SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001

                         COMMISSION FILE NUMBER: 1-14234


                        AUDIO VISUAL SERVICES CORPORATION
                    ----------------------------------------

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                      DELAWARE                      13-3466655
            -------------------------------------------------------
            (STATE OR OTHER JURISDICTION        OF (I.R.S. EMPLOYER
            INCORPORATION OR ORGANIZATION)       IDENTIFICATION NO.)


           111 WEST OCEAN BOULEVARD, SUITE 1110, LONG BEACH, CA 90802
               ---------------------------------------------------

               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (562) 366-0620

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 / /

The registrant had 25,057,346 shares of Common Stock (par value $0.01 per share)
outstanding as of August 10, 2001.

                                       1
<PAGE>


                                      INDEX

PART I    FINANCIAL INFORMATION
ITEM 1.   FINANCIAL STATEMENTS (UNAUDITED)

          Consolidated Balance Sheets as of
          June 30, 2001 and September 30, 2000............................... 3

          Consolidated Statements of Operations for
          the nine months ended June 30, 2001 and 2000....................... 4

          Consolidated Statements of Operations for
          the three months ended June, 2001 and 2000......................... 5

          Consolidated Statements of Cash Flows for
          the nine months ended June 30, 2001 and 2000....................... 6

          Consolidated Statement of Changes in Stockholders'
          Equity for the nine months ended June 30, 2001 and 2000............ 7

          Notes to Consolidated Financial Statements......................... 8

Item 2.   Management's Discussion and Analysis of
          Financial Condition and Results of Operations......................14

Item 3.   Quantitative and Qualitative
          Disclosures About Market Risk .....................................20

PART II. OTHER INFORMATION

Item 1.   Legal Proceedings..................................................21

Item 2.   Changes in Securities..............................................21

Item 4.   Submission of Matters to a Vote of Security Holders................21

Item 5.   Other Information .................................................22

Item 6.   Exhibits and Reports on Form 8-K...................................23

SIGNATURES...................................................................25

                                       2
<PAGE>


                        AUDIO VISUAL SERVICES CORPORATION
                           CONSOLIDATED BALANCE SHEETS

                                                        JUNE 30,   SEPTEMBER 30,
ASSETS                                                    2001        2000
                                                       (UNAUDITED)  (NOTE 1)
                                                        ---------    ---------
                                                        (AMOUNTS IN THOUSANDS)
Current Assets:
Cash and cash equivalents                               $   8,182    $   1,272
Trade accounts receivable - net of allowance for
  doubtful accounts of $4,540 and $4,310 at
  June 30, 2001 and September 30, 2000, respectively       48,323       47,585
Prepaid expenses and other current assets                   6,008       14,782
                                                        ---------    ---------
        Total Current Assets                               62,513       63,639

Property and equipment - net                               70,342       68,103
Goodwill - net                                            265,202      272,009
Other assets                                               11,225       10,538
                                                        ---------    ---------
        TOTAL ASSETS                                    $ 409,282    $ 414,289
                                                        =========    =========
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Current portion of long-term debt                       $ 373,950    $      --
Trade accounts payable                                      7,547       13,249
Accrued expenses and other current liabilities             40,393       38,427
Taxes payable                                                 626          830
                                                        ---------    ---------

Total Current Liabilities                                 422,516       52,506

Long-term debt                                                 --      344,957
Deferred tax liability                                      7,295        7,350
Other liabilities                                           1,382        1,922
                                                        ---------    ---------

                TOTAL LIABILITIES                         431,193      406,735
Stockholders' Equity:
Preferred stock, $0.01 par value:
2,000 shares authorized, none issued and
  outstanding at June 30, 2001 and
  September 30, 2000, respectively                             --           --
Common stock, $0.01 par value:
  100,000 voting shares authorized 25,057 and
  24,568 shares issued and outstanding at
  June 30, 2001 and September 30, 2000, respectively          251          246
Additional paid-in capital                                168,344      168,170
Deferred compensation                                        (271)        (250)
Accumulated other comprehensive loss                       (7,838)      (7,828)
Accumulated deficit                                      (182,397)    (152,784)

                                                        ---------    ---------
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY                      (21,911)       7,554
                                                        ---------    ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY              $ 409,282    $ 414,289
                                                        =========    =========

   See accompanying notes to the unaudited consolidated financial statements.

                                       3
<PAGE>


                        AUDIO VISUAL SERVICES CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                            FOR THE NINE MONTHS ENDED
                                   (UNAUDITED)

                                                               JUNE 30,
                                                         2001           2000
                                                       ---------      ---------
                                                        (AMOUNTS IN THOUSANDS)

Revenue                                                $ 327,468      $ 327,028

Cost of revenue                                          274,604        265,534
                                                       ---------      ---------
Gross profit                                              52,864         61,494
                                                       ---------      ---------

Operating expenses:
  Selling, general and administrative
    expenses (note 4)                                     35,891         41,668
  Loss on sale of assets (note 5)                             --          3,000
  Depreciation and amortization                            9,729          8,801
                                                       ---------      ---------

       Total operating expenses                           45,620         53,469
                                                       ---------      ---------

Operating income                                           7,244          8,025

Interest expense, net                                     36,537         33,686
                                                       ---------      ---------

Loss from continuing operations before taxes             (29,293)       (25,661)
  Provision (benefit) for taxes                              320           (330)
                                                       ---------      ---------

Loss from continuing operations                          (29,613)       (25,331)

Discontinued operations (note 4)
  Loss from operations (less income taxes
    of $330)                                                  --        (16,458)
  Loss on disposal of assets
    (less income taxes of $0)                                 --        (40,313)
                                                       ---------      ---------

Loss from discontinued operations                             --        (56,771)
                                                       ---------      ---------

Net loss                                               $ (29,613)     $ (82,102)
                                                       =========      =========

Basic and diluted loss per common share:

    Loss from continuing operation                     $   (1.18)     $   (1.08)
    Loss  from discontinued operations,
      net of tax                                              --          (2.38)
                                                       ---------      ---------

Net loss per common share                              $   (1.18)     $   (3.46)
                                                       =========      =========

   See accompanying notes to the unaudited consolidated financial statements.

                                       4
<PAGE>


                        AUDIO VISUAL SERVICES CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                           FOR THE THREE MONTHS ENDED
                                   (UNAUDITED)

                                                                 JUNE,
                                                          2001           2000
                                                       ---------      ---------
                                                        (AMOUNTS IN THOUSANDS)

Revenue                                                $ 109,729      $ 117,054

Cost of revenue                                           94,188         92,494
                                                       ---------      ---------

Gross profit                                              15,541         24,560
                                                       ---------      ---------
Operating expenses:
  Selling, general and administrative
    expenses (note 4)                                     14,163         12,633
  Depreciation and amortization                            3,370          2,973
                                                       ---------      ---------

        Total operating expenses                          17,533         15,606
                                                       ---------      ---------

Operating income (loss)                                   (1,992)         8,954

Interest expense, net                                     11,357         12,341
                                                       ---------      ---------

Loss before taxes                                        (13,349)        (3,387)
  Provision (benefit) for taxes                              135             --
                                                       ---------      ---------

Net loss                                                 (13,484)     $  (3,387)
                                                       =========      =========

Basic and diluted net loss per common share            $   (0.54)         (0.14)
                                                       =========      =========

   See accompanying notes to the unaudited consolidated financial statements.

                                       5
<PAGE>


                        AUDIO VISUAL SERVICES CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            FOR THE NINE MONTHS ENDED
                                   (UNAUDITED)

                                                                  JUNE,
                                                           2001         2000
                                                         ---------    ---------
                                                         (AMOUNTS IN THOUSANDS)
Cash flows from operating activities:
  Net loss                                               $ (29,613)   $ (82,102)
  Adjustments to reconcile net income to net
    cash used in operating activities:
      Depreciation and amortization                         28,980       33,147
      Fixed asset write-off                                    180        2,500
      Loss on disposition of assets                             --       40,313
  Change in assets and liabilities:
      Increase in trade accounts receivable                   (738)      (2,587)
      Increase in deferred charges                              --       (7,167)
      Decrease in prepaid expenses and
         other current assets                                6,195        3,910
      (Increase) decrease in other assets                     (686)       2,212
      Increase (decrease) in trade accounts payable         (5,702)         418
      Increase in deferred income                               --       12,733
      Increase (decrease) in accrued expenses and
         other liabilities                                   5,516       (6,083)
      Decrease in taxes payable                               (260)        (821)
                                                         ---------    ---------
  Net cash provided by (used in) operating
    activities                                               3,872       (3,527)
                                                         ---------    ---------
Cash flow used in investing activities:
      Purchase of property and equipment                   (24,817)     (27,854)
      Proceeds from disposed
        business, net of transaction costs                      --      111,694
      Acquisition of intangibles and businesses,
        net of cash acquired                                    --         (229)
                                                         ---------    ---------
   Net cash (used in) provided by investing activities     (24,817)      83,611
                                                         ---------    ---------

Cash flow provided by financing activities:
      Repayments of long-term debt                          (8,000)    (161,700)
      Proceeds from long-term debt                          36,993       84,625
      Payment of debt issuance fees                         (1,122)        (991)
                                                         ---------    ---------
   Net cash (used in) provided by financing
     activities                                             27,871      (78,066)
                                                         ---------    ---------
Translation effect on cash and cash equivalents                (16)        (679)
Net increase (decrease) in cash                              6,910        1,339
Cash, beginning of period                                    1,272        1,675
                                                         ---------    ---------
Cash, end of period                                      $   8,182    $   3,014
                                                         =========    =========
Supplemental disclosure of cash flow information:
        Interest paid                                    $  23,977    $  38,009
                                                         =========    =========
        Income taxes paid                                $     520    $     198
                                                         =========    =========

   See accompanying notes to the unaudited consolidated financial statements.

