAGE>

        We ceased  amortization  of  approximately  $26.3  million  of  goodwill
beginning in 2002. We had recorded approximately $2.0 million of amortization on
these amounts during the year ended December 31, 2001.

        In August  2001,  the FASB issued SFAS No.  143,  "ACCOUNTING  FOR ASSET
RETIREMENT  OBLIGATIONS,"  which 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. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002.
The Company does not have asset retirement obligations and, therefore,  believes
there will be no impact upon adoption of SFAS No. 143.

        In October  2001,  the FASB  issued SFAS No.  144,  "ACCOUNTING  FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED  ASSETS,"  which is applicable to financial
statements issued for fiscal years beginning after December 15, 2001. The FASB's
new  rules on asset  impairment  supersede  SFAS No.  121,  "ACCOUNTING  FOR THE
IMPAIRMENT OF LONG-LIVED  ASSETS AND FOR  LONG-LIVED  ASSETS TO BE DISPOSED OF,"
and portions of APB Opinion No. 30,  "REPORTING THE RESULTS OF OPERATIONS." SFAS
No. 144 provides a single  accounting model for long-lived assets to be disposed
of and significantly  changes the criteria that would have to be met to classify
an asset as  held-for-sale.  Classification  as  held-for-sale  is an  important
distinction since such assets are not depreciated and are stated at the lower of
fair value and  carrying  amount.  SFAS No. 144 also  requires  expected  future
operating losses from  discontinued  operations to be displayed in the period(s)
in which the losses are  incurred,  rather  than as of the  measurement  date as
presently required. SFAS No. 144 has had no impact on the Company.

        In  April  2002,  the FASB  issued  SFAS No.  145,  "RESCISSION  OF FASB
STATEMENTS NO. 4, 44, AND 64,  AMENDMENT OF FASB STATEMENT NO. 13, AND TECHNICAL
CORRECTIONS."  SFAS  No.  145  updates,   clarifies,   and  simplifies  existing
accounting  pronouncements.  This statement  rescinds SFAS No. 4, which required
all gains and  losses  from  extinguishment  of debt to be  aggregated  and,  if
material, classified as an extraordinary item, net of related income tax effect.
As a result, the criteria in APB No. 30 will now be used to classify those gains
and losses.  SFAS No. 64 amended  SFAS No. 4 and is no longer  necessary as SFAS
No. 4 has been  rescinded.  SFAS No.  44 has been  rescinded  as it is no longer
necessary.  SFAS No.  145  amends  SFAS No. 13 to  require  that  certain  lease
modifications that have economic effects similar to sale-leaseback  transactions
be accounted for in the same manner as sale-lease  transactions.  This statement
also  makes  technical  corrections  to  existing  pronouncements.  While  those
corrections  are not substantive in nature,  in some instances,  they may change
accounting  practice.  The Company  does not expect  adoption of SFAS No. 145 to
have a  material  impact,  if any,  on its  financial  position  or  results  of
operations.

        In June  2002,  the FASB  issued  SFAS No.  146,  "ACCOUNTING  FOR COSTS
ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES." This statement addresses financial
accounting and reporting for costs  associated with exit or disposal  activities
and nullifies  Emerging  Issues Task Force ("EITF")  Issue No. 94-3,  "LIABILITY
RECOGNITION FOR CERTAIN EMPLOYEE TERMINATION BENEFITS AND OTHER COSTS TO EXIT AN
ACTIVITY (INCLUDING CERTAIN COSTS INCURRED IN A RESTRUCTURING)."  This statement
requires  that a  liability  for a cost  associated  with an  exit  or  disposal
activity be recognized when the liability is incurred.  Under EITF Issue 94-3, a
liability  for an exit  cost,  as  defined,  was  recognized  at the  date of an
entity's  commitment  to an exit plan.  The  provisions  of this  statement  are
effective for exit or disposal  activities that are initiated after December 31,
2002 with earlier application  encouraged.  The Company does not expect adoption
of SFAS No.146 to have a material impact,  if any, on its financial  position or
results of operations.

        In October 2002, the FASB issued SFAS No. 147,  "ACQUISITIONS OF CERTAIN
FINANCIAL INSTITUTIONS." SFAS No. 147 removes the requirement in SFAS No. 72 and
Interpretation 9 thereto, to recognize and amortize any excess of the fair value
of  liabilities  assumed  over  the  fair  value of  tangible  and  identifiable
intangible assets acquired as an unidentifiable intangible asset. This statement
requires that those  transactions  be accounted for in accordance  with SFAS No.
141,  "Business  Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." In addition,  this statement  amends SFAS No. 144,  "ACCOUNTING FOR THE
IMPAIRMENT  OR DISPOSAL OF  LONG-LIVED  ASSETS,"  to include  certain  financial
institution-related  intangible assets.  This statement is not applicable to the
Company.

                                       6
<PAGE>

        In  December  2002,  the FASB  issued  SFAS  No.  148,  "ACCOUNTING  FOR
STOCK-BASED  COMPENSATION-TRANSITION  AND  DISCLOSURE," an amendment of SFAS No.
123. SFAS No. 148 provides  alternative  methods of  transition  for a voluntary
change to the fair value based method of  accounting  for  stock-based  employee
compensation.  In addition,  SFAS No. 148 amends the disclosure  requirements of
SFAS No.  123 to  require  more  prominent  and  more  frequent  disclosures  in
financial  statements  about  the  effects  of  stock-based  compensation.  This
statement is effective  for financial  statements  for fiscal years ending after
December  15,  2002.  SFAS No.  148 will not have any  impact  on the  Company's
financial  statements as management does not have any intention to change to the
fair value method.

NOTE 3 - LONG TERM DEBT AND NOTES PAYABLE

        In November 1998, the Company borrowed $29,000,000 on a term loan with a
bank.  The term loan was  repaid in 2000 with the  proceeds  of a new  borrowing
arrangement with a group of banks.

        In  September  2000,  the  Company  entered  into  a  credit   agreement
("Agreement")  with a group of banks providing a revolving credit facility of up
to $45,000,000.  The purpose of the facility was to repay previously outstanding
amounts under a prior  agreement with a bank,  fund working  capital and capital
expenditures and for general  corporate  purposes  including up to $5,000,000 of
stock repurchases under the Company's  repurchase program.  Loans made under the
Agreement are  collateralized by substantially all of the Company's assets.  The
borrowing  base under the  Agreement  was  limited to 90% of  eligible  accounts
receivable,  50% of inventory and 100% of operating machinery and equipment. The
Agreement  provided that the aggregate  commitment will decline by $5,000,000 on
each December 31 beginning in 2002 until expiration of the entire  commitment on
December 31, 2005.

        The Agreement  also  contained  covenants  requiring  certain  levels of
annual earnings before interest,  taxes,  depreciation and amortization (EBITDA)
and net worth, and limited the amount of capital  expenditures.  By December 31,
2000,  the Company had borrowed  $31,024,000  under the Agreement and was not in
compliance with certain financial covenants due to adjustments recorded to prior
years' and 2000  results.  The bank waived  compliance  with the  covenants  and
amended the  Agreement in April 2001.  In  connection  with the  amendment,  the
Company paid the banks a restructuring fee of $225,000 which was expensed in the
second quarter of 2001.

