UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


             [X]       Quarterly  Report  Pursuant to Section 13 or 15(d) of the
                       Securities Exchange Act of 1934
                For the quarterly period ended September 30, 1999

            [ ] Transition Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934
                         For the transition period from
                                       to


                         Commission File Number: 0-22392


                          PRIME MEDICAL SERVICES, INC.
             (Exact name of registrant as specified in its charter)


            DELAWARE                                       74-2652727
(State or other jurisdiction of                         (I.R.S. Employer
 incorporation or organization)                        Identification No.)


               1301 Capital of Texas Highway, Austin, Texas 78746
               (Address of principal executive offices) (Zip Code)


                                 (512) 328-2892
              (Registrant's telephone number, including area code)


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

YES x NO

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

                                                 Number of Shares Outstanding at
Title of Each Class                                      October 31, 1999
Common Stock, $.01 par value                                16,567,967




<PAGE>













                                                      PART I


                                               FINANCIAL INFORMATION


































                                                        -2-


<PAGE>
                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)

($ in thousands, except per share data)
<TABLE>
<S>                                                  <C>             <C>           <C>            <C>
                                                       Three Months Ended            Nine Months Ended
                                                          September 30,                September 30,
                                                       1999            1998         1999            1998
                                                      -------        -------       -------        -------
Fee revenue:
     Lithotripsy:
          Fee revenues                                $21,647         $23,053       $62,720        $62,598
          Management fees                               1,403           1,444         4,165          3,797
          Equity income                                   756             727         1,919          1,977
                                                      -------         -------       -------        -------
                                                       23,806          25,224        68,804         68,372

     Manufacturing                                      5,375           3,313        13,248          7,474
     Refractive                                           987             --            987           --
     Prostatherapy                                        406             344         1,409            651
     Cardiac                                               58              55           174            263
                                                      -------         -------       -------        -------
        Total fee revenue                              30,632          28,936        84,622         76,760
                                                      -------         -------       -------        -------

Costs and expenses:
     Cost of services and general
       and administrative expense
          Lithotripsy                                   5,385           6,282        17,225         17,456
          Manufacturing                                 4,242           2,993        10,038          6,150
          Refractive                                      529             --            529            --
          Prostatherapy                                   332             259         1,160            528
          Cardiac                                          54              49           173            197
          Corporate                                     1,375           1,328         3,603          3,979
          Nonrecurring development and
            other costs                                   --              --            --           1,617
                                                      -------         -------       -------        -------
                                                       11,917          10,911        32,728         29,927
     Depreciation and amortization                      2,784           2,567         7,812          7,740
                                                      -------         -------       -------        -------
                                                       14,701          13,478        40,540         37,667
                                                      -------         -------       -------        -------

Operating income                                       15,931          15,458        44,082         39,093

Other income (deductions):
     Interest income                                      466             564         1,204          1,150
     Interest expense                                  (2,356)         (2,312)       (7,010)        (6,426)
     Financing costs                                      --              --            --          (4,982)
     Release of contractual obligation                    --              --          1,140            --
     Other, net                                            61            (147)         (230)           185
                                                      -------         -------       -------        -------
                                                       (1,829)         (1,895)       (4,896)       (10,073)
                                                      -------         -------       -------        -------

Income before provision for income taxes
    and minority interest                              14,102          13,563        39,186         29,020

Minority interest in consolidated income                6,872           7,036        19,516         18,069
Provision for income taxes                              2,891           2,586         7,867          4,661
                                                      -------         -------       -------        -------

Net income                                             $4,339          $3,941       $11,803         $6,290
                                                      =======         =======       =======        =======

Basic earnings per share:
     Net income                                         $0.26           $0.21         $0.69          $0.33
                                                      =======         =======       =======        =======
     Weighted average shares outstanding               16,818          18,437        17,096         18,943
                                                      =======         =======       =======        =======

Diluted earnings per share:
     Net income                                         $0.26           $0.21         $0.69          $0.33
                                                      =======         =======       =======        =======
     Weighted average shares outstanding               17,000          18,561        17,225         19,084
                                                      =======         =======       =======        =======
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       -3-