                                       6
<PAGE>


                        AUDIO VISUAL SERVICES CORPORATION
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                FOR THE NINE MONTHS ENDED JUNE 30, 2001 AND 2000
                                   (UNAUDITED)
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                    ADDITIONAL             ACCUMULATED                  TOTAL
                                                  COMMON STOCK       PAID-IN    RETAINED  COMPREHENSIVE   DEFERRED   STOCKHOLDERS'
                                               SHARES      AMOUNT    CAPITAL    EARNINGS     INCOME     COMPENSATION   EQUITY
                                             ---------   ---------  ---------  ---------  ------------  ------------ ------------
<S>                                          <C>         <C>        <C>        <C>          <C>          <C>         <C>
For the nine months ended June 30, 2001:

Balance at September 30, 2000                   24,568   $     246  $ 168,170  $(152,784)   $  (7,828)   $    (250)   $   7,554
Net loss                                            --          --         --    (29,613)          --           --      (29,613)
Foreign currency translation adjustment             --          --         --         --          (10)          --          (10)
                                                                                                                      ---------
Comprehensive loss                                  --          --         --         --           --           --      (29,623)
                                             ---------   ---------  ---------  ---------    ---------    ---------    ---------

Restricted Stock                                    --          --         --         --           --          158          158
Issuance of restricted common stock                489           5        174         --           --         (179)          --
                                             ---------   ---------  ---------  ---------    ---------    ---------    ---------

Balance at June 30, 2001                        25,057   $     251  $ 168,344  $(182,397)   $  (7,838)        (271)     (21,911)
                                             =========   =========  =========  =========    =========    =========    =========


For the nine months ended June 30, 2000:

Balance at September 30, 1999                   23,697   $     236  $ 167,677  $ (40,648)   $  (4,785)          --    $ 122,480
Net loss                                            --          --         --    (82,102)          --           --      (82,102)
Foreign currency translation adjustment             --          --         --         --       (2,387)          --       (2,387)
                                                                                                                      ---------
Comprehensive loss                                  --          --         --         --           --           --      (84,489)
Issuance of common stock                           205           3        250         --           --           --          253
                                             ---------   ---------  ---------  ---------    ---------    ---------    ---------

Balance at June 30, 2000                        23,902   $     239  $ 167,927  $(122,750)   $  (7,172)         $--    $  38,244
                                             =========   =========  =========  =========    =========    =========    =========
</TABLE>

   See accompanying notes to the unaudited consolidated financial statements.

                                       7
<PAGE>


                        AUDIO VISUAL SERVICES CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.   INTERIM FINANCIAL INFORMATION

The  accompanying  consolidated  financial  statements of Audio Visual  Services
Corporation  (the  "Company")  have been prepared in accordance  with  generally
accepted  accounting  principles  for  interim  financial  information  and  the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes  required by generally accepted
accounting  principles  for  complete  financial  statements.  In the opinion of
management,  the  consolidated  financial  statements  contain all  adjustments,
consisting  of normal  recurring  adjustments,  considered  necessary to present
fairly the consolidated financial position, results of operations and cash flows
of the Company.  The results of  operations  for the three and nine months ended
June 30, 2001 are not  necessarily  indicative of the results of operations that
may be expected for any other  interim  periods or for the year ending  December
31, 2001.


The balance  sheet at September  30, 2000 has been  derived  from the  Company's
audited  financial  statements  at that date,  but does not  include  all of the
information and footnotes required by generally accepted  accounting  principles
for complete  financial  statements.  During the three months ended December 31,
2000,  the Company  changed its fiscal year end from  September 30th to December
31st.  The Company filed its  Transition  Report on Form 10-Q for the transition
period  October 1, 2000 through  December  31, 2000 on February  14,  2001.  The
Company will include audited financial statements covering the transition report
period  within the  Company's  Annual  Report  filed on Form 10-K for the period
ending December 31, 2001.

2.   FINANCIAL CONDITION

As of August 10, 2001, the Company had total debt outstanding of $374.0 million,
of which $362.1 million was  outstanding  under its previously  existing  credit
facility (the "Credit  Agreement") and $11.9 million was  outstanding  under its
$16.0 million senior revolving  credit facility (the "New Credit  Agreement" and
together with the Credit Agreement, the "Credit Agreements").  All principal and
accrued  interest  amounts  outstanding  under the Credit  Agreement and the New
Credit  Agreement  are due on October 1, 2001 and March 31,  2002,  respectively
(the "Maturity  Dates").  Accordingly,  all outstanding debt associated with the
Credit  Agreements  has  been  classified  as  short-term  in  the  accompanying
consolidated balance sheet at June 30, 2001. The Company recognizes that it will
be necessary to refinance or restructure  its  indebtedness on or before October
1, 2001.  While the Company has not identified a definitive  plan to address its
outstanding  indebtedness,  it is currently  assessing  various  refinancing  or
restructuring  options,  including,  among other things,  extending the Maturity
Dates and converting a portion of the Company's  existing  outstanding debt into
equity. To this end, the Company has engaged a financial advisor, The Blackstone
Group,  L.P.,  to assist  the  Company  in  analyzing  and  developing  specific
alternatives in connection with refinancing  and/or  restructuring the Company's
indebtedness.  Since the Company has not identified a definitive plan to address
the Company's outstanding  indebtedness,  it is too early to predict anticipated
costs associated with executing a refinancing  and/or  restructuring plan and it
is too early to assess the  likelihood  of  successfully  executing a definitive
plan.  Further,  there  can be no  assurance  that the  Company  will be able to
refinance or restructure  its  indebtedness or that it will be able to take such
other action to reduce its  indebtedness  prior to October 1, 2001. In the event
that the Company is unable to refinance or restructure  the  indebtedness  under
the Credit  Agreements  by such date,  the lenders would be entitled to exercise
all or any of their rights and  remedies  provided  under the Credit  Agreements
and/or the Company may deem it  advisable  to exercise  its rights and  remedies
under applicable law, including,  without  limitation,  seeking protection under
bankruptcy  law. Any such  exercise of rights and  remedies  would likely have a
material adverse effect on the Company,  raising substantial doubt as to whether
the Company would continue as a going concern.  No adjustments have been made to
the  carrying  value of assets and  liabilities  in the  accompanying  financial
statements to reflect this uncertainty.

On January 29, 2001, the Company entered into the New Credit  Agreement with The
Chase Manhattan Bank and Chase  Securities,  Inc.  providing the Company with an
additional  revolving  credit  facility to be utilized  for the  purchase of new
audiovisual  equipment and other working  capital needs of the Company.  The New
Credit  Agreement is secured,  on a first priority basis, by the same collateral
that secures the Credit Agreement;  therefore,  in connection with entering into
the New Credit Agreement, the Company was required to obtain a further amendment
to its Credit  Agreement  (the "January  2001  Amendment")  which  permitted the

                                       8
<PAGE>


subordination  of the  collateral  in favor of the lenders  under the New Credit
Agreement.  Approximately  $1.1 million in debt  issuance  fees were incurred in
connection with the New Credit  Agreement.  Such fees will be amortized over the
term of the New Credit Agreement.  Similar to the Credit Agreement,  interest on
outstanding amounts under the New Credit Agreement is payable monthly in arrears
and at the option of the Company  accrues at either (i) LIBOR plus an applicable
margin or (ii) an  alternate  base rate based upon the greatest of (a) the agent
bank's prime rate, (b) the three-month secondary certificate of deposit rate and
(c) the federal funds rate. The New Credit Agreement has  substantially the same
financial covenants as those required under the Credit Agreement.

In May and August,  2001,  the  Company  notified  the lenders  under the Credit
Agreements  that it was not in compliance with certain  financial  covenants set
forth in the March 2000  Amendment and the New Credit  Agreement;  specifically,
the financial covenant relating to the minimum required Consolidated  Unadjusted
EBITDA, as defined in the Credit Agreements,  for the four consecutive  quarters
ended  March 31 and June 30,  2001.  In both  instances,  the  Company  obtained
waivers  from its  lenders  waiving  all  defaults  arising  from its failure to
achieve  the  minimum  required  Unadjusted  Consolidated  EBITDA  for the  four
consecutive  quarters  ended March 31 and June 30, 2001.  No  amendments  to the
Credit Agreements were made in connection with the waivers.