        As of April 30, May 31 and June 30, 2001,  outstanding amounts under the
line of credit  exceeded the borrowing  base. On June 11 and July 20, 2001,  the
Company entered into amendment and  forbearance  agreements with the banks which
required  the Company to repay the amount of excess  borrowings  and amended the
Agreement to reduce the aggregate  commitment  from  $45,000,000  to $30,050,000
until the expiration of the commitment on December 31, 2005. In August 2001, the
Company  did not make  required  debt  payments  which  created  a breach of the
amendment and forbearance agreements. As a consequence of the breach, the amount
outstanding under the credit facility became immediately due and payable.

        In May 2002, the Company and the banks entered into a restructured  loan
agreement  changing  the  revolving  credit  facility  to a term loan,  with all
existing  defaults  being waived.  The term loan has a maturity date of December
31, 2004.  Pursuant to the  agreement,  the Company made a $2 million  principal
payment  and will make  additional  principal  payments  of $3.5  million,  $5.0
million and $18.5 million in 2002,  2003 and 2004,  respectively.  The agreement
provides for interest at the banks'  reference  rate plus 1.25% and requires the
Company to maintain certain financial  covenant ratios. The term loan is secured
by  substantially   all  of  the  Company's   assets.  In  connection  with  the
restructuring,  the  Company  wrote off  $265,000 of  deferred  financing  costs
related to the original  Agreement in the second quarter of 2002.  Certain legal
and other costs  associated with the new term loan were  capitalized and will be
amortized over the life of the loan.

        In  October  2002,  the  company  paid  the  banks  $20,000  and made an
additional  principal  payment of $500,000 in connection  with a waiver received
from the banks to allow  the  company's  former  President  and Chief  Executive
Officer to reduce his percentage ownership in the Company to below 14%.

                                       7
<PAGE>

NOTE 4 - ISSUANCE OF WARRANT AND POSSIBLE ACQUISITION

        In  July  2002,  the  Company  acquired  an  option  to  purchase  three
subsidiaries  (the  "Subsidiaries")  of Alliance  Atlantis  Communications  Inc.
("Alliance")  engaged in businesses directly related to those of the Company. In
consideration  for the  option,  the  Company  issued to  Alliance  a warrant to
acquire  500,000  shares of the Company's  common stock at $2.00 per share.  The
warrant expires five years from the closing date of the transaction,  or July 3,
2005 if the Company does not purchase the Subsidiaries. In connection therewith,
the Company  capitalized the fair value of the warrant  ($619,000  determined by
using the Black-Scholes  valuation model) and the deposit as other assets on the
balance sheet.

        In  December  2002,  the  option  was  extended  to March 10,  2003.  In
connection  with the extension,  the Company made a $300,000  deposit toward the
purchase price of the  Subsidiaries,  which deposit is  nonrefundable  except in
very  limited  circumstances.  The deposit was  capitalized  as an other  asset.
Additionally,  the Company capitalized  approximately  $411,000 of due diligence
and  other  expenses  associated  with  the  proposed  acquisition  and  related
financing during the quarter ended March 31, 2003.

        The Company did not exercise its option to purchase the  Subsidiaries by
the  March  10,  2003  termination   date.   Alliance  has  agreed  to  continue
negotiations  with the Company to complete the transaction.  If the Company does
not purchase the Subsidiaries,  the capitalized  values or costs of the warrant,
deposit and financing will be written off.

        In order to complete the  acquisition,  the Company must  refinance  its
existing  bank debt and raise  additional  funds to pay the cash  portion of the
purchase  price.  A  provision  in the  Company's  current  term loan  agreement
prohibits  acquisitions  unless approved by the banks, which permission has been
denied.

        In connection with the possible  acquisition and financing,  the Company
will incur additional legal,  accounting and other costs subsequent to March 31,
2003. If the acquisition and/or financing transactions are not consummated, such
costs will be expensed.  If the  acquisition  and financing is completed,  these
amounts will be  capitalized as costs of the  acquisition or deferred  financing
costs, respectively.

NOTE 5 - DERIVATIVE AND HEDGING ACTIVITIES

        In  November  2000,  the  Company  entered  into an  interest  rate swap
contract to  economically  hedge its floating debt rate.  Under the terms of the
contract, the notional amount is $15,000,000, whereby the Company receives LIBOR
and pays a fixed 6.5% rate of interest  for three years.  FAS 133 requires  that
the swap  contract  be  recorded  at fair  value  upon  adoption  of FAS 133 and
quarterly by recording  (i) a  cumulative-effect  type  adjustment at January 1,
2001 equal to the fair value of the swap contract on that date,  (ii) amortizing
the cumulative-effect  type adjustment quarterly over the life of the derivative
contract, and (iii) a charge or credit to income in the amount of the difference
between  the fair value of the swap  contract at the  beginning  and end of such

                                       8
<PAGE>

quarter.  The following  adjustments were recorded to reflect changes during the
quarters ended March 31, 2002 and 2003:
<TABLE>
<CAPTION>
                                                                 Increase (Decrease) Income
                                               ---------------------------------------------------------------------
                                               Derivative Fair      (Provision for) Benefit          Net Derivative
                                                Value Change           from Income Taxes           Fair Value Change
                                                ------------           -----------------           -----------------
<S>                                            <C>                     <C>                         <C>
For the quarter ended March 31, 2002:
------------------------------------
Amortization of cumulative-effect type
adjustment                                     $   (26,000)            $    11,000                 $  ( 15,000)

Difference in the derivative fair value
between the beginning and end of the year           202,000                (87,000)                    115,000
                                               ------------            -----------                 -----------
                                               $    176,000            $   (76,000)                $   100,000
                                               ============            ===========                 ===========

For the quarter ended March 31, 2003:
------------------------------------
Amortization of cumulative-effect type
adjustment                                     $   (26,000)            $    11,000                 $   (15,000)

Difference in the derivative fair value
between the beginning and end of the period        171,000                 (70,000)                    101,000
                                               -----------             -----------                 -----------
                                               $   145,000             $   (59,000)                $    86,000
                                               ===========             ===========                 ===========
</TABLE>

NOTE 6 - SETTLEMENT AGREEMENT

        In the quarter  ended March 31, 2003,  the Company  entered into a Final
Settlement  agreement  with its former Chief  Executive  Officer.  The agreement
resulted in a $90,000 reduction of the amount previously  credited to Additional
Paid-in  Capital in connection  with the October 2002  resignation  of the Chief
Executive Officer.

                                       9
<PAGE>

                                    POINT.360

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

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

Three Months Ended March 31, 2003 Compared To Three Months Ended March 31, 2002.

        REVENUES.  Revenues  increased by $0.5 million to $17.3  million for the
three-month  period  ended March 31,  2003,  compared  to $16.8  million for the
three-month period ended March 31, 2002.

        GROSS PROFIT.  Gross profit increased $0.2 million or 3% to $6.4 million
for the  three-month  period ended March 31, 2003,  compared to $6.2 million for
the  three-month  period ended March 31, 2002.  As a percent of revenues,  gross
profit was 37%.

        SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSE.  Selling,  general  and
administrative  ("SG&A") expense  decreased $0.2 million,  or 5% to $4.4 million
for the  three-month  period ended March 31, 2003,  compared to $4.6 million for
the three-month  period ended March 31, 2002. As a percentage of revenues,  SG&A
decreased to 25% for the  three-month  period ended March 31, 2003,  compared to
27% for the three-month period ended March 31, 2002.