<PAGE>
                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

($ in thousands)


<TABLE>
<S>                                                  <C>                <C>
                                                     September 30,    December 31,
                                                         1999             1998
                                                       --------         --------

ASSETS

Current assets:
     Cash                                               $21,001          $40,146
     Accounts receivable, less allowance
       for doubtful accounts of $109 in
       1999 and $966 in 1998                             26,500           22,321
     Other receivables                                    2,174            2,228
     Deferred income taxes                                1,432            2,330
     Prepaid expenses and other current assets            3,759            2,774
                                                       --------         --------
          Total current assets                           54,866           69,799
                                                       --------         --------

Property and equipment:
     Equipment, furniture and fixtures                   41,211           34,485
     Building and leasehold improvements                  2,081            2,073
                                                       --------         --------
                                                         43,292           36,558
Less accumulated depreciation and
     amortization                                       (23,250)         (18,471)
                                                       --------         --------
     Property and equipment, net                         20,042           18,087


Other investments                                        19,851           11,491
Goodwill, at cost, net of amortization                  148,530          140,863
Other noncurrent assets                                   2,774              879
                                                       --------         --------

                                                       $246,063         $241,119
                                                       ========         ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       -4-


<PAGE>

                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)


($ in thousands)
<TABLE>
<S>                                                  <C>                <C>
                                                     September 30,    December 31,
                                                         1999             1998
                                                       --------         --------
LIABILITIES:

Current liabilities:

  Current portion of long-term debt                      $1,499             $890
  Accounts payable                                        3,107            6,208
  Accrued distributions to minority interests                55            8,951
  Accrued expenses                                       12,049           12,051
                                                       --------         --------
     Total current liabilities                           16,710           28,100

Long-term debt, net of current portion                  103,385          100,987
Deferred income taxes                                     6,841            4,789
                                                       --------         --------
     Total liabilities                                  126,936          133,876

Minority interest                                        23,957           17,493

STOCKHOLDERS' EQUITY:

Preferred stock, $.01 par value,
  1,000,000 shares authorized;
  none outstanding                                          --               --
Common stock, $.01 par value,
  40,000,000 shares authorized;
  19,359,267 issued in 1999 and
  19,350,267 issued in 1998                                 194              194
Capital in excess of par value                           87,567           87,380
Accumulated earnings                                     30,416           18,615
Treasury stock, at cost, 2,690,300 in 1999
  and 1,845,200 in 1998                                 (23,007)         (16,439)
                                                       --------         --------
     Total stockholders' equity                          95,170           89,750
                                                       --------         --------

                                                       $246,063         $241,119
                                                       ========         ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       -5-



<PAGE>

                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

($ in thousands)


 <TABLE>
<S>                                                  <C>                <C>
                                                        Nine Months Ended
                                                          September 30,
                                                       1999               1998
                                                     --------           --------

CASH FLOWS FROM OPERATING ACTIVITIES:
  Fee and other revenue collected                     $79,882            $72,755
  Cash paid to employees, suppliers
         of goods and others                          (39,725)           (33,919)
  Interest received                                     1,204              1,150
  Interest paid                                        (4,801)            (7,001)
  Income taxes paid                                    (4,811)            (5,676)
                                                     --------           --------
         Net cash provided by
         operating activities                          31,749             27,309
                                                     --------           --------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of equipment and
         leasehold improvements                        (4,787)            (3,643)
  Distributions from investments                        2,062              2,336
  Purchase of investments and entities                (21,293)              (408)
  Other                                                   564                293
                                                     --------           --------
         Net cash used in
         investing activities                         (23,454)            (1,422)
                                                     --------           --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings on notes payable                           3,673            100,025
  Payments on notes payable, exclusive of interest     (1,078)           (80,392)
  Distributions to minority interest                  (25,685)           (24,892)
  Contributions by minority interest                    2,138               --
  Purchase of treasury stock                           (6,567)           (11,905)
  Exercise of stock options                                79                 70
                                                     --------           --------