Further,  the Company was required to engage a financial  advisor in  connection
with refinancing or  restructuring  its indebtedness no later than June 1, 2001,
pursuant to the terms of the Credit  Agreement.  The  Company  obtained a waiver
from its lenders  extending the date by which the Company was required to engage
a  financial  advisor to October 1,  2001.  Notwithstanding  the  aforementioned
waiver,  in July, 2001, the Company  determined that it was in its best interest
to engage a financial advisor to assist it in identifying specific  alternatives
with respect to refinancing and/or restructuring the Company's indebtedness.  As
referenced above, the Company engaged The Blackstone Group L.P. as its financial
advisor in August 2001.

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Certain   reclassifications  have  been  made  to  the  Company's  statement  of
operations  for the nine  months  ended June 30, 2001 and for the three and nine
months  ended June 30,  2000 to conform to the  presentation  of the  results of
operations for the three months ended June 30, 2001.

REVENUE RECOGNITION

Revenue is recognized over the period in which audio visual  equipment is rented
to  customers.  Revenue for staging  services is  recognized as the services are
provided.


COST OF REVENUE

Cost of revenue is comprised  principally  of direct  labor costs,  commissions,
depreciation  of  equipment  rented to clients and  customers  in the conduct of
business, and equipment rentals.


GOODWILL AND OTHER LONG LIVED ASSETS

Goodwill  represents  the  excess of cost over the fair  value of net  assets of
purchased  businesses  and is  amortized on a  straight-line  basis over periods
ranging  from 15 years to 40 years.  Accumulated  amortization  of goodwill  was
$34.5  million and $27.7  million as of June 30, 2001 and  September  30,  2000,
respectively. Other long-lived assets represent property and equipment.

Goodwill is allocated to the operating segments.  The carrying value of goodwill
for each operating segment is reviewed if the facts and  circumstances,  such as
significant  declines  in sales,  earnings  or cash  flows or  material  adverse
changes in the business climate, suggest that it may be impaired. Similarly, the
carrying value of other long-lived assets, including any associated goodwill, is
reviewed for impairment when events or circumstances  indicate that the carrying
value of these assets may not be recoverable.  If this review indicates that the
carrying  values will not be recoverable,  as determined  based on the estimated
undiscounted  cash flows of the  related  businesses  or assets,  impairment  is
measured by comparing the carrying value to fair value. Fair value is determined
based on quoted market values,  discounted cash flows or appraisals.  Impairment
for long-lived

                                       9
<PAGE>


assets to be  disposed  is  identified  and  measured  based upon its  estimated
recovery using quoted market values or appraisals.

The Company  periodically  reviews its goodwill and other  long-lived  assets to
determine potential  impairment,  if any. In performing such review, the Company
uses its most recent  available  earnings  projections and estimated future cash
flows  expected  to result  from the use of the  assets.  The  Company  uses its
projected earnings before interest,  depreciation and amortization ("EBITDA") as
a measurement  of its future cash flows  projections.  In performing  the review
using estimated future cash flows  (undiscounted and without interest  charges),
the Company will recognize an impairment  loss if the sum of the expected future
cash flows is less than the carrying amount of the goodwill and other long-lived
assets.

In June 2001,  the Financial  Accounting  Standards  Board issued  Statements of
Financial  Accounting  Standards No. 141,  BUSINESS  COMBINATIONS,  and No. 142,
GOODWILL AND OTHER INTANGIBLE ASSETS, effective for fiscal years beginning after
December 15, 2001. Under the new rules, goodwill will no longer be amortized but
will be subject to annual impairment tests in accordance with the Statements.

The  Company  will  apply the new rules on  accounting  for  goodwill  and other
intangible  assets  beginning in the first quarter of 2002.  Application  of the
nonamortization provisions of the Statement is expected to result in an increase
in net income of $9.1 million per year.  During  2002,  the Company will perform
the first of the required impairment tests of goodwill as of January 1, 2002 and
has not yet  determined  what the effect of these tests will be on the  earnings
and financial position of the Company.

4.   DISCONTINUED OPERATIONS

On April 20,  2000,  the  Company  sold  substantially  all of the assets of its
worldwide Communications Group (the "Communications Group"). On May 9, 2000, the
Company sold its U.K.-based Melville Exhibition Services subsidiary ("MES"). The
Company  recorded an  aggregate  loss on disposal of these  operations  of $40.3
million at March 31, 2000. Operating results of the Communications Group and MES
have been segregated and reported as discontinued operations in the Consolidated
Statement of Operations for the three and nine months ended June 30, 2000.  Cash
flow impacts of the  discontinued  operations  have not been  segregated  in the
Consolidated  Statement  of Cash  Flows.  Components  of the income  (loss) from
discontinued  operations reflected in the Consolidated  Statements of Operations
are presented in the following table.

                                                   NINE MONTHS ENDED
                                                     JUNE 31, 2000
                                                     -------------
Revenue                                                $ 138,946
Cost of Revenue                                           94,943
Selling, general and  administrative expenses             53,378

Depreciation and Amortization                              6,671
                                                       ---------
Operating loss                                           (16,046)
Interest expense, net                                         82

Loss from operations  before tax                         (16,128)

                                                       ---------
Tax provision                                               (330)
                                                       ---------
Loss from discontinued  operations                     $ (16,458)
                                                       =========

                                       10
<PAGE>


5.   SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

During the three months ended March 31 and June 30, 2001,  the Company  recorded
non cash  charges  aggregating  $0.8  million  and $2.3  million,  respectively,
primarily  relating to the  write-off  of old accounts  receivables  and certain
other miscellaneous  assets related to the Company's former  Atlanta-based audio
visual  services  operations.  Such charges have been  included in the Company's
selling,  general and administrative  expenses in the accompanying  statement of
operations for the three and nine months ended June 30, 2001.

In March,  2000,  the Company  recorded a charge of $3.6 million  related to its
corporate office and certain divisional  reorganization plans. The charge, which
relates to severance  payments made in May,  2000, has been included in selling,
general and  administrative  expenses for the nine months ended June 30, 2000 in
the Company's accompanying consolidated statement of operations.

6.   LOSS ON DISPOSAL OF ASSETS

During the nine months ended June 30, 2000,  the Company  wrote off $3.0 million
of assets relating to audio visual services businesses sold in August, 1999.

7.   SEGMENT INFORMATION

Set forth below is selected financial information about the Company's continuing
operating segments.


DESCRIPTION OF SEGMENTS

Prior to January 1, 2001,  the  Company's  operations  were  divided  into three
reportable segments:  Presentation Services,  Audio Visual Headquarters ("AVHQ")
and Rental Services.  On January 1, 2001, the Company merged its Rental Services
business  segment into the AVHQ business  unit and began  managing and reporting
its operations through two reportable segments:

Presentation  Services and AVHQ. The segment  information  for all prior periods
has been restated to conform to the current period's presentation.  Presentation
Services provides audiovisual equipment rental services to hotels via an on-site
presence of both equipment and technical  support  staff.  AVHQ is a provider of
audiovisual   equipment,   technical  labor  and  related  staging  services  to
production  companies  and other  corporations  for use during  meetings,  trade
shows, conventions and presentations. In addition, AVHQ is a remote full service
provider on an as-needed  basis to local and national  corporations,  convention
centers and smaller hotels.


MEASUREMENT OF SEGMENT PROFIT OR LOSS

The Company evaluates  performance based upon revenues,  gross profit and profit
or  loss  from  operations  before  interest,  income  taxes,  depreciation  and
amortization  ("EBITDA").  Interdivision  sales are  recorded  at the  Company's
costs; there is no intercompany profit or loss on interdivision sales.


THREE MONTHS ENDED JUNE 30, 2001 (AMOUNTS IN THOUSANDS)


                                PRESENTATION
                                  SERVICES           AVHQ              TOTAL
                                  --------          -------          --------
     Revenue                       $83,278           $28,749         $112,027
     Gross profit                   11,777             3,764           15,541
     EBITDA                          8,595             4,657           13,252

                                       11
<PAGE>


     Three Months Ended June 30, 2000 (Amounts in Thousands)


                        PRESENTATION
                          SERVICES         AVHQ         OTHER        TOTAL
                        ------------     --------       ------     --------
     Revenue             $ 87,261      $ 31,769           $--      $119,030
     Gross profit          19,704         4,626           230        24,560
     EBITDA                17,038         4,223            --        21,261


Reconciliations to Consolidated Statement of Operations (Amounts in Thousands)

                                                           THREE MONTHS ENDED
                                                                JUNE 30,
                                                            2001         2000
                                                         ---------    ---------

Total external revenue for reportable segments           $ 109,729    $ 117,054
Intradivision revenue for reportable segments                2,298        1,976
Elimination of intradivision revenue                        (2,298)      (1,976)
                                                         ---------    ---------
Total consolidated revenue                               $ 109,729    $ 117,054
                                                         =========    =========

Total "EBITDA" for reportable segments                   $  13,252    $  21,261
Corporate expenses                                           2,905        3,391
Write-offs of certain idle assets                            2,358           --
                                                         ---------    ---------