        OPERATING  INCOME.  Operating  income  increased  $0.5  million  to $2.1
million for the  three-month  period  ended March 31,  2003,  compared to a $1.6
million for the three-month period ended March 31, 2002.

        INTEREST  EXPENSE.  Interest  expense for the  three-month  period ended
March 31, 2003 was $0.5 million, a decrease of $0.1 million from the three-month
period  ended  March 31,  2002  because  of lower debt  levels due to  principal
payments made during the last twelve months.

        DERIVATIVE FAIR VALUE CHANGE. The Company adopted SFAS 133 on January 1,
2001.  During the quarters ended March 31, 2003 and 2002,  the Company  recorded
the difference  between the derivative fair value of the Company's interest rate
hedge  contract at the beginning and end of the periods,  or $171,000  ($101,000
net of tax provision)  and $202,000  ($115,000 net of tax provision) in 2003 and
2002, respectively, and amortization of the cumulative-effect adjustment.

        INCOME  TAXES.  The  Company's  effective tax rate was 41% for the first
quarter of 2003 and 43% for the first quarter of 2002. The decrease in effective
tax rate is the result of the Company's periodic  assessment of the relationship
of book/tax timing  differences to total expected annual pre-tax results and the
elimination of goodwill expense for financial statement purposes.  The effective
tax rate percentage may change from period to period depending on the difference
in the timing of the  recognition  of  revenues  and  expenses  for book and tax
purposes.

        NET INCOME.  The net income for the  three-month  period ended March 31,
2003 was $1.0  million,  an increase of $0.4  million  compared to net income of
$0.6 million for the three-month period ended March 31, 2002.

LIQUIDITY AND CAPITAL RESOURCES

        This  discussion  should  be read in  conjunction  with the notes to the
financial  statements and the corresponding  information more fully described in
the Company's Form 10-K for the year ended December 31, 2002.

        On March 31, 2003,  the Company's cash and cash  equivalents  aggregated
$6.7 million.  The Company's operating  activities provided cash of $3.4 million
for the three months ended March 31, 2003.

        The  Company's  investing  activities  used cash of $0.7  million in the
three months ended March 31, 2003. The Company spent  approximately $0.5 million
for the addition and replacement of capital equipment and management information
systems  which we believe is a reasonable  capital  expenditure  level given the
current revenue volume.  In the prior year, the Company's  capital  expenditures
were $0.3 million.  The  Company's  business is equipment  intensive,  requiring
periodic  expenditures  of cash or the incurrence of additional  debt to acquire
additional  fixed  assets in order to  increase  capacity  or  replace  existing
equipment. We estimate that capital expenditures will be $3.5 to $4.5 million in
2003.

                                       10
<PAGE>

        In September  2000,  the Company signed a $45 million  revolving  credit
facility  agented by Union Bank of California.  The amount of the commitment was
reduced to $30 million in July 2001.  The  facility  provided  the Company  with
funding  for capital  expenditures,  working  capital  needs and support for its
acquisition strategies.

        Due to lower  sales  levels in the second and third  quarters  of Fiscal
2001, the borrowing base (eligible accounts receivable,  inventory and machinery
and  equipment)  securing  the  Company's  bank line of credit was less than the
amount  borrowed  under the line.  Consequently,  the  Company  was in breach of
certain  covenants.  On June 11 and on July 20, 2001,  the Company  entered into
amendment  and  forbearance  agreements  with the banks and  agreed to repay the
overdraft  amount in weekly  increments.  In August 2001,  the Company failed to
meet the repayment schedule and again entered discussions with the banks.

        In May 2002, the Company and the banks entered into a restructured  loan
agreement  changing  the  revolving  credit  facility  to a term loan,  with all
existing  defaults  being waived.  The term loan has a maturity date of December
31, 2004. Pursuant to the agreement,  the Company made $5.5 million in scheduled
principal  payments in 2002 and will make additional  principal payments of $5.0
million and $18.0 million in 2003 and 2004, respectively. The agreement provides
for interest at the banks' reference rate plus 1.25% and requires the Company to
maintain  certain  financial  covenant  ratios.  The  term  loan is  secured  by
substantially all of the Company's assets.

        In July 2002, we entered into an arrangement regarding earn-out payments
related to the July 1997 acquisition of MultiMedia  Services,  Inc. The original
acquisition agreement would have required payments of approximately $1.5 million
during the next two years assuming minimum earnings levels are met, which levels
have been achieved in the past. In exchange for a one-time $1.1 million  payment
made in July 2002, we were relieved of all future earn-out obligations under the
purchase agreement.

        In  October  2002,  the  company  paid  the  banks  $20,000  and made an
additional  principal  payment of $500,000 in connection  with a waiver received
from the banks to allow  the  company's  former  President  and Chief  Executive
Officer  to reduce  his  percentage  ownership  in the  Company to below the 14%
required in the restructured loan agreement.

        During the past year, the Company has generated  sufficient cash to meet
operating,  capital expenditure and debt service needs and obligations,  as well
as to provide sufficient cash reserves to address contingencies.  When preparing
estimates   of  future  cash  flows,   we   consider   historical   performance,
technological  changes,  market factors,  industry trends and other criteria. In
our  opinion,  the  Company  will  continue to be able to fund its needs for the
foreseeable future.

        The Company,  from time to time, considers the acquisition of businesses
complementary to its current operations. Consummation of any such acquisition or
other  expansion of the business  conducted by the Company may be subject to the
Company securing  additional  financing.  For example,  the Company is currently
negotiating to acquire three  subsidiaries of Alliance  Atlantis  Communications
Inc.  ("Alliance").  If we acquire the entities, we will have to finance a large
portion of the purchase  price and refinance our existing $22 million term loan.
The cost of new  financing is expected to be higher than our existing term loan.
Future  earnings  and cash flow may be  negatively  impacted  to the  extent the
acquired  entities do not generate  sufficient  earnings and cash flow to offset
the increased costs.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

        Our  discussion  and analysis of our financial  condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues  and  expenses,   and  related  disclosure  of  contingent  assets  and
liabilities.  On an on-going  basis,  we evaluate our estimates  and  judgments,
including  those  related to  allowance  for  doubtful  accounts,  valuation  of
long-lived  assets,  and accounting  for income taxes.  We base our estimates on

                                       11
<PAGE>

historical  experience  and on various other  assumptions  that we believe to be
reasonable  under the  circumstances,  the  results  of which form the basis for
making  judgments about the carrying  values of assets and liabilities  that are
not readily  apparent from other  sources.  Actual results may differ from these
estimates  under different  assumptions or conditions.  We believe the following
critical accounting policies affect our more significant judgments and estimates
used in the preparation of our consolidated financial statements.