         Net cash used in financing activities        (27,440)           (17,094)
                                                     --------           --------

NET INCREASE (DECREASE) IN CASH AND CASH
         EQUIVALENTS                                  (19,145)             8,793

Cash and cash equivalents, beginning of period         40,146             23,770
                                                     --------           --------

Cash and cash equivalents, end of period              $21,001            $32,563
                                                     ========           ========
</TABLE>



                 See notes to consolidated financial statements

                                       -6-

<PAGE>

                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

($ in thousands)


 <TABLE>
<S>                                                  <C>                <C>
                                                        Nine Months Ended
                                                          September 30,
                                                       1999               1998
                                                     --------           --------
Reconciliation of net income to
  cash provided by operating activities
    Net income                                        $11,803             $6,290

    Adjustments to reconcile net income to
     cash provided by operating activities:
       Minority interest in consolidated income        19,516             18,069
       Depreciation and amortization                    7,812              7,740
       Provision (benefit) for deferred income taxes    2,950               (785)
       Equity in earnings of affiliates                (2,032)            (1,977)
       Provision for uncollectible accounts              (926)               --
       Other                                              (75)                20

    Changes in operating assets and liabilities,
     net of effect of purchase transactions:
       Accounts receivable                             (2,529)            (2,032)
       Other receivables                                 (514)            (1,192)
       Other current assets                              (630)            (1,022)
       Accounts payable                                (3,358)             4,491
       Accrued expenses                                  (268)            (2,293)
                                                     --------           --------

         Total adjustments                             19,946             21,019
                                                     --------           --------
    Net cash provided by
     operating activities                             $31,749            $27,309
                                                     ========           ========
</TABLE>





















                 See notes to consolidated financial statements

                                       -7-


<PAGE>


                          PRIME MEDICAL SERVICES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1999
                                   (Unaudited)

1.       General
--       -------

The accompanying  unaudited consolidated financial statements have been prepared
in conformity  with the accounting  principles  stated in the audited  financial
statements  for the year ended  December  31, 1998 and  reflect all  adjustments
which are, in the opinion of  management,  necessary for a fair statement of the
financial  position as of September 30, 1999 and the results of  operations  for
the periods  presented.  These statements have not been audited by the Company's
independent certified public accountants.  The operating results for the interim
periods are not necessarily indicative of results for the full fiscal year.

The notes to consolidated financial statements appearing in the Company's Annual
Report  on Form  10-K  for the year  ended  December  31,  1998  filed  with the
Securities Exchange Commission should be read in conjunction with this Quarterly
Report on Form 10-Q.  There have been no significant  changes in the information
reported  in those  notes  other than from  normal  business  activities  of the
Company.

2.       Acquisitions
--       ------------

Effective  September  1, 1999 the Company  purchased a 60% interest in two laser
(refractive)   surgery  centers  operated  by  Barnet  Dulaney  Eye  Center  for
approximately $8,807,000 in cash and 29,000 warrants, plus an earnout to be paid
at the  end of  the  first  year  of  operations  after  the  acquisition.  This
investment is accounted for using the equity method.

Effective  September  1, 1999 the  Company  acquired,  through a majority  owned
acquisition subsidiary,  60% of the outstanding stock of Horizon Vision Centers,
Inc.  (Horizon).  Horizon  operates four laser  (refractive)  surgery centers in
California.  The  Company  paid  approximately  $10,866,000  in  cash  for  this
acquisition and has accounted for the  transaction  using the purchase method of
accounting.