Total consolidated operating income before
  depreciation and amortization expense
  and interest expense, net                                  7,989       17,870
Depreciation and amortization expenses,
  including depreciation in cost of revenue                  9,981        8,916
Interest expense, net                                       11,357       12,341
                                                         ---------    ---------

    Total consolidated operating loss from continuing
     operations before taxes                             $ (13,349)   $  (3,387)
                                                         =========    =========


     Nine Months Ended June 30, 2001 (Amounts in Thousands)


                               PRESENTATION
                                 SERVICES           AVHQ            TOTAL
                                 --------         --------         --------

     Revenue                     $250,193         $ 83,696         $333,889
     Gross profit                  41,800           11,064           52,864
     EBITDA                        33,412           13,144           46,556

                                       12
<PAGE>


     Nine Months Ended June 30, 2000 (Amounts in Thousands)


                       PRESENTATION
                         SERVICES        AVHQ         OTHER          TOTAL
                       ------------     ------        ------         ------

     Revenue            $244,148      $ 88,061           $--       $332,209
     Gross profit         52,666        11,045        (2,217)        61,494
     EBITDA               41,004        11,107            --         52,111

     Reconciliations to Consolidated Statement of Operations (Amounts in
     Thousands)


                                                           NINE MONTHS ENDED
                                                                JUNE 30,
                                                           2001          2000
                                                        ---------     ---------

  Total external revenue for reportable segments        $ 327,468     $ 327,028
  Intradivision revenue for reportable segments             6,421         5,181
  Elimination of intradivision revenue                     (6,421)       (5,181)
                                                        ---------     ---------
  Total consolidated revenue                            $ 327,468     $ 327,028
                                                        =========     =========
  Total "EBITDA" for reportable segments                $  46,556     $  52,111
  Corporate expenses                                        7,224         9,293
  Write off of certain idle assets                          3,108            --
  Fixed asset write-off                                        --         2,500
  Loss on sale of assets                                       --         3,000
  Corporate reorganization costs                               --         3,600
                                                        ---------     ---------
  Total consolidated operating income before
  depreciation and amortization expense
  and interest expense, net                                36,224        33,718
  Depreciation and amortization expenses,
    including depreciation in cost of revenue              28,980        25,693
  Interest expense, net                                    36,537        33,686
                                                        ---------     ---------
Total consolidated operating loss
    from continuing operations before taxes             $ (29,293)    $ (25,661)
                                                        =========     =========


7.   EARNINGS PER COMMON SHARE

     The weighted average number of shares used in the calculation of basic and
     diluted earnings per common share was 25,016 and 23,752 for the nine months
     ended June 30, 2001 and 2000, respectively, and 25,057 and 23,862 for the
     three months ended June 30, 2001 and 2000, respectively.

                                       13
<PAGE>


AUDIO VISUAL SERVICES CORPORATION

     Management's Discussion and Analysis of Financial Condition and Results of
Operations


RESULTS OF OPERATIONS

Effective April 20, 2000 and May 9, 2000, the Company  disposed of substantially
all of the  assets of its  worldwide  Communications  Group  and its  U.K.-based
Melville Exhibition Services subsidiary,  respectively. The operating results of
each  of  the  disposed   businesses   have  been  segregated  and  reported  as
discontinued  operations in the  consolidated  statements of operations  for the
nine months ended June 30,  2000.  The results of  operations  below are for the
continuing  operations of the Company's  audiovisual  services  businesses  only
(which are comprised of the Presentation  Services and Audio Visual Headquarters
division)  and do  not  include  the  results  of  operations  of  the  disposed
businesses.


Nine Months Ended June 30, 2001 Compared to Nine Months Ended June 30, 2000

Revenue.  The Company's total revenue was $327.5 million and $327.0 for the nine
months  ended  June 30,  2001 and 2000,  respectively,  excluding  interdivision
revenue of $6.4 million. The Company's Presentation Services division recognized
$250.2  million of revenue  during the nine months ended June 30, 2001  compared
with revenue of $244.1  million  during the nine months ended June 30, 2000,  an
increase of $6.1 million,  or 2.5%.  The increase is primarily  attributable  to
higher  revenues  from new hotel  properties  as revenues  from  existing  hotel
properties  ("same-store  revenue")  decreased as compared  with the same period
last year. The Company  believes that the decrease in same-store  hotel revenues
within  Presentation  Services is due to the impact that the current economy has
had on the level of business meetings occurring in these hotels.  Revenue of the
Company's Audio Visual  Headquarters  division  decreased by approximately  $4.4
million,  or 5.0%, to $83.7 million for the nine months ended June 30, 2001 from
$88.1  million for the nine months ended June 30, 2000  primarily as a result of
the impact of the  economic  downturn  and the  discontinuance  of  unprofitable
business.

Gross  profit.  Consolidated  gross profit was $52.9 million for the nine months
ended June 30, 2001, a decrease of $8.6 million from $61.5 million  reported for
the  nine  months  ended  June  30,  2000.  Gross  profit  of the  Audio  Visual
Headquarters  division for the nine months ended June 30, 2001  approximated the
corresponding period in the prior year on a lower sales level,  primarily due to
lower  equipment  subrental and salary  related  costs.  The gross profit of the
Presentation  Services division decreased by approximately  $10.9 million during
the nine months ended June 30, 2001 due to higher commission rates paid to hotel
properties  and salary  costs.  The gross profit on revenue was also impacted by
$19.3  million  and  $16.9 for the nine  months  ended  June 30,  2001 and 2000,
respectively,  of depreciation  expense related to rental  equipment used in the
audio visual services businesses.  Such depreciation expense is included in cost
of revenue.  In addition,  $2.5 million  related to fixed asset  write-offs  was
included in cost of revenue during the nine months ended June 30, 2000.

Selling,  general  and  administrative  expenses.  Total  selling,  general  and
administrative  expenses  decreased $5.8 million,  or 13.9%, to $35.9 million in
the nine months ended June 30, 2001 from $41.7  million in the nine months ended
June  30,  2000.  The  selling,  general  and  administrative  expenses  of  the
Presentation Services and AVHQ business segments decreased by approximately $1.5
million and $1.7 million, respectively,  from the prior year's comparable period
as a result of certain cost cutting plans  implemented by the Company during the
last year.  During the nine months ended June 30, 2001, the Company recorded non
cash charges aggregating $3.1 million primarily relating to the write-off of old
accounts  receivable  and  certain  other  miscellaneous  assets  related to the
Company's former  Atlanta-based  audio visual services  operations.  Included in
selling,  general and administrative expenses for the nine months ended June 30,
2000  was  a  total  of  $3.6  million  related  to  one-time  corporate  office
reorganization  charges,  including  severance  payments.  Selling,  general and
administrative  expenses,  as a percentage of revenue, was 11.0% during the nine
months ended June 30, 2001 compared with 12.7% in the nine months ended June 30,
2000  primarily due to the corporate  reorganization  costs included in selling,
general and administrative expenses during the nine months ended June 30, 2000.

                                       14
<PAGE>


Depreciation and  amortization.  Depreciation  and amortization  expense for the
nine months  ended June 30, 2001 was $9.7  million,  an increase of $0.9 million
from $8.8 million in the corresponding  period in the prior year,  primarily due
to  increased  depreciation  from  additional  computer  software  and  hardware
purchases.

Interest expense,  net.  Interest expense,  net increased by $2.9 million due to
higher average outstanding indebtedness as well as higher borrowing costs.

Provision  for  taxes.  Taxes  reflect  an  allocation  based on the  full  year
anticipated  effective  tax rate.  The income tax  provision for the nine months
ended June 30, 2001 relates to the Company's foreign operations.

Net loss. The Company  realized a net loss from  continuing  operations of $29.6
million in the nine  months  ended  June 30,  2001  compared  to a net loss from
continuing  operations  of $25.3 million in the nine months ended June 30, 2000.
The loss per common share from  continuing  operations for the nine months ended
June 30, 2001 was $1.18 as compared with a loss per common share from continuing
operations of $1.08 for the  comparable  period in the prior year.  The loss per
common share from  discontinued  operations was $ 2.38 for the nine months ended
June 30, 2000.


Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000

Revenue.  The Company's total revenue decreased $7.4 million from $117.1 million
in the three  months  ended June 30, 2000 to $109.7  million in the three months
ended June 30, 2001, after  considering  interdivision  revenue  eliminations of
$2.0 million.  The Company's  Presentation  Services  division  recognized total
revenue of $83.3  million  during the three months ended June 30, 2001  compared
with  revenue of $87.3  million  during the three  months ended June 30, 2000, a
decrease of $4.0 million, or 4.6%. The decrease is primarily attributable to the
impact of the economic  downturn on same-store  hotel revenue  compared with the
prior year. The increase in revenue from new hotel properties was not sufficient
to offset the decrease in the same-store revenue. Revenue of the Company's Audio
Visual  Headquarters  division decreased by approximately $3.0 million, or 9.4%,
to $28.8 million for the three months ended June 30, 2001 from $31.8 million for
the three  months  ended June 30, 2000  primarily  as a result of smaller  shows
being held and cancellations occurring during the general economic slowdown.