        Critical  accounting  policies  are  those  that  are  important  to the
portrayal of the Company's  financial  condition and results,  and which require
management to make difficult,  subjective  and/or complex  judgements.  Critical
accounting  policies  cover  accounting  matters that are  inherently  uncertain
because the future resolution of such matters is unknown.  We have made critical
estimates in the following areas:

        ALLOWANCE  FOR DOUBTFUL  ACCOUNTS.  We are  required to make  judgments,
based on historical experience and future expectations, as to the collectibility
of accounts  receivable.  The allowances for doubtful accounts and sales returns
represent  allowances for customer trade accounts  receivable that are estimated
to be partially or entirely  uncollectible.  These allowances are used to reduce
gross trade receivables to their net realizable value. The Company records these
allowances  based on estimates  related to the  following  factors:  i) customer
specific  allowances;  ii)  amounts  based  upon an aging  schedule  and iii) an
estimated amount, based on the Company's historical  experience,  for issues not
yet identified.

        VALUATION  OF  LONG-LIVED  AND  INTANGIBLE  ASSETS.  Long-lived  assets,
consisting primarily of property, plant and equipment and intangibles comprise a
significant portion of the Company's total assets.  Long-lived assets, including
goodwill and intangibles are reviewed for impairment  whenever events or changes
in  circumstances  have  indicated  that  their  carrying  amounts  may  not  be
recoverable.  Recoverability  of  assets  is  measured  by a  comparison  of the
carrying amount of an asset to future net cash flows expected to be generated by
that  asset.  The cash  flow  projections  are based on  historical  experience,
management's view of growth rates within the industry and the anticipated future
economic environment.

        Factors we consider  important which could trigger an impairment  review
include the following:

   o    significant   underperformance   relative  to  expected   historical  or
        projected future operating results;
   o    significant  changes in the manner of our use of the acquired  assets or
        the strategy for our overall business;
   o    significant negative industry or economic trends;
   o    significant decline in our stock price for a sustained period; and
   o    our market capitalization relative to net book value.

        When we determine  that the carrying  value of  intangibles,  long-lived
assets and related goodwill and enterprise level goodwill may not be recoverable
based upon the existence of one or more of the above  indicators of  impairment,
we measure any impairment based on a projected discounted cash flow method using
a discount rate  determined by our management to be  commensurate  with the risk
inherent  in our current  business  model.  Net  intangible  assets,  long-lived
assets, and goodwill amounted to $47.6 million as of March 31, 2003.

        We ceased  amortization  of  approximately  $26.3  million  of  goodwill
beginning in 2002. We had recorded approximately $2.0 million of amortization on
these amounts during the year ended December 31, 2001.

        ACCOUNTING  FOR INCOME  TAXES.  As part of the process of preparing  our
consolidated financial statements,  we are required to estimate our income taxes
in each of the  jurisdictions  in which we  operate.  This  process  involves us
estimating  our actual current tax exposure  together with  assessing  temporary
differences  resulting  from  differing  treatment  of items,  such as  deferred
revenue, for tax and accounting  purposes.  These differences result in deferred
tax assets and liabilities,  which are included within our consolidated  balance
sheet.  We must then assess the likelihood  that our deferred tax assets will be
recovered  from future taxable income and to the extent we believe that recovery
is not  likely,  we must  establish  a  valuation  allowance.  To the  extent we
establish a valuation  allowance or increase this allowance in a period, we must
include an expense within the tax provision in the statement of operations.

                                       12
<PAGE>

        Significant management judgment is required in determining our provision
for income  taxes,  our deferred tax assets and  liabilities  and any  valuation
allowance  recorded  against our net deferred  tax assets.  The net deferred tax
liability  as of March 31, 2003 was $2.6  million.  The Company did not record a
valuation allowance against its deferred tax assets as of March 31, 2003.

RECENT ACCOUNTING PRONOUNCEMENTS

        Effective  January  1, 2001,  the  Company  adopted  SFAS No.  133.  The
standard,  as amended,  requires that all derivative  instruments be recorded on
the balance sheet at their fair value.  Changes in the fair value of derivatives
are recorded each period in other income.

        In June 2001, the Financial  Accounting Standards Board issued SFAS Nos.
141 and 142, "BUSINESS COMBINATIONS" and "GOODWILL AND OTHER INTANGIBLE ASSETS,"
respectively.  SFAS No. 141 replaces Accounting Principles Board ("APB") Opinion
No.  16.  It also  provides  guidance  on  purchase  accounting  related  to the
recognition of intangible assets and accounting for negative goodwill.  SFAS No.
142  changes  the  accounting  for  goodwill  and other  intangible  assets with
indefinite  useful  lives  ("goodwill")  from  an  amortization   method  to  an
impairment-only  approach.  Under SFAS No. 142, goodwill will be tested annually
and whenever  events or  circumstances  occur  indicating that goodwill might be
impaired.  SFAS  No.  141 and  SFAS  No.  142  are  effective  for all  business
combinations  completed  after June 30,  2001.  Upon  adoption  of SFAS No. 142,
amortization of goodwill recorded for business combinations consummated prior to
July 1, 2001 ceases,  and intangible  assets acquired prior to July 1, 2001 that
do not meet the criteria for recognition under SFAS No. 141 will be reclassified
to goodwill. The Company implemented SFAS No. 142 in the first quarter of fiscal
2002 which required no goodwill impairment.  The Company also tested goodwill as
of September 30, 2002 with no impairment indicated.

        We ceased  amortization  of  approximately  $26.3  million  of  goodwill
beginning in 2002. We had recorded approximately $2.0 million of amortization on
these amounts during the year ended December 31, 2001.

        In August  2001,  the FASB issued SFAS No.  143,  "ACCOUNTING  FOR ASSET
RETIREMENT  OBLIGATIONS,"  which 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. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002.
The Company does not have asset retirement obligations and, therefore,  believes
there will be no impact upon adoption of SFAS No. 143.

        In October  2001,  the FASB  issued SFAS No.  144,  "ACCOUNTING  FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED  ASSETS,"  which is applicable to financial
statements issued for fiscal years beginning after December 15, 2001. The FASB's
new  rules on asset  impairment  supersede  SFAS No.  121,  "ACCOUNTING  FOR THE
IMPAIRMENT OF LONG-LIVED  ASSETS AND FOR  LONG-LIVED  ASSETS TO BE DISPOSED OF,"
and portions of APB Opinion No. 30,  "REPORTING THE RESULTS OF OPERATIONS." SFAS
No. 144 provides a single  accounting model for long-lived assets to be disposed
of and significantly  changes the criteria that would have to be met to classify
an asset as  held-for-sale.  Classification  as  held-for-sale  is an  important
distinction since such assets are not depreciated and are stated at the lower of
fair value and  carrying  amount.  SFAS No. 144 also  requires  expected  future
operating losses from  discontinued  operations to be displayed in the period(s)
in which the losses are  incurred,  rather  than as of the  measurement  date as
presently required. SFAS No. 144 has had no impact on the Company.

        In  April  2002,  the FASB  issued  SFAS No.  145,  "RESCISSION  OF FASB
STATEMENTS NO. 4, 44, AND 64,  AMENDMENT OF FASB STATEMENT NO. 13, AND TECHNICAL
CORRECTIONS."  SFAS  No.  145  updates,   clarifies,   and  simplifies  existing
accounting  pronouncements.  This statement  rescinds SFAS No. 4, which required
all gains and  losses  from  extinguishment  of debt to be  aggregated  and,  if
material, classified as an extraordinary item, net of related income tax effect.
As a result, the criteria in APB No. 30 will now be used to classify those gains
and losses.  SFAS No. 64 amended  SFAS No. 4 and is no longer  necessary as SFAS
No. 4 has been  rescinded.  SFAS No.  44 has been  rescinded  as it is no longer
necessary.  SFAS No.  145  amends  SFAS No. 13 to  require  that  certain  lease
modifications that have economic effects similar to sale-leaseback  transactions
be accounted for in the same manner as sale-lease  transactions.  This statement
also  makes  technical  corrections  to  existing  pronouncements.  While  those
corrections  are not substantive in nature,  in some instances,  they may change
accounting  practice.  The Company  does not expect  adoption of SFAS No. 145 to
have a  material  impact,  if any,  on its  financial  position  or  results  of
operations.