3.       Earnings per share
--       ------------------

Basic earnings per share ("EPS") is based on weighted average shares outstanding
without any dilutive effects considered.  Diluted EPS reflects dilution from all
contingently  issuable shares,  including options and warrants. A reconciliation
of such EPS data is as follows:

<TABLE>
<S>                                                  <C>             <C>
                                                     Basic            Diluted
                                                    earnings          earnings
Nine Months Ended September 30, 1999               per share         per share
                                                   ---------         ---------
                                            ( in thousands, except per share data)

Net income                                            $11,803         $11,803
                                                     ========        ========

Average number of shares outstanding                   17,096          17,096
Effect of contingently issuable shares                    --              129
                                                     --------        --------
Shares for EPS calculation                             17,096          17,225
                                                     ========        ========

Net income per share                                    $0.69           $0.69
                                                     ========        ========
</TABLE>




                                                            -8-



<PAGE>


                          PRIME MEDICAL SERVICES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1999
                                   (Unaudited)

3.       Earnings per share, continued
--       -----------------------------

<TABLE>
<S>                                                  <C>             <C>
                                                     Basic            Diluted
                                                    earnings          earnings
Nine Months Ended September 30, 1998               per share         per share
                                                   ---------         ---------
                                           ($ in thousands, except per share data)

Net income                                            $6,290           $6,290
                                                     ========        ========

Average number of shares outstanding                  18,943           18,943
Effect of contingently issuable shares                   --               141
                                                     --------        --------
Shares for EPS  calculation                           18,943           19,084
                                                     ========        ========

Net income per share                                   $0.33            $0.33
                                                     ========        ========

Three Months Ended September 30, 1999

Net income                                             $4,339          $4,339
                                                     ========        ========

Average number of shares outstanding                   16,818          16,818
Effect of contingently issuable shares                    --              182
                                                     --------        --------
Shares for EPS calculation                             16,818          17,000
                                                     ========        ========

Net income per share                                    $0.26           $0.26
                                                     ========        ========

Three Months Ended September 30, 1998

Net income                                             $3,941          $3,941
                                                     ========        ========

Average number of shares outstanding                   18,437          18,437
Effect of contingently issuable shares                   --               124
                                                     --------        --------
Shares for EPS calculation                             18,437          18,561
                                                     ========        ========

Net income per share                                    $0.21           $0.21
                                                     ========        ========
</TABLE>

Unexercised  stock  options and  warrants to purchase  1,107,000  and  1,397,000
shares of the Company's  common stock as of September 30, 1999 and 1998 were not
included  in the  computation  of  diluted  EPS  because  the  effect  would  be
antidilutive.

4.       Segment Reporting
--       -----------------

The Company has two reportable segments:  Medical,  which includes  lithotripsy,
prostatherapy,   refractive  and  cardiac  rehabilitation,   and  Manufacturing.
Lithotripsy and  prostatherapy  provide services related to the operation of the
lithotripters and prostatherapy units, including scheduling, staffing, training,
quality  assurance,  maintenance,  regulatory  compliance and  contracting  with
payors,  hospitals and surgery centers;  refractive provides services related to
the   operations  of  refractive   vision   correction   centers;   and  cardiac
rehabilitation  provides  non-medical  management  services for several  cardiac
rehabilitation  centers  pursuant to  agreements  with  physicians,  clinics and
hospitals.   The   manufacturing   segment  provides   manufacturing   services,
installation,  upgrade,  refurbishment and repair of major medical equipment for
mobile medical service providers.

                                       -9-


<PAGE>


                          PRIME MEDICAL SERVICES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1999
                                   (Unaudited)

4. Segment Reporting, continued
-------------------------------

The Company  measures  performance  based on the pretax  income or loss from its
operating  segments,  which do not  include  unallocated  corporate  general and
administrative expenses and corporate interest revenue and expense.

<TABLE>
<S>                           <C>                       <C>                       <C>                       <C>
    ($ in thousands)         Nine Months Ended         Nine Months Ended         Nine Months Ended         Nine Months Ended
                             September 30, 1999        September 30, 1999        September 30, 1998        September 30, 1998
                             ------------------        ------------------        ------------------        ------------------
                                  Medical                Manufacturing                Medical                Manufacturing
                                  -------                -------------                -------                -------------
Revenue from
external customers                $71,374                   $13,248                   $69,286                    $7,474

Intersegment
revenues                              -                        286                        -                        223
Segment profit                     26,469                    2,470                     26,478                     1,111
</TABLE>