Gross profit.  Consolidated  gross profit was $15.5 million for the three months
ended June 30, 2001 as compared  with $24.6  million for the three  months ended
June 30, 2000. Gross profit of the Audio Visual Headquarters  division decreased
by  approximately  $0.9 million during the three months ended June 30, 2001 as a
result  of lower  revenues  and  slightly  higher  costs of  revenue,  primarily
depreciation  and  other  miscellaneous   expenses.  The  gross  profit  of  the
Presentation  Services division  decreased by approximately  $7.9 million during
the three months ended June 30, 2001 due to higher  commission  rates and salary
costs.  The gross profit on revenue for the three months ended June 30, 2001 and
2000  was  also  impacted  by  approximately  $6.6  million  and  $5.9  million,
respectively,  of depreciation  expense related to rental  equipment used in the
audio visual services businesses.  Such depreciation expense is included in cost
of revenue.


Selling,  general  and  administrative  expenses.  Total  selling,  general  and
administrative  expenses  increased $1.6 million,  or 12.7%, to $14.2 million in
the three  months  ended June 30,  2001 from $12.6  million in the three  months
ended June 30, 2000.  During the three  months ended June 30, 2001,  the Company
recorded non cash charges  aggregating  $2.3 million  primarily  relating to the
write-off of old accounts  receivable  and certain  other  miscellaneous  assets
related to the Company's former  Atlanta-based audio visual services operations.
The  selling,  general and  administrative  costs of the  Presentation  Services
division  increased  by $0.8  million  due to higher  salary  costs and bad debt
expense recognized during the three months ended June 30, 2001. Selling, general
and administrative  expenses related to the Audio Visual  Headquarters  division
decreased by $1.1 million as a result of certain cost cutting plans  implemented
by the  Company  during the last year.  As a  percentage  of  revenue,  selling,
general and administrative expenses was 12.9% during the three months ended June
30, 2001 compared with 8.2% in the three months ended June 30, 2000


Depreciation and  amortization.  Depreciation  and amortization  expense for the
three months ended June 30, 2001 was $3.4  million,  an increase of $0.4 million
from the  corresponding  period in the prior year,  primarily  due to  increased
depreciation from additional computer software and hardware purchases.

                                       15
<PAGE>


Interest  expense,  net.  Interest  expense,  net  increased by $1.0 million due
higher borrowing costs.

Provision  for  taxes.  Taxes  reflect  an  allocation  based on the  full  year
anticipated  effective tax rate.  The income tax expense during the three months
ended June 30, 2001 relates to the Company's foreign operations.

Net loss.  The Company  realized a net loss of $13.5 million in the three months
ended June 30, 2001  compared to a net loss of $3.4  million in the three months
ended June 30,  2000.  The loss per common share from  operations  for the three
months ended June 30, 2001 was $0.54 as compared with a loss per common share of
$0.14 for the comparable period in the prior year.


LIQUIDITY AND CAPITAL RESOURCES

The following  section provides certain  historical  information  concerning the
Company's existing credit facilities:

On October 28, 1997, the Company  entered into a loan agreement with a syndicate
of banks  pursuant to which the Company  increased its aggregate  available bank
financing  from $100 million to $550  million,  consisting of a $300 million six
year  revolving  line of credit  (the  "Revolving  Facility"  to be  utilized in
connection  with  acquisitions  and for working  capital  and general  corporate
purposes and a $250 million six year term loan (the "Term Facility" and together
with the Revolving Facility,  the "Credit Agreement"),  which was fully utilized
in connection  with the  acquisition of Visual Action Holdings plc in late 1997.
Amounts  outstanding under the Company's former credit facility were repaid with
the proceeds from the Credit Agreement.  The Company recognized an extraordinary
loss of $0.6 million, net of taxes of $0.4 million in the quarter ended December
31, 1997  resulting  from the  write-off of the  unamortized  debt issuance fees
relating to the Company's former credit facility.  Approximately $4.8 million in
debt issuance fees were incurred in connection with the Credit  Agreement.  Such
fees are being amortized over the term of the Credit Agreement.

In May,  1998,  the Company  repaid  approximately  $26  million  under the Term
Facility thereby permanently reducing availability thereunder by such amount. In
December,  1998 and July, 1999, the terms of the Revolving Facility were amended
to reduce  the  aggregate  availability  thereunder  from $300  million  to $250
million,  to amend certain financial covenants contained therein and to increase
the interest rate on amounts outstanding under the Credit Agreement.


At June 30, 1999, the Company did not achieve certain of the financial covenants
specified in the Credit Agreement. In connection with the amendments made to the
Credit  Agreement in July 1999 (the "July 1999  Amendment"),  the lenders waived
through  March 30, 2000,  all  defaults  that had arisen or might arise from the
failure  to  satisfy  the  specified  financial  covenants  for June  30,  1999,
September 30, 1999 and December 31, 1999. As part of such amendment, the Company
agreed,  among other things, to revised covenants regarding minimum consolidated
earnings before interest,  taxes,  depreciation  and amortization  ("EBITDA") as
defined in the Credit  Agreement,  for the twelve month periods  ending June 30,
September  30 and  December  31,  1999,  and to  restrictions  on the  amount of
permitted  capital  expenditures (as described in the Credit  Agreement) for the
six month periods ending September 30 and December 31, 1999.

At September 30, 1999, the Company was not in compliance  with the covenants set
forth in the July 1999  Amendment.  In December,  1999,  the Company  obtained a
further  amendment (the "December 1999 Amendment") to the Credit Agreement that,
among other  things,  extended the waivers under the July 1999  Amendment  until
October 1, 2000,  and waived through  October 1, 2000 all defaults  arising from
the failure at September 30, 1999 to satisfy the financial  covenants  specified
in the July 1999 Amendment. As part of the December 1999 Amendment,  the Company
agreed to a minimum  consolidated  adjusted  EBITDA  covenant  that was based on
post-September   30,  1999  consolidated   EBITDA  (as  defined  in  the  Credit
Agreement), and to restrictions on the amount of capital expenditures that could
be made by the Company  during the fiscal year ending  September  30, 2000.  The
minimum  required  consolidated  adjusted  EBITDA,  as defined,  for fiscal 2000
exceeded levels achieved in fiscal 1999.

In addition to the waivers and revised financial  covenants described above, the
December 1999 Amendment provided for the deferral through October 1, 2000 of the
principal  payments  due under the Term  Facility on December 31, 1999 and March
31, 2000.  The December  1999  Amendment  also included a consent by the lenders


                                       16
<PAGE>


that  would  have  allowed  the  Company  to  pursue  the  possible  sale of its
audiovisual  businesses,  provided that certain timing requirements were met and
minimum net proceeds exceeded a specified amount.

In March,  2000, the Company  entered into a further  amendment (the "March 2000
Amendment") to the Credit Agreement,  that, among other things,  (i) amended the
maturity date of the Term Facility to October 1, 2001,  (ii) reduced the amounts
available to the Company under the Credit Agreement for letters of credit, (iii)
eliminated altogether those financial covenants that the July 1999 Amendment and
December 1999  Amendments  previously had waived through  October 1, 2000,  (iv)
amended the covenant  relating to minimum  Unadjusted  Consolidated  EBITDA,  as
defined in the Credit Agreements,  for the three month period ended December 31,
1999,  the six month period ended March 31, 2000,  the nine month period  ending
June 30, 2000,  the twelve month  periods  ending  September 30 and December 31,
2000,  and any period of four  consecutive  fiscal  quarters  ending on or after
March 31, 2001, (v) amended the covenant  relating to restrictions on the amount
of permitted  capital  expenditures (as described in the Credit  Agreement) such
that the Company may not permit  capital  expenditures  to exceed $25 million in
any two  consecutive  fiscal  quarters  or $40  million in any four  consecutive
fiscal quarters commencing with the fiscal quarter beginning January 1, 2000 and
(vi) requires the Company to provide certain  additional reports to the lenders.
In  addition,  pursuant  to the terms of the March 2000  Amendment,  the lenders
withdrew the consent  granted to the Company in the December  1999  Amendment to
pursue the possible sale of the Company's audiovisual businesses.

                                       17
<PAGE>


In addition to the amendments and revised financial  covenants  described above,
the March 2000  Amendment  also  included a consent by the  lenders to allow the
Company to proceed  with its  previously  announced  sale of its  Communications
Division  (the  "Communications  Sale")  and to pursue the sale of MES (the "MES
Sale"),  provided  that, in each case,  certain  timing  requirements  were met,
minimum net proceeds  exceeded a specific  amount and 75% of the net proceeds of
each such  disposition  would be applied to the  prepayment of the Term Facility
and the reduction of the commitment  under the Revolving  Facility.  The Company
consummated the  Communications  Sale on April 20, 2000, and consummated the MES
Sale on May 9, 2000,  and in  connection  therewith  (i) repaid an  aggregate of
$38.0 million under the Term Facility thereby permanently reducing  availability
and  outstanding  amounts  thereunder  from $199.6 million to $161.6 million and
(ii) repaid an aggregate of $47.5 million under the  Revolving  Facility,  which
resulted in a permanent  reduction of the  availability  thereunder  from $250.0
million to $202.5 million.