                                       13
<PAGE>

        In June  2002,  the FASB  issued  SFAS No.  146,  "ACCOUNTING  FOR COSTS
ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES." This statement addresses financial
accounting and reporting for costs  associated with exit or disposal  activities
and nullifies  Emerging  Issues Task Force ("EITF")  Issue No. 94-3,  "LIABILITY
RECOGNITION FOR CERTAIN EMPLOYEE TERMINATION BENEFITS AND OTHER COSTS TO EXIT AN
ACTIVITY (INCLUDING CERTAIN COSTS INCURRED IN A RESTRUCTURING)."  This statement
requires  that a  liability  for a cost  associated  with an  exit  or  disposal
activity be recognized when the liability is incurred.  Under EITF Issue 94-3, a
liability  for an exit  cost,  as  defined,  was  recognized  at the  date of an
entity's  commitment  to an exit plan.  The  provisions  of this  statement  are
effective for exit or disposal  activities that are initiated after December 31,
2002 with earlier application  encouraged.  The Company does not expect adoption
of SFAS No.146 to have a material impact,  if any, on its financial  position or
results of operations.

        In October 2002, the FASB issued SFAS No. 147,  "ACQUISITIONS OF CERTAIN
FINANCIAL INSTITUTIONS." SFAS No. 147 removes the requirement in SFAS No. 72 and
Interpretation 9 thereto, to recognize and amortize any excess of the fair value
of  liabilities  assumed  over  the  fair  value of  tangible  and  identifiable
intangible assets acquired as an unidentifiable intangible asset. This statement
requires that those  transactions  be accounted for in accordance  with SFAS No.
141,  "BUSINESS  COMBINATIONS," and SFAS No. 142, "GOODWILL AND OTHER INTANGIBLE
ASSETS." In addition,  this statement  amends SFAS No. 144,  "ACCOUNTING FOR THE
IMPAIRMENT  OR DISPOSAL OF  LONG-LIVED  ASSETS,"  to include  certain  financial
institution-related  intangible assets.  This statement is not applicable to the
Company.

        In  December  2002,  the FASB  issued  SFAS  No.  148,  "ACCOUNTING  FOR
STOCK-BASED  COMPENSATION-TRANSITION  AND  DISCLOSURE," an amendment of SFAS No.
123. SFAS No. 148 provides  alternative  methods of  transition  for a voluntary
change to the fair value based method of  accounting  for  stock-based  employee
compensation.  In addition,  SFAS No. 148 amends the disclosure  requirements of
SFAS No.  123 to  require  more  prominent  and  more  frequent  disclosures  in
financial  statements  about  the  effects  of  stock-based  compensation.  This
statement is effective  for financial  statements  for fiscal years ending after
December  15,  2002.  SFAS No.  148 will not have any  impact  on the  Company's
financial  statements as management does not have any intention to change to the
fair value method.

CAUTIONARY STATEMENTS AND RISK FACTORS

        In our  capacity  as Company  management,  we may from time to time make
written  or  oral  forward-looking  statements  with  respect  to our  long-term
objectives  or  expectations  which  may be  included  in our  filings  with the
Securities and Exchange  Commission,  reports to  stockholders  and  information
provided in our web site.

        The words or phrases "will likely," "are expected to," "is anticipated,"
"is  predicted,"   "forecast,"   "estimate,"  "project,"  "plans  to  continue,"
"believes," or similar expressions identify "forward-looking  statements" within
the  meaning of the  Private  Securities  Litigation  Reform  Act of 1995.  Such
forward-looking  statements are subject to certain risks and uncertainties  that
could cause actual results to differ  materially  from  historical  earnings and
those  presently  anticipated or projected.  We wish to caution you not to place
undue reliance on any such  forward-looking  statements,  which speak only as of
the date made.  In connection  with the "Safe Harbor"  provisions of the Private
Securities  Litigation  Reform Act of 1995,  we are  calling  to your  attention
important  factors that could affect our financial  performance  and could cause
actual  results for future  periods to differ  materially  from any  opinions or
statements expressed with respect to future periods in any current statements.

        The following list of important factors may not be all-inclusive, and we
specifically   decline  to  undertake  an  obligation  to  publicly  revise  any
forward-looking   statements   that  have  been  made  to   reflect   events  or
circumstances  after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events. Among the factors that could have an impact
on our  ability to achieve  expected  operating  results  and growth  plan goals
and/or affect the market price of our stock are:

                                       14
<PAGE>

   o    Recent history of losses
   o    Prior breach of credit  agreement  covenants and new  principal  payment
        requirements.
   o    Our highly competitive marketplace.
   o    The risks associated with dependence upon significant customers.
   o    Our ability to execute our expansion strategy.
   o    The uncertain ability to manage growth.
   o    Our  dependence   upon  and  our  ability  to  adapt  to   technological
        developments.
   o    Dependence on key personnel.
   o    Our ability to maintain and improve service quality.
   o    Fluctuation in quarterly operating results and seasonality in certain of
        our markets.
   o    Possible  significant  influence over  corporate  affairs by significant
        shareholders.

These risk factors are discussed further below.

RECENT HISTORY OF LOSSES.  The Company has reported  losses for each of the five
fiscal quarters ended December 31, 2001 due, in part, to lower gross margins and
lower  sales  levels  and a number of  unusual  charges.  Although  we  achieved
profitability  in Fiscal  2000 and prior  years,  as well as in the five  fiscal
quarters  ended  March  31,  2003,  there  can  be no  assurance  as  to  future
profitability on a quarterly or annual basis.

PRIOR  BREACH  OF  CREDIT   AGREEMENT   COVENANTS  AND  NEW  PRINCIPAL   PAYMENT
REQUIREMENTS.  Due to lower operating cash amounts  resulting from reduced sales
levels in 2001 and the  consequential  net losses,  the Company breached certain
covenants of its credit facility.  The breaches were temporarily  cured based on
amendments  and  forbearance  agreements  among the  Company and the banks which
called for, among other provisions, scheduled payments to reduce amounts owed to
the banks to the permitted borrowing base. In August 2001, the Company failed to
meet the principal repayment schedule and was once again in breach of the credit
facility.  The banks ended their  formal  commitment  to the Company in December
2001.

In May 2002,  we entered into an  agreement  with the banks to  restructure  the
credit  facility to a term loan  maturing on December 31, 2004.  As part of this
restructuring,  the banks  waived all  existing  defaults  and the Company  made
principal  payments of $5.5 million in 2002, and will make principal payments of
$5.0 million and $18.5 million in 2003, and 2004,  respectively.  Based upon the
Company's financial forecast, the Company will have to refinance the facility by
2004 to satisfy the final payment requirement.