The following is a reconciliation  of the measure of segment profit per above to
consolidated  income  before  income taxes per the  consolidated  statements  of
income:
<TABLE>
<S>                                                                                 <C>               <C>
                                                                                  Nine months ended September 30,
                                                                                      1999              1998
                                                                                    -------           -------
                                                                                         ($ in thousands)

Total segment profit                                                                 $28,939          $27,589

Unallocated corporate expenses:
     General and administrative expenses                                              (3,603)          (3,756)
     Net interest expense                                                             (5,772)          (5,428)
     Financing costs                                                                    -              (4,982)
     Nonrecurring development and other costs                                           -              (1,617)
     Release of contractual obligation                                                 1,140             -
     Other, net                                                                       (1,034)            (855)
                                                                                     -------          -------
Income before income taxes                                                           $19,670          $10,951
                                                                                     =======          =======
</TABLE>

<TABLE>
<S>                           <C>                       <C>                       <C>                       <C>
    ($ in thousands)         Three Months Ended        Three Months Ended        Three Months Ended        Three Months Ended
                             September 30, 1999        September 30, 1999        September 30, 1998        September 30, 1998
                             ------------------        ------------------        ------------------        ------------------
                                  Medical                Manufacturing                Medical                Manufacturing
                                  -------                -------------                -------                -------------
Revenue from
external customers                $25,257                    $5,375                   $25,623                    $3,313

Intersegment
revenues                             -                         138                        -                        13
Segment profit                      9,599                    1,027                      9,757                      213
</TABLE>

                                      -10-


<PAGE>


                          PRIME MEDICAL SERVICES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1999
                                   (Unaudited)

4.       Segment Reporting, continued
--       ----------------------------

The following is a reconciliation  of the measure of segment profit per above to
consolidated  income  before  income taxes per the  consolidated  statements  of
income:
<TABLE>
<S>                                                                                 <C>               <C>
                                                                                  Three  months ended September 30,
                                                                                       1999             1998
                                                                                     -------          -------
                                                                                         ($ in thousands)

Total segment profit                                                                 $10,626           $9,970

Unallocated corporate expenses:
     General and administrative expenses                                              (1,375)          (1,328)
     Net interest expense                                                             (1,847)          (1,793)
     Other, net                                                                         (174)            (322)
                                                                                     -------          -------
Income before income taxes                                                            $7,230           $6,527
                                                                                     =======          =======
</TABLE>

5.       Condensed Financial Information Regarding Guarantor Subsidiaries
--       ----------------------------------------------------------------

Condensed consolidating  financial information regarding the Company,  Guarantor
Subsidiaries and  Non-guarantor  Subsidiaries for September 30, 1999 and 1998 is
presented below for purposes of complying with the reporting requirements of the
Guarantor  Subsidiaries.  Separate  financial  statements and other  disclosures
concerning each Guarantor  Subsidiary have not been presented because management
has determined that such information is not material to investors. The Guarantor
Subsidiaries  are  wholly-owned  subsidiaries  of the Company who have fully and
unconditionally guaranteed the 8.75% unsecured senior subordinated Notes.






















                                      -11-




<PAGE>


                          PRIME MEDICAL SERVICES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1999
                                   (Unaudited)

5.  Condensed Financial Information Regarding Guarantor Subsidiaries, continued
--  ---------------------------------------------------------------------------

                   Condensed Consolidating Statement of Income
<TABLE>
<S>                                     <C>            <C>            <C>            <C>            <C>
                                                        Nine Months Ended September 30, 1999
($ in thousands)
                                         Prime Medical  Guarantor     Non-Guarantor   Eliminating    Consolidated
                                         Services Inc. Subsidiaries   Subsidiaries      Entries          Total