Pursuant to the terms of the March 2000  Amendment,  the Company  also agreed to
retain not later than June 1, 2001, an investment  banking firm for the purposes
of evaluating strategic and debt reduction alternatives.

Fees of approximately $1.2 million,  $1.4 million and $1.0 million were incurred
in connection with the amendments made to the Credit Agreement in December 1998,
July, 1999, and December 1999, respectively.  Such fees are being amortized over
the remaining term of the Credit Agreement.

No fees were paid to the  Company's  lenders in  connection  with the March 2000
Amendment;  however, pursuant to a deferred amendment fee letter entered into in
connection with the March 2000 Amendment,  the Company will be required to pay a
fee equal to the  greater of (A) not less than $2.5  million nor more than $12.5
million or (B) not less than 2.5% nor more than  12.5% of the net  equity  value
(as  defined in the  deferred  amendment  fee  letter) of the  Company  upon the
occurrence of the earlier of (i) the maturity  date of the  Revolving  Facility,
(ii) an event of default (as defined in the Credit  Agreement),  (iii) a sale of
all or substantially all of the Company's  assets,  (iv) a sale of substantially
all of the capital  stock of the  Company,  or (v) the  repayment of all amounts
outstanding  under the Credit  Agreement  (such  events  being  referred to as a
"Triggering  Event").  The actual  amount of such fee will be  determined on the
date that a Triggering Event shall occur.

The maturity  date of each of the Term  Facility and the  Revolving  Facility is
October 1, 2001.  Interest on outstanding  amounts under the Credit Agreement is
payable  monthly in arrears and at the option of the  Company  accrues at either
(i) LIBOR plus 3.00% or (ii) an  alternate  base rate based upon the greatest of
(a) the agent bank's prime rate,  (b) the  six-month  secondary  certificate  of
deposit rate and (c) the federal funds rate. The applicable  margins are subject
to change based on the  occurrence of certain  events.  Pursuant to the terms of
the March 2000  Amendment,  outstanding  amounts under each of the Term Facility
and  Revolving  Facility also accrue  additional  interest at the rate of 1% per
annum payable in arrears upon the termination of the Credit Agreement.

On January  29,  2001,  the Company  entered  into an  agreement  with The Chase
Manhattan Bank and Chase  Securities,  Inc. for a $16.0 million senior revolving
credit  facility (the "New Credit  Agreement")  to be utilized for investment in
audio visual  equipment and other working capital needs of the Company.  The New
Credit  Agreement  provided the Company with additional  liquidity to accelerate
and increase its investment in new audio visual rental equipment. The New Credit
Agreement is secured,  on a first priority  basis,  by the same  collateral that
secures the Credit  Agreement;  therefore,  in connection with entering into the
New Credit Agreement,  the Company was required to obtain a further amendment to
the  Credit  Agreement  (the  "January  2001  Amendment")  which  permitted  the
subordination  of the  collateral  in favor of the lenders  under the New Credit
Agreement. The maturity date of the New Credit Agreement is March 31, 2002.

Approximately  $1.1 million in debt  issuance  fees were  incurred in

                                       18
<PAGE>


connection with the New Credit  Agreement.  Such fees will be amortized over the
term of the New Credit Agreement.  Similar to the Credit Agreement,  interest on
outstanding amounts under the New Credit Agreement is payable monthly in arrears
and at the option of the Company  accrues at either (i) LIBOR plus an applicable
margin or (ii) an  alternate  base rate based upon the greatest of (a) the agent
bank's prime rate, (b) the three-month secondary certificate of deposit rate and
(c) the federal funds rate. The New Credit Agreement has  substantially the same
financial covenants as those required under the Credit Agreement.


The  securitized  collateral  under  the  Credit  Agreement  and the New  Credit
Agreement  consists  of  substantially  all of the assets of the Company and its
material  subsidiaries,  and the  Company  and its  material  subsidiaries  have
pledged the stock of their  respective  subsidiaries  for the ratable benefit of
its lending banks. In addition to the financial  covenants  described above, the
Credit Agreements contain certain other covenants and restrictions customary for
credit  facilities  of  a  similar  nature,   including,   without   limitation,
restrictions on the ability of the Company to pay dividends.


In May and August,  2001,  the  Company  notified  the lenders  under the Credit
Agreements  that it was not in compliance with certain  financial  covenants set
forth in the March 2000  Amendment and the New Credit  Agreement;  specifically,
the financial covenant relating to the minimum required Consolidated  Unadjusted
EBITDA, as defined in the Credit Agreements,  for the four consecutive  quarters
ended March 31 and June 30, 2001. The Company  obtained waivers from its lenders
waiving all defaults  arising  from its failure to achieve the minimum  required
Unadjusted  Consolidated EBITDA for the four consecutive quarters ended March 31
and  June  30,  2001.  No  amendments  to the  Credit  Agreements  were  made in
connection with the waivers.


The Company was also required to engage a financial  advisor in connection  with
refinancing  or  restructuring  its  indebtedness  no later  than June 1,  2001,
pursuant to the terms of the Credit  Agreement.  The  Company  obtained a waiver
from its lenders  extending the date by which the Company was required to engage
financial  advisor until  October 1, 2001.  Notwithstanding  the  aforementioned
waiver,  in July, 2001, the Company  determined that it was in its best interest
to engage a financial advisor to assist it in identifying specific  alternatives
with respect to refinancing and/or restructuring the Company's indebtedness.  As
referenced above, the Company engaged The Blackstone Group L.P. as its financial
advisor in August 2001.


Pursuant to the terms of the Credit Agreement and the New Credit Agreement,  all
principal and interest amounts outstanding thereunder are due on October 1, 2001
and March 31, 2002,  respectively,  (the  "Maturity  Dates").  Accordingly,  all
outstanding  debt  associated  with  the  Credit  Agreement  and the New  Credit
Agreement has been  classified as  short-term in the  accompanying  consolidated
balance  sheet  at  March  31,  2001.  The  Company  recognizes  that it will be
necessary to refinance or restructure its indebtedness on or before the Maturity
Dates.  While the Company has not  identified a  definitive  plan to address its
outstanding  indebtedness,  it is currently  assessing  various  refinancing  or
restructuring  options,  including,  among other things,  extending the Maturity
Dates and converting a portion of the Company's  existing  outstanding debt into
equity. To this end, the Company has engaged a financial advisor, The Blackstone
Group,  L.P.,  to assist  the  Company  in  analyzing  and  developing  specific
alternatives in connection with refinancing  and/or  restructuring the Company's
indebtedness.  Since the Company has not identified a definitive plan to address
the Company's outstanding  indebtedness,  it is too early to predict anticipated
costs associated with executing a refinance and/or  restructuring plan and it is
too early to assess the likelihood of successfully  executing a definitive plan.
Further, there can be no assurance that the Company will be able to refinance or
restructure  its  indebtedness or that it will be able to take such other action
to reduce its  indebtedness  prior to  October  1,  2001.  In the event that the
Company is unable to refinance or restructure the indebtedness  under the Credit
Agreements by such date, the lenders would be entitled to exercise all/or any of
their  rights  and  remedies  provided  under the Credit  Agreements  and or the
Company  may deem it  advisable  to  exercise  its  rights  and  remedies  under
applicable  law,  including,   without  limitation,   seeking  protection  under
bankruptcy  law. Any such  exercise of rights and  remedies  would likely have a
material adverse effect on the Company,  raising substantial doubt as to whether
the Company would continue as a going concern.  No adjustments have been made to
the  carrying  value of assets and  liabilities  in the  accompanying  financial
statements to reflect this uncertainty.

                                       19
<PAGE>


As of August 10,  2001,  the Company had a total of $374.0  million  outstanding
under the  Credit  Agreement  and the New  Credit  Agreement.  A total of $362.1
million was outstanding under the Credit Agreement,  of which $200.5 million was
outstanding  under the Revolving  Facility,  and $11.9  million was  outstanding
under the New Credit Agreement.  Cash on hand as of such date was $12.6 million.
The weighted  average  interest rate on outstanding  indebtedness was 7.2% as of
June 30, 2001.

                                       20
<PAGE>


As previously disclosed, the Company disposed of its Communications Division and
MES subsidiary in April and May, 2000,  respectively.  The following  table sets
forth certain cash flow  information for the Company's  combined  continuing and
discontinued  operations  for the nine  months  ended June 30,  2000 and for the
Company's  continuing  audio visual services  business units for the nine months
ended June 30, 2001.