COMPETITION.  Our broadcast video post production,  duplication and distribution
industry is a highly competitive,  service-oriented  business. In general, we do
not have long-term or exclusive service agreements with our customers.  Business
is  acquired  on a  purchase  order  basis and is based  primarily  on  customer
satisfaction with reliability, timeliness, quality and price.

We  compete  with a variety of post  production,  duplication  and  distribution
firms,  some of which  have a national  presence,  and to a lesser  extent,  the
in-house post production and distribution operations of our major motion picture
studio and advertising  agency  customers.  Some of these firms,  and all of the
studios,  have greater financial,  distribution and marketing resources and have
achieved a higher level of brand recognition than the Company. In the future, we
may not be able to compete  effectively  against these competitors merely on the
basis of reliability, timeliness, quality and price or otherwise.

We may also face competition from companies in related markets which could offer
similar or superior services to those offered by the Company. We believe that an
increasingly  competitive  environment  and the  possibility  that customers may
utilize in-house capabilities to a greater extent could lead to a loss of market
share or price  reductions,  which could have a material  adverse  effect on our
financial condition, results of operations and prospects.

                                       15
<PAGE>

CUSTOMER AND INDUSTRY  CONCENTRATION.  Although we have an active client list of
over 2,500 customers,  seven motion picture studios  accounted for approximately
34% of the Company's revenues during the year ended December 31, 2002. If one or
more of these  companies were to stop using our services,  our business could be
adversely  affected.  Because we derive  substantially  all of our revenue  from
clients  in  the  entertainment  and  advertising   industries,   the  financial
condition,  results of  operations  and  prospects of the Company  could also be
adversely  affected  by an  adverse  change in  conditions  which  impact  those
industries.

EXPANSION STRATEGY.  Our growth strategy involves both internal  development and
expansion through  acquisitions.  We currently have no agreements or commitments
to acquire  any  company  or  business  other  than an option to  acquire  three
facilities  from  Alliance  Atlantis  Communications  Inc.  Even  though we have
completed  eight  acquisitions  in the last five fiscal years, we cannot be sure
additional acceptable  acquisitions will be available or that we will be able to
reach mutually agreeable terms to purchase  acquisition targets, or that we will
be able to profitably  manage  additional  businesses or successfully  integrate
such additional businesses into the Company without substantial costs, delays or
other  problems.  Certain of the businesses  previously  acquired by the Company
reported net losses for their most recent fiscal years prior to being  acquired,
and our future financial performance will be in part dependent on our ability to
implement  operational  improvements  in, or exploit  potential  synergies with,
these acquired businesses.

Acquisitions may involve a number of special risks including: adverse effects on
our  reported   operating  results   (including  the  amortization  of  acquired
intangible  assets),  diversion  of  management's  attention  and  unanticipated
problems or legal liabilities. In addition, we may require additional funding to
finance  future  acquisitions.  We cannot be sure that we will be able to secure
acquisition  financing  on  acceptable  terms or at all. We may also use working
capital or equity, or raise financing through equity offerings or the incurrence
of debt, in connection with the funding of any acquisition. Some or all of these
risks could negatively affect our financial condition, results of operations and
prospects  or  could  result  in  dilution  to the  Company's  shareholders.  In
addition,  to the  extent  that  consolidation  becomes  more  prevalent  in the
industry,  the prices  for  attractive  acquisition  candidates  could  increase
substantially. We may not be able to effect any such transactions. Additionally,
if we are able to complete such transactions they may prove to be unprofitable.

The  geographic  expansion of the  Company's  customers  may result in increased
demand for services in certain  regions  where it  currently  does not have post
production, duplication and distribution facilities. To meet this demand, we may
subcontract.  However,  we have not  entered  into any  formal  negotiations  or
definitive agreements for this purpose.  Furthermore,  we cannot assure you that
we will be able to effect such  transactions or that any such  transactions will
prove to be profitable.

In July 2002,  the Company  issued a warrant to purchase  500,000  shares of the
Company's common stock to Alliance Atlantis Communications, Inc. ("Alliance") in
consideration  of an option to purchase three  post-production  facilities  (the
"Subsidiaries")  owned  by  Alliance.  In  connection  therewith,   the  Company
capitalized  the fair value of the warrant  ($619,000,  determined  by using the
Black-Scholes  valuation  model).  In December  2002, the option was extended by
mutual agreement and we deposited  $300,000 toward the ultimate  purchase price,
which was negotiated downward. Additionally, the Company capitalized $278,000 of
due diligence  costs  associated  with the proposed  acquisition and $141,000 of
costs associated with a new financing arrangement.  The Company did not exercise
its option to purchase the Subsidiaries by the March 10, 2003 termination  date.
Alliance  has agreed to continue  negotiations  with the Company to complete the
transaction.  In the event the Company  does not exercise its option to purchase
the Alliance  subsidiaries,  or does not complete the  financing,  these amounts
will be written off. Although such a write-off would represent a non cash charge
to income,  we cannot predict the effect of such a charge on the market price of
our common stock, if any.

If we  acquire  the  entities,  we will have to  finance a large  portion of the
anticipated purchase price and refinance our existing $22 million term loan. The
cost of new  financing  is expected to be higher  than our  existing  term loan.
Future  earnings  and cash flow may be  negatively  impacted  to the  extent the
acquired  entities do not generate  sufficient  earnings and cash flow to offset
the increased costs.

                                       16
<PAGE>

MANAGEMENT  OF GROWTH.  During the three  years  ended  December  31,  1999,  we
experienced rapid growth that resulted in new and increased responsibilities for
management  personnel and placed and continues to place increased demands on our
management, operational and financial systems and resources. To accommodate this
growth,  compete  effectively  and manage future growth,  we will be required to
continue to implement  and improve our  operational,  financial  and  management
information systems, and to expand,  train,  motivate and manage our work force.
We cannot be sure that the Company's personnel, systems, procedures and controls
will be adequate to support  our future  operations.  Any failure to do so could
have a material adverse effect on our financial condition, results of operations
and prospects.

DEPENDENCE ON TECHNOLOGICAL DEVELOPMENTS. Although we intend to utilize the most
efficient  and  cost-effective   technologies   available  for  telecine,   high
definition  formatting,  editing,  coloration  and  delivery  of video  content,
including digital  satellite  transmission,  as they develop,  we cannot be sure
that we will be able to adapt to such  standards in a timely  fashion or at all.
We believe our future growth will depend in part, on our ability to add to these
services and to add customers in a timely and  cost-effective  manner. We cannot
be sure we will be successful in offering such services to existing customers or
in  obtaining  new  customers  for  these  services,   including  the  Company's
significant investment in high definition technology in 2000 and 2001. We intend
to rely on third party vendors for the  development  of these  technologies  and
there  is  no  assurance  that  such  vendors  will  be  able  to  develop  such
technologies  in a manner that meets the needs of the Company and its customers.
Any material  interruption  in the supply of such services could  materially and
adversely affect the Company's  financial  condition,  results of operations and
prospects.