Fee revenue:
Lithotripsy:
     Fee revenues                       $      --      $   16,060     $   46,660     $     --       $   62,720
     Management fees                           --           2,552          1,613           --            4,165
     Equity income                          26,289         14,538            --        (38,908)          1,919
                                        ----------     ----------     ----------     ----------     ----------
                                            26,289         33,150         48,273       (38,908)         68,804
Manufacturing                                  --             --          13,248           --           13,248
Refractive                                     152            114            873          (152)            987
Prostatherapy                                   --            --           1,409           --            1,409
Cardiac                                         --            174            --            --              174
                                        ----------     ----------     ----------     ----------     ----------
          Total revenues                    26,441         33,438         63,803       (39,060)         84,622
                                        ----------     ----------     ----------     ----------     ----------
Costs and expenses:
Cost of services and general and
   administrative expenses:
     Lithotripsy                               --           1,388         15,837          --            17,225
     Manufacturing                             --             --          10,038          --            10,038
     Refractive                                --             --             529          --               529
     Prostatherapy                             --             --           1,160          --             1,160
     Cardiac                                   --             173            --           --               173
     Corporate                                 210          3,393            --           --             3,603
                                        ----------     ----------     ----------     ----------     ----------
          Total costs and expenses             210          4,954         27,564          --            32,728
Depreciation and amortization                    5          3,825          3,982          --             7,812
                                        ----------     ----------     ----------     ----------     ----------
                                               215          8,779         31,546          --            40,540
                                        ----------     ----------     ----------     ----------     ----------
Operating income                            26,226         24,659         32,257      (39,060)          44,082
                                        ----------     ----------     ----------     ----------     ----------
Other income (deductions):
Interest income                                599            449            156          --             1,204
Interest expense                            (6,838)            27           (199)         --            (7,010)
Release of contractual obligation              --           1,140             --          --             1,140
Other, net                                    (694)           439             25          --              (230)
                                        ----------     ----------     ----------     ----------     ----------
          Total other income
             (deductions)                   (6,933)         2,055            (18)         --            (4,896)
Income before provision for income
   taxes and minority interest              19,293         26,714         32,239      (39,060)          39,186
Minority interest in consolidated
   income                                      --             --             --        19,516           19,516
Provision for income taxes                   7,490            273            104          --             7,867
                                        ----------     ----------     ----------     ----------     ----------
          Net income                    $   11,803     $   26,441     $   32,135     $(58,576)      $   11,803
                                        ==========     ==========     ==========     ==========     ==========
</TABLE>

                                      -12-


  <PAGE>


                          PRIME MEDICAL SERVICES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1999
                                   (Unaudited)

5.  Condensed Financial Information Regarding Guarantor Subsidiaries, continued
--  ---------------------------------------------------------------------------
                  Condensed Consolidating Statement of Income

<TABLE>
<S>                                     <C>            <C>            <C>            <C>            <C>
                                                         Nine Months Ended September 30, 1998
($ in thousands)
                                         Prime Medical  Guarantor    Non-Guarantor   Eliminating   Consolidated
                                         Services Inc. Subsidiaries  Subsidiaries      Entries        Total

Fee revenue:
Lithotripsy:
     Fee revenues                       $     --       $   16,473        $46,125   $       --       $   62,598
     Management fees                          --            2,139          1,658           --            3,797
     Equity income                          22,375         14,478           --          (34,876)         1,977
                                        ----------     ----------     ----------     ----------     ----------
                                            22,375         33,090         47,783        (34,876)        68,372
Manufacturing                                 --              --           7,474            --           7,474
Prostatherapy                                 --              --             651            --             651
Cardiac                                       --              263            --             --             263
                                        ----------     ----------     ----------     ----------     ----------
          Total revenues                    22,375         33,353         55,908        (34,876)        76,760
                                        ----------     ----------     ----------     ----------     ----------
Costs and expenses:
Cost of services and general and
   administrative expenses:
     Lithotripsy                              --            2,604         14,852            --          17,456
     Manufacturing                            --              --           6,150            --           6,150
     Prostatherapy                            --              --            528             --             528
     Cardiac                                  --              197            --             --             197
     Corporate                                149           3,830            --             --           3,979
        Nonrecurring development
            and other costs                 1,617             --             --             --           1,617
                                        ----------     ----------     ----------     ----------     ----------
          Total costs and expenses          1,766           6,631         21,530            --          29,927
Depreciation and amortization                   5           3,877          3,858            --           7,740
                                        ----------     ----------     ----------     ----------     ----------
Operating income                           20,604          22,845         30,520        (34,876)        39,093
                                        ----------     ----------     ----------     ----------     ----------
Other income (deductions):
Interest income                               507             359            284            --           1,150
Interest expense                           (6,259)             (5)          (162)           --          (6,426)
Financing costs                            (4,982)            --             --             --          (4,982)
Other, net                                   (135)            319              1            --             185
                                        ----------     ----------     ----------     ----------     ----------
          Total other income
             (deductions)                 (10,869)            673            123            --         (10,073)
Income before provision for income
  taxes and minority interest               9,735          23,518         30,643        (34,876)        29,020
Minority interest in consolidated
    income                                    --              --             --          18,069         18,069
Provision for income taxes                  3,445           1,143            73             --           4,661
                                        ----------     ----------     ----------     ----------     ----------
          Net income                    $   6,290      $   22,375        $30,570     $  (52,945)    $    6,290
                                        ==========     ==========     ==========     ==========     ==========
</TABLE>