                                     NINE MONTHS ENDED JUNE 30,
                                        2001           2000
                                     ----------       --------

Net cash provided by (used in):

Operating activities                 $    3,872       $ (3,527)
Investing activities                    (24,817)        83,611
Financing activities                     27,871        (78,066)

For the nine months ended June 30, 2001,  $3.9 million was provided by operating
activities.  The net loss adjusted for  depreciation  and amortization and fixed
asset  write-offs  required  $0.5  million.  The net change in  working  capital
provided $4.3 million,  with  increases in accounts  receivable and other assets
and decreases in accounts payable and taxes payable, which were more than offset
by  decreases  in prepaid  expenses and other  current  assets and  increases in
accrued expenses and other current liabilities.  Investing activities used $24.8
million as a result of  audiovisual  rental  equipment  purchases and additional
investments  in  computer  software  applications  for new  accounting  systems.
Financing  activities  provided $27.9 million  primarily from drawings under the
Company's credit facility. In addition,  debt issuance fees of $1.1 million were
paid in connection  with the amendment made to the Credit  Agreement in January,
2001.

For the nine months  ended June 30,  2000,  $3.5  million was used in  operating
activities.  The net loss adjusted for depreciation and amortization,  the fixed
asset  write-offs and the loss on  disposition of assets  required $6.1 million.
The net change in working  capital  provided  $2.6  million,  with  decreases in
prepaid and other current assets, other assets and increases in accounts payable
and  deferred  income,  which were more than  offset by  increases  in  accounts
receivable,  deferred  charges  and  decreases  in  accrued  expenses  and other
liabilities and in taxes payable.  Investing  activities  provided $83.6 million
from the disposition of the Company's  communications business in April 2000 and
the  disposition  of its Melville  Exhibition  Services  subsidiary in May 2000,
offset  by  expenditures  for  property  and  equipment   additions.   Financing
activities  used $78.1  million in the nine months ended June 30, 2000, of which
$161.7 million was used to repay  outstanding  indebtedness  under the Company's
Credit  Agreement,  offset by  borrowings  of $84.6  million.  In addition  debt
issuance fees of $1.0 million were paid in connection  with the amendments  made
to the Credit Agreement in December, 1999.

Capital expenditures were $24.8 million and $27.9 million during the nine months
ended June 30, 2001 and 2000,  respectively.  During the nine months  ended June
30, 2001 and 2000,  the purchase of  audiovisual  equipment  used in  operations
comprised the major portion of capital expenditures.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business,  the Company's foreign  operations are exposed
to fluctuations in currency  values.  However,  management does not consider the
impact of currency  fluctuations to represent a significant risk, as its foreign
operations are a minimal component to its consolidated operations. The Company's
interest  expense is sensitive to changes in the general level of U.S.  interest
rates.  In this regard,  changes in the U.S. rates affect the interest paid on a
portion  of its debt.  The  Company  does not enter  into  derivative  financial
instruments in the normal course of business,  nor are such instruments used for
speculative purposes.

                                       21
<PAGE>


                                     PART II


                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

On March 25, 1999, a purported  shareholder class action was filed in the United
States  District  Court for the  Southern  District  of New York (the  "Southern
District") against the Company and certain of its former officers and one of its
former  directors.  On  May  7,  1999,  a  purported  shareholder  class  action
substantially  identical  to the March  25th  action  was filed in the  Southern
District  against the Company and the same  individuals  named in the March 25th
action. Both lawsuits allege, among other things, that defendants misrepresented
the  Company's  ability to  integrate  various  companies it was  acquiring  and
alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of
1934 and various rules  promulgated  thereunder.  The lawsuits seek  unspecified
money damages,  plus costs and expenses,  including  attorneys'  fees and expert
fees. In November,  1999, the court issued an order  consolidating  the lawsuits
into a single  action and  appointing  lead  plaintiffs  and lead  counsel.  The
plaintiffs filed a consolidated  amended complaint in January 2000. In February,
2000, the Company filed a motion to dismiss the consolidated amended complaint.

Although the Company  believes it has  meritorious  defenses to this action,  in
light of the  inherent  uncertainties  and the  burden  and  expense  of lengthy
litigation, the Company reached an agreement in principal in late June, 2000, to
settle  the  class  action,  which was  announced  on July 20,  2000.  Under the
agreement,  all  claims  against  the  Company  and  the  individuals  named  as
defendants in the action will be dismissed  without  presumption or admission of
any liability or wrongdoing.  The principal terms of the settlement call for the
payment  to the  plaintiff  class of the sum of $15.0  million.  The  settlement
amount was paid entirely by the Company's insurance carrier and was paid into an
account to be  administered  by  counsel  for the  plaintiffs.  The terms of the
settlement  are subject to, among other things,  court approval and execution of
definitive  settlement  documentation.  In  July,  2001,  definitive  settlement
documentation  was executed  between the parties and  submitted to the court for
approval.  The court has also  signed a  preliminary  order in  connection  with
settlement  proceedings  and has  established a schedule for the court  approval
process in connection with the approval of the settlement. In the event that the
action is not finally settled,  the Company believes it has meritorious defenses
to this action and intends to defend the lawsuit vigorously.

In addition to the litigation  described above, from time to time the Company is
a party to various legal  proceedings  incidental to its business.  Although the
ultimate disposition of these proceedings is not determinable, in the opinion of
the Company,  none of such  proceedings  has had or is likely to have a material
adverse effect on the Company's  results of operations,  financial  condition or
liquidity.


ITEM 2. CHANGES IN SECURITIES

(a)  Not applicable.

(b)  Not Applicable

(c) On July 21, 2001  ("Issuance  Date"),  the  Company  granted  Hilton  Hotels
Corporation   ("Hilton")   warrants  to  purchase   1,000,000   fully  paid  and
non-assessable  shares of the Company's  Common Stock, par value $0.01 per share
at an exercise  price of $0.42 per share  ("Warrants"),  an amount  equal to the
market price at the close of regular  trading on the Issuance Date. The Warrants
are not registered pursuant to an exemption under Section 4(2) of the Securities
Act of 1933.  The Warrants  vest and may be  purchased on a cumulative  basis on
each of the first,  second, third and fourth anniversaries of the Issuance Date.
The Warrants were issued in connection with a business  transaction  between the
Company's Presentation Services hotel outsourcing operating division and Hilton,
pursuant to which  Presentation  Services will provide  audiovisual  services to
participating hotels in the Hilton family of brands for a period of four years.

(d)  Not applicable.

                                       22
<PAGE>


ITEM 5. OTHER INFORMATION

Effective  August 9, 2001,  Bryan D.  Langton  resigned  from his  position as a
director of the Company.





                                       23
<PAGE>


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K


(a)     EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K:


EXHIBIT
NUMBER                           DESCRIPTION OF DOCUMENT

3.1     Restated  Certificate of Incorporation  of the Company,  filed March 15,
        1996,  with the  Secretary  of State of the State of Delaware  (filed as
        Exhibit  3.1 to the  Company's  Quarterly  Report  on Form  10-Q for the
        quarterly  period  ended  March  31,  1996 and  incorporated  herein  by
        reference).

3.2      Certificate of Amendment to the Restated  Certificate of  Incorporation
         of the Company,  filed March 30, 1998,  with the  Secretary of State of
         the State of Delaware (filed as Exhibit 3.2 to the Company's  Quarterly
         Report on Form 10-Q for the quarterly  period ended March 31, 1998 and,
         incorporated herein by reference).

3.3      Certificate of Amendment to the Restated Certificate of Incorporatin of
         the Company,  filed June 29, 2000,  with the  Secretary of State of the
         State of Delaware (filed as Exhibit to the Company's  Quarterly  Report
         on Form  10-Q  for  the  quarterly  period  ended  June  30,  2000  and
         incorporated herein by reference).

3.4      Third Amended and Restated By-Laws of the Company (filed as Exhibit 3.3
         to the Company's Quarterly Report on Form 10-Q for the quarterly period
         ended December 31, 1998 and incorporated herein by reference).

10.1     Credit   Agreement,   dated  as  of  October  28,  1997  (the   "Credit
         Agreement'"),  among the Company,  Caribiner, Inc., the several lenders
         named therein and The Chase  Manhattan Bank, as  Administrative  Agent,
         and Merrill Lynch Capital Corporation,  as Syndication Agent (schedules
         and  exhibits  omitted  the  Company  agrees  to  furnish a copy of any
         schedule or exhibit to the Commission  upon request)  (filed as Exhibit
         10.10 to the  Company's  Annual Report on Form 10-K for the fiscal year
         ended September 30, 1997 and incorporated herein by reference).

10.2     First  Amendment  and  Agreement,  dated as of March 31,  1998,  to the
         Credit Agreement  (schedules and exhibits omitted the Company agrees to
         furnish  a copy of any  schedule  or  exhibit  to the  Commission  upon
         request) (filed as Exhibit 10.13 to the Company's Annual Report on Form
         10-K for the fiscal  year ended  September  30,  1998 and  incorporated
         herein by reference).

10.3     Second  Amendment  and Waiver,  dated as of December 18,  1998,  to the
         Credit Agreement  (schedules and exhibits omitted the Company agrees to
         furnish  a copy of any  schedule  or  exhibit  to the  Commission  upon
         request) (filed as Exhibit 10.14 to the Company's Annual Report on Form
         10-K for the fiscal  year ended  September  30,  1998 and  incorporated
         herein by reference).