DEPENDENCE  ON KEY  PERSONNEL.  The  Company is  dependent  on the  efforts  and
abilities  of certain of its senior  management,  particularly  those of Haig S.
Bagerdjian,  Chairman,  President  and  Chief  Executive  Officer.  The  loss or
interruption of the services of key members of management  could have a material
adverse effect on our financial  condition,  results of operations and prospects
if a suitable replacement is not promptly obtained. Mr. Bagerdjian  beneficially
owns approximately 25% of the Company's  outstanding stock, but does not have an
employment contract.  Although we have employment agreements with certain of our
other key  executives,  we cannot be sure that  either Mr.  Bagerdjian  or other
executives will remain with the Company.  In addition,  our success depends to a
significant  degree upon the continuing  contributions of, and on our ability to
attract and retain,  qualified  management,  sales,  operations,  marketing  and
technical personnel.  The competition for qualified personnel is intense and the
loss of any such  persons,  as well as the  failure  to recruit  additional  key
personnel  in a timely  manner,  could  have a  material  adverse  effect on our
financial condition,  results of operations and prospects. There is no assurance
that we will be able to continue to attract and retain qualified  management and
other personnel for the development of our business.

ABILITY TO MAINTAIN AND IMPROVE  SERVICE  QUALITY.  Our business is dependent on
our  ability to meet the  current  and future  demands of our  customers,  which
demands include  reliability,  timeliness,  quality and price. Any failure to do
so,  whether or not caused by factors  within our control could result in losses
to such clients. Although we disclaim any liability for such losses, there is no
assurance that claims would not be asserted or that dissatisfied customers would
refuse  to make  further  deliveries  through  the  Company  in the  event  of a
significant occurrence of lost deliveries, either of which could have a material
adverse effect on our financial condition,  results of operations and prospects.
Although we maintain insurance against business interruption, such insurance may
not  be  adequate  to  protect  the  Company  from  significant  loss  in  these
circumstances  and there is no assurance  that a major  catastrophe  (such as an
earthquake  or  other  natural   disaster)  would  not  result  in  a  prolonged
interruption of our business. In addition, our ability to make deliveries within
the time periods requested by customers depends on a number of factors,  some of
which are outside of our control, including equipment failure, work stoppages by
package  delivery  vendors or interruption in services by telephone or satellite
service providers.

FLUCTUATING RESULTS, SEASONALITY. Our operating results have varied in the past,
and may  vary  in the  future,  depending  on  factors  such  as the  volume  of
advertising in response to seasonal buying  patterns,  the timing of new product
and service introductions, the timing of revenue recognition upon the completion
of longer term projects, increased competition, timing of acquisitions,  general
economic   factors   and  other   factors.   As  a  result,   we  believe   that
period-to-period  comparisons of our results of operations  are not  necessarily
meaningful and should not be relied upon as an indication of future performance.

                                       17
<PAGE>

For  example,   our  operating  results  have  historically  been  significantly
influenced by the volume of business from the motion picture industry,  which is
an  industry  that  is  subject  to  seasonal  and  cyclical   downturns,   and,
occasionally,  work stoppages by actors, writers and others. In addition, as our
business from advertising  agencies tends to be seasonal,  our operating results
may be subject to  increased  seasonality  as the  percentage  of business  from
advertising  agencies  increases.  In any period  our  revenues  are  subject to
variation  based on changes in the volume and mix of services  performed  during
the period.  It is possible that in some future quarter the Company's  operating
results  will  be  below  the  expectations  of  equity  research  analysts  and
investors.  In such event,  the price of the Company's Common Stock would likely
be materially  adversely affected.  Fluctuations in sales due to seasonality may
become more pronounced if the growth rate of the Company's sales slows.

CONTROL  BY  PRINCIPAL  SHAREHOLDER;  POTENTIAL  ISSUANCE  OF  PREFERRED  STOCK;
ANTI-TAKEOVER PROVISIONS. The Company's Chairman,  President and Chief Executive
Officer,  Haig  S.  Bagerdjian,  beneficially  owned  approximately  25%  of the
outstanding  common  stock  as of March  31,  2003.  The  ex-spouse  of R.  Luke
Stefanko,  the Company's  former  President and Chief Executive  Officer,  owned
approximately  25% of the  common  stock  on that  date.  Together,  they  owned
approximately  50%. By virtue of their stock  ownership,  Ms.  Stefanko  and Mr.
Bagerdjian  individually or together may be able to significantly  influence the
outcome of matters required to be submitted to a vote of shareholders, including
(i) the election of the board of  directors,  (ii)  amendments  to the Company's
Restated  Articles  of  Incorporation  and (iii)  approval  of mergers and other
significant  corporate  transactions.  The  foregoing  may  have the  effect  of
discouraging,  delaying or preventing certain types of transactions involving an
actual or potential change of control of the Company,  including transactions in
which the holders of common  stock might  otherwise  receive a premium for their
shares over current market prices. Our Board of Directors also has the authority
to issue up to  5,000,000  shares of  preferred  stock  without  par value  (the
"Preferred Stock") and to determine the price, rights,  preferences,  privileges
and restrictions thereof,  including voting rights,  without any further vote or
action by the Company's shareholders. Although we have no current plans to issue
any shares of Preferred  Stock,  the rights of the holders of common stock would
be subject to, and may be  adversely  affected  by, the rights of the holders of
any  Preferred  Stock that may be issued in the future.  Issuance  of  Preferred
Stock could have the effect of discouraging, delaying, or preventing a change in
control  of the  Company.  Furthermore,  certain  provisions  of  the  Company's
Restated  Articles of Incorporation and By-Laws and of California law also could
have the effect of  discouraging,  delaying or preventing a change in control of
the Company.

                                       18
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        MARKET RISK. The Company had borrowings of $22,000,000 at March 31,
2003 under a credit agreement. Amounts outstanding under the credit agreement
now bear interest at the bank's reference rate plus 1.25%.

        The Company's market risk exposure with respect to financial instruments
is to changes in the London Interbank Offering Rate ("LIBOR"). In November 2000,
the Company  entered into an interest rate swap contract to  economically  hedge
its floating debt rate. Under the terms of the contract,  the notional amount is
$15,000,000,  whereby  the  Company  receives  LIBOR  and  pays a 6.50%  rate of
interest for the three years.

        On June 15, 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial  Accounting  Standards No. 133, Accounting for Derivative
Instruments  and Hedging  Activities.  The standard,  as amended by Statement of
Financial  Accounting  Standards No. 137, Accounting for Derivative  Instruments
and Hedging Activities Deferral of the Effective Date of FASB Statement No. 133,
an amendment of FASB  Statement No. 133, and  Statement of Financial  Accounting
Standards No. 138,  Accounting for Certain  Derivative  Instruments  and Certain
Hedging  Activities,  an  amendment  of FASB  Statement  No.  133  (referred  to
hereafter  as "FAS 133"),  is  effective  for all fiscal  quarters of all fiscal
years beginning  after June 15, 2000 (January 1, 2001 for the Company).  FAS 133
requires  that all  derivative  instruments  be recorded on the balance sheet at
their fair value.  Changes in the fair value of  derivatives  are recorded  each
period in  current  earnings  or in other  comprehensive  income,  depending  on
whether a derivative is designated as part of a hedging  relationship and, if it
is,  depending on the type of hedging  relationship.  During  2001,  the Company
recorded a cumulative  effect type  adjustment  of $247,000  (net of $62,000 tax
benefit) as a charge to Accumulated Other  Comprehensive  Income, a component of
Shareholders'  Equity,  and an expense of $700,000 ($560,000 net of tax benefit)
for the  derivative  fair value  change of an interest  rate swap  contract  and
amortization of the cumulative effect adjustment. During the twelve month period
ended December 31, 2002, the Company  recorded income of $82,000 ($48,000 net of
tax  provision),  for the derivative  fair value change and  amortization of the
cumulative effect type adjustment.  During the quarter ended March 31, 2003, the
Company  recorded income of $171,000  ($101,000 net of tax  provision),  for the
derivative  fair value change and  amortization  of the  cumulative  effect-type
adjustment.