                                      -13-



<PAGE>


                          PRIME MEDICAL SERVICES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1999
                                   (Unaudited)

5.  Condensed Financial Information Regarding Guarantor Subsidiaries, continued
--  ---------------------------------------------------------------------------

                  Condensed Consolidating Statement of Income
<TABLE>
<S>                                     <C>            <C>            <C>            <C>            <C>
                                                        Three Months Ended September 30, 1999
($ in thousands)
                                         Prime Medical  Guarantor    Non-Guarantor   Eliminating   Consolidated
                                         Services Inc. Subsidiaries  Subsidiaries      Entries        Total

Fee revenue:
Lithotripsy:
     Fee revenues                       $      --      $    6,161     $   15,486     $      --      $   21,647
     Management fees                           --             827            576            --           1,403
     Equity income                           9,002          4,818            --         (13,064)           756
                                        ----------     ----------     ----------     ----------     ----------
                                             9,002         11,806         16,062        (13,064)        23,806
Manufacturing                                  --             --           5,375            --           5,375
Refractive                                     152            114            873           (152)           987
Prostatherapy                                  --             --            406             --             406
Cardiac                                        --              58            --             --              58
                                        ----------     ----------     ----------     ----------     ----------
          Total revenues                     9,154         11,978         22,716        (13,216)        30,632
                                        ----------     ----------     ----------     ----------     ----------
Costs and expenses:
Cost of services and general and
   administrative expenses:
     Lithotripsy                               --             253          5,132            --           5,385
     Manufacturing                             --             --           4,242            --           4,242
     Refractive                                --             --             529            --             529
     Prostatherapy                             --             --             332            --             332
     Cardiac                                   --              54            --             --              54
     Corporate                                  64          1,311            --             --           1,375
                                        ----------     ----------     ----------     ----------     ----------
          Total costs and expenses              64          1,618         10,235            --          11,917
Depreciation and amortization                    2          1,389          1,393            --           2,784
                                        ----------     ----------     ----------     ----------     ----------
                                                66          3,007         11,628            --          14,701
Operating income                             9,088          8,971         11,088        (13,216)        15,931
                                        ----------     ----------     ----------     ----------     ----------
Other income (deductions):
Interest income                                247            169             50            --             466
Interest expense                            (2,284)            27            (99)           --          (2,356)
Other, net                                      33             22              6            --              61
                                        ----------     ----------     ----------     ----------     ----------
          Total other income
             (deductions)                   (2,004)           218            (43)           --          (1,829)
Income before provision for income
   taxes and minority interest               7,084          9,189         11,045        (13,216)        14,102
Minority interest in consolidated
   income                                      --             --             --           6,872          6,872
Provision for income taxes                   2,745             35            111            --           2,891
                                        ----------     ----------     ----------     ----------     ----------
          Net income                    $    4,339     $    9,154     $   10,934     $  (20,088)    $    4,339
                                        ==========     ==========     ==========     ==========     ==========
</TABLE>