10.4     Third  Amendment  and Waiver,  dated as of July 30, 1999, to the Credit
         Agreement (schedules and exhibits omitted the Company agrees to furnish
         a copy of any  schedule  or exhibit  to the  Commission  upon  request)
         (filed as Exhibit 10.1 to the Company's  Quarterly  Report on Form 10-Q
         for the quarterly period ended June 30, 1999 and incorporated herein by
         reference).

                                       24
<PAGE>


10.5     Fourth Amendment, Consent and Waiver, dated as of December 23, 1999, to
         the Credit Agreement (schedules and exhibits omitted the Company agrees
         to furnish a copy of any  schedule  or exhibit to the  Commission  upon
         request) (filed as Exhibit 10.17 to the Company's Annual Report on Form
         10-K for the fiscal  year ended  September  30,  1999 and  incorporated
         herein by reference).

10.6     Fifth Amendment,  Consent and Agreement, dated as of March 31, 2000, to
         the Credit Agreement (schedules and exhibits omitted the Company agrees
         to furnish a copy of any  schedule  or exhibit to the  Commission  upon
         request)  (filed as Exhibit 10.6 to the Company's  Quarterly  Report on
         Form  10-Q  for  the   Quarterly   Period  ended  March  31,  2000  and
         incorporated herein by reference).

10.7     Sixth Amendment,  Consent and Agreement,  dated as of January 29, 2001,
         to the Credit  Agreement  (schedules and exhibits omitted - the Company
         agrees to furnish a copy of any  schedule or exhibit to the  Commission
         upon request) (filed as Exhibit 10.7 to the Company's Transition Report
         on Form 10-Q for the three months ended December 31, 2000.)

10.8     Waiver, dated May 4, 2001, to the Credit Agreement (filed as Exhibit
         10.8 to the Company's Quarterly Report on Form 10-Q for the three
         months ended March 31, 2001).

10.9     Waiver, dated June 30, 2001, to the Credit Agreement.

10.10    Waiver, dated August 10, 2001, to the Credit Agreement.


10.11    Senior Secured Revolving Credit Agreement, dated as of January 29,
         2001, among the Company, Audio Visual Services (NY) Corporation, the
         several lenders named therein, The Chase Manhattan Bank, as
         Administrative Agent, and Chase Securities, Inc., as Arranger ("Senior
         Credit Agreement") (schedules and exhibits omitted - the Company agrees
         to furnish a copy of any schedule or exhibit to the Commission upon
         request) (filed as Exhibit 10.8 to the Company's Transition Report on
         Form 10-Q for the three months ended December 31, 2000.)

10.12    Waiver, dated May 4, 2001, to the Senior Credit Agreement (filed as
         Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q for the
         three months ended March 31, 2001).

10.13    Waiver, dated August 10, 2001, to the Senior Credit Agreement.

(b)      REPORTS ON FORM 8-K:

The Company filed the following report on Form 8-K during the three months ended
June 30, 2001:

         None

                                       25
<PAGE>


                                   SIGNATURES

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


                        AUDIO VISUAL SERVICES CORPORATION

                                   REGISTRANT

                              Date: August 14, 2001



                           BY: /s/ DIGBY J. DAVIES
                               -------------------------------------------------
                               Digby J. Davies
                               President and Chief Operating

                           Officer and Acting Chief Financial Officer (Principal
                           -----------------------------------------------------
                           Financial and Accounting Officer)


                                       26
<PAGE>


                                  EXHIBIT INDEX

EXHIBIT
 NUMBER                     DESCRIPTION OF DOCUMENT PAGE NUMBER

   3.1   Restated  Certificate of Incorporation of the Company,  filed March 15,
         1996,  with the  Secretary of State of the State of Delaware  (filed as
         Exhibit  3.1 to the  Company's  Quarterly  Report  on Form 10-Q for the
         quarterly  period  ended  March  31,  1996 and  incorporated  herein by
         reference).

   3.2   Certificate of Amendment to the Restated  Certificate of  Incorporation
         of the Company,  filed March 30, 1998,  with the  Secretary of State of
         the State of Delaware (filed as Exhibit 3.2 to the Company's  Quarterly
         Report on Form 10-Q for the quarterly  period ended March 31, 1998 and,
         incorporated herein by reference).

   3.3   Certificate of Amendment to the Restated  Certificate of  Incorporation
         of the Company, filed June 29, 2000, with the Secretary of State of the
         State of  Delaware  (filed as Exhibit  3.3 to the  Company's  Quarterly
         Report on Form 10-Q for the  quarterly  period  ended June 30, 2000 and
         incorporated herein by reference).

   3.4   Third Amended and Restated By-Laws of the Company (filed as Exhibit 3.3
         to the Company's Quarterly Report on Form 10-Q for the quarterly period
         ended December 31, 1998 and  incorporated  herein by  reference).  10.1
         Credit   Agreement,   dated  as  of  October  28,  1997  (the   "Credit
         Agreement"),  among the Company,  Caribiner,  Inc., the several lenders
         named therein and The Chase  Manhattan Bank, as  Administrative  Agent,
         and Merrill Lynch Capital Corporation,  as Syndication Agent (schedules
         and  exhibits  omitted  the  Company  agrees  to  furnish a copy of any
         schedule or exhibit to the Commission  upon request)  (filed as Exhibit
         10.10 to the  Company's  Annual Report on Form 10-K for the fiscal year
         ended September 30, 1997 and incorporated herein by reference).

  10.2   First  Amendment  and  Agreement,  dated as of March 31,  1998,  to the
         Credit Agreement  (schedules and exhibits omitted the Company agrees to
         furnish  a copy of any  schedule  or  exhibit  to the  Commission  upon
         request) (filed as Exhibit 10.13 to the Company's Annual Report on Form
         10-K for the fiscal  year ended  September  30,  1998 and  incorporated
         herein by reference).

  10.3   Second  Amendment  and Waiver,  dated as of December 18,  1998,  to the
         Credit Agreement  (schedules and exhibits omitted the Company agrees to
         furnish  a copy of any  schedule  or  exhibit  to the  Commission  upon
         request) (filed as Exhibit 10.14 to the Company's Annual Report on Form
         10-K for the fiscal  year ended  September  30,  1998 and  incorporated
         herein by reference).

  10.4   Third  Amendment  and Waiver,  dated as of July 30, 1999, to the Credit
         Agreement (schedules and exhibits omitted the Company agrees to furnish
         a copy of any  schedule  or exhibit  to the  Commission  upon  request)
         (filed as Exhibit 10.1 to the Company's  Quarterly  Report on Form 10-Q
         for the quarterly period ended June 30, 1999 and incorporated herein by
         reference).

                                       27
<PAGE>


 10.5    Fourth Amendment, Consent and Waiver, dated as of December 23, 1999, to
         the Credit Agreement (schedules and exhibits omitted the Company agrees
         to furnish a copy of any  schedule  or exhibit to the  Commission  upon
         request) (filed as Exhibit 10.17 to the Company's Annual Report on Form
         10-K for the fiscal  year ended  September  30,  1999 and  incorporated
         herein by reference).

 10.6    Fifth Amendment,  Consent and Agreement, dated as of March 31, 2000, to
         the Credit Agreement (schedules and exhibits omitted the Company agrees
         to furnish a copy of any  schedule  or exhibit to the  Commission  upon
         request)  (filed as Exhibit 10.6 to the Company's  Quarterly  Report on
         Form  10-Q  for  the   Quarterly   Period  ended  March  31,  2000  and
         incorporated herein by reference).

 10.7    Sixth Amendment,  Consent and Agreement,  dated as of January 29, 2001,
         to the Credit  Agreement  (schedules and exhibits omitted - the Company
         agrees to furnish a copy of any  schedule or exhibit to the  Commission
         upon request) (filed as Exhibit 10.7 to the Company's Transition Report
         on Form 10-Q for the three months ended December 31, 2000.)

10.8     Waiver, dated May 4, 2001, to the Credit Agreement (filed as Exhibit
         10.8 to the Company's Quarterly Report on Form 10-Q for the three
         months ended March 31, 2001).

10.9     Waiver, dated June 30, 2001, to the Credit Agreement.

10.10    Waiver, dated August 10, 2001, to the Credit Agreement.


10.11    Senior Secured Revolving Credit Agreement, dated as of January 29,
         2001, among the Company, Audio Visual Services (NY) Corporation, the
         several lenders named therein, The Chase Manhattan Bank, as
         Administrative Agent, and Chase Securities, Inc., as Arranger ("Senior
         Credit Agreement") (schedules and exhibits omitted - the Company agrees
         to furnish a copy of any schedule or exhibit to the Commission upon
         request) (filed as Exhibit 10.8 to the Company's Transition Report on
         Form 10-Q for the three months ended December 31, 2000.)

10.12    Waiver, dated May 4, 2001, to the Senior Credit Agreement (filed as
         Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q for the
         three months ended March 31, 2001).

10.13    Waiver, dated August 10, 2001, to the Senior Credit Agreement.


                                       28