ITEM 4. CONTROLS AND PROCEDURES

        Within the 90-day  period  prior to the filing date of this  report,  an
evaluation was conducted under the supervision and with the participation of the
Company's management,  including our Chief Executive Officer and Chief Financial
Officer,  of the  effectiveness  of the design and  operation  of the  Company's
disclosure  controls and procedures,  as such term is defined in Rules 13a-14(c)
and 15d-14(c)  under the Securities  Exchange Act of 1934 (the "Exchange  Act").
Based on that  evaluation,  the Chief  Executive  Officer  and  Chief  Financial
Officer  concluded  that the Company's  disclosure  controls and  procedures are
effective in bringing to their attention on a timely basis material  information
relating  to the  Company  that is required  to be  disclosed  in the  Company's
reports that are filed under the Exchange  Act.  Subsequent to the date that the
Chief Executive  Officer and Chief Financial Officer completed their evaluation,
there have not been any significant  changes in the Company's  internal controls
or in other factors that could significantly affect such internal controls.

                                       19
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

  (a)   Exhibits

  10.1  Amended and Restated  Option  Agreement  dated December 30, 2002 between
        the Company and Alliance Atlantis Communications Inc. (1)

  99.1  Certification of Chief Executive  Officer Pursuant to 18  U.S.C.ss.1350,
        as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

  99.2  Certification of Chief Financial  Officer Pursuant to 18  U.S.C.ss.1350,
        as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

  Notes:

        (1) Filed as an  exhibit to Form 8-K with the  Commission  on January 8,
            2003.

  (b)   Reports On Form 8-K

        The  Company  filed a Form 8-K  dated  January  8,  2003  related  to an
        extension of the period in which the Company could exercise an option to
        purchase three entities.


                                   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.

                                    POINT.360

DATE:  May 14, 2003                 BY:  /s/ Alan Steel
                                         -----------------------------
                                         Alan Steel
                                         Executive Vice President,
                                         Finance and Administration
                                         (duly authorized officer and
                                          principal financial officer)



                                       20
<PAGE>

                                 CERTIFICATIONS

I, Haig S. Bagerdjian, certify that:

1.      I have reviewed this quarterly report on Form 10-Q of Point.360;

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

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

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

        (a) designed  such  disclosure  controls and  procedures  to ensure that
            material  information  relating  to the  registrant,  including  its
            consolidated  subsidiaries,  is made  known to us by  others  within
            those  entities,  particularly  during  the  period  in  which  this
            quarterly report is being prepared;

        (b) evaluated the effectiveness of the registrant's  disclosure controls
            and  procedures as of a date within 90 days prior to the filing date
            of this quarterly report (the "Evaluation Date"); and

        (c) presented  in  this  quarterly  report  our  conclusions  about  the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.      The registrant's other certifying officer and I have disclosed, based on
        our most recent evaluation,  to the registrant's  auditors and the audit
        committee of the registrant's board of directors:

        (a) all significant  deficiencies in the design or operation of internal
            controls which could adversely  affect the  registrant's  ability to
            record,  process,  summarize  and  report  financial  data  and have
            identified for the registrant's  auditors any material weaknesses in
            internal controls; and

        (b) any fraud,  whether or not  material,  that  involves  management or
            other  employees  who have a  significant  role in the  registrant's
            internal controls; and

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


Date: May 14, 2003                    /s/  Haig S. Bagerdjian
                                      -----------------------------------
                                      Haig S. Bagerdjian
                                      Chairman of the Board of Directors,
                                      President and Chief Executive Officer


                                       21
<PAGE>

I, Alan R. Steel, certify that:

1.      I have reviewed this quarterly report on Form 10-Q of Point.360;

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

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

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

        (a) designed  such  disclosure  controls and  procedures  to ensure that
            material  information  relating  to the  registrant,  including  its
            consolidated  subsidiaries,  is made  known to us by  others  within
            those  entities,  particularly  during  the  period  in  which  this
            quarterly report is being prepared;

        (b) evaluated the effectiveness of the registrant's  disclosure controls
            and  procedures as of a date within 90 days prior to the filing date
            of this quarterly report (the "Evaluation Date"); and

        (c) presented  in  this  quarterly  report  our  conclusions  about  the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.      The registrant's other certifying officer and I have disclosed, based on
        our most recent evaluation,  to the registrant's  auditors and the audit
        committee of the registrant's board of directors:

        (a) all significant  deficiencies in the design or operation of internal
            controls which could adversely  affect the  registrant's  ability to
            record,  process,  summarize  and  report  financial  data  and have
            identified for the registrant's  auditors any material weaknesses in
            internal controls; and

        (b) any fraud,  whether or not  material,  that  involves  management or
            other  employees  who have a  significant  role in the  registrant's
            internal controls; and

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


Date: May 14, 2003                     /s/  Alan R. Steel
                                       ----------------------------------
                                       Alan R. Steel
                                       Executive Vice President
                                       Finance and Administration and
                                       Chief Financial Officer


                                       22
<PAGE>


                                                                   Exhibit 99.1




                            CERTIFICATION PURSUANT TO
                               18 U.S.C. ss. 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection  with the Quarterly  Report of Point.360 ( the  "Company") on Form
10-Q for the period  ended  March 31,  2003,  as filed with the  Securities  and
Exchange  Commission  (the  "Report"),  I, Haig S.  Bagerdjian,  Chief Executive
Officer of the Company,  certify,  pursuant to 18 U.S.C.  ss.  1350,  as adopted
pursuant  to  Section  906  of  the  Sarbanes-Oxley  Act of  2002,  that,  to my
knowledge:

   (1)  The Report fully complies with the  requirements of Section 13 (a) or 15
        (d) of the Securities Exchange Act of 1934; and

   (2)  The information contained in the Report fairly presents, in all material
        respects,  the  financial  condition  and results of  operations  of the
        Company.




/s/  Haig S. Bagerdjian
---------------------------
Haig  S. Bagerdjian
Chief Executive Officer
May 14, 2003


                                       23
<PAGE>


                                                                   Exhibit 99.2




                            CERTIFICATION PURSUANT TO
                               18 U.S.C. ss. 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection  with the Quarterly  Report of Point.360 ( the  "Company") on Form
10-Q for the period  ended  March 31,  2003,  as filed with the  Securities  and
Exchange Commission (the "Report"), I, Alan R. Steel, Chief Financial Officer of
the Company,  certify,  pursuant to 18 U.S.C.  ss. 1350, as adopted  pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

   (1)  The Report fully complies with the  requirements of Section 13 (a) or 15
        (d) of the Securities Exchange Act of 1934; and

   (2)  The information contained in the Report fairly presents, in all material
        respects,  the  financial  condition  and results of  operations  of the
        Company.




/s/  Alan R. Steel
---------------------------
Alan R. Steel
Chief Financial Officer
May 14, 2003


                                       24