                                      -14-


<PAGE>


                          PRIME MEDICAL SERVICES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1999
                                   (Unaudited)

5.  Condensed Financial Information Regarding Guarantor Subsidiaries, continued
--  ---------------------------------------------------------------------------

                   Condensed Consolidating Statement of Income
<TABLE>
<S>                                     <C>            <C>            <C>            <C>            <C>
                                                      Three Months Ended September 30, 1998
($ in thousands)
                                         Prime Medical  Guarantor    Non-Guarantor   Eliminating   Consolidated
                                         Services Inc. Subsidiaries  Subsidiaries      Entries        Total

Fee revenue:
Lithotripsy:
     Fee revenues                       $      --      $    5,866     $   17,187     $      --      $   23,053
     Management fees                           --             777            667            --           1,444
     Equity income                           8,312          5,506            --         (13,091)           727
                                        ----------     ----------     ----------     ----------     ----------
                                             8,312         12,149         17,854        (13,091)        25,224
Manufacturing                                  --             --           3,313            --           3,313
Prostatherapy                                  --             --             344            --             344
Cardiac                                        --              55            --             --              55
                                        ----------     ----------     ----------     ----------     ----------
          Total revenues                     8,312         12,204         21,511        (13,091)        28,936
                                        ----------     ----------     ----------     ----------     ----------
Costs and expenses:
Cost of services and general and
   administrative expenses:
     Lithotripsy                               --           1,136          5,146            --           6,282
     Manufacturing                             --             --           2,993            --           2,993
     Prostatherapy                             --             --             259            --             259
     Cardiac                                   --              49            --             --              49
     Corporate                                  74          1,254            --             --           1,328
                                        ----------     ----------     ----------     ----------     ----------
          Total costs and expenses              74          2,439          8,398            --          10,911
Depreciation and amortization                    2          1,257          1,308            --           2,567
                                        ----------     ----------     ----------     ----------     ----------
                                                76          3,696          9,706            --          13,478
                                        ----------     ----------     ----------     ----------     ----------
Operating income                             8,236          8,508         11,805        (13,091)        15,458
                                        ----------     ----------     ----------     ----------     ----------
Other income (deductions):
Interest income                                254            233             77            --             564
Interest expense                            (2,267)            (2)           (43)           --          (2,312)
Other, net                                    (138)            (9)           --             --            (147)
                                        ----------     ----------     ----------     ----------     ----------
          Total other income
             (deductions)                   (2,151)           222             34            --          (1,895)
Income before provision for
    income taxes and minority interest       6,085          8,730         11,839        (13,091)        13,563
Minority interest in consolidated
    income                                     --             --             --           7,036          7,036
Provision for income taxes                   2,144            418             24            --           2,586
                                        ----------     ----------     ----------     ----------     ----------
          Net income                    $    3,941     $    8,312     $   11,815     $  (20,127)    $    3,941
                                        ==========     ==========     ==========     ==========     ==========
</TABLE>


                                      -15-


<PAGE>


                          PRIME MEDICAL SERVICES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1999
                                   (Unaudited)

5.   Condensed Financial Information Regarding Guarantor Subsidiaries, continued
--   ---------------------------------------------------------------------------

                     Condensed Consolidating Balance Sheet
<TABLE>
<S>                                             <C>            <C>            <C>            <C>            <C>
($ in thousands)                                                      September 30, 1999

                                               Prime Medical    Guarantor    Non-Guarantor  Eliminating   Consolidated
                                               Services, Inc.  Subsidiaries   Subsidiaries    Entries         Total

ASSETS:

Current assets:
Cash                                             $    5,996     $    7,009     $    7,996     $      --      $   21,001
Accounts receivable, net                                --           4,091         22,409            --          26,500
Other receivables                                       --           2,174            --             --           2,174
Deferred income taxes                                   705            727            --             --           1,432
Prepaid expenses and other current assets                28            393          3,338            --           3,759
                                                 ----------     ----------     ----------     ----------     ----------
  Total current assets                                6,729         14,394         33,743            --          54,866
                                                 ----------     ----------     ----------     ----------     ----------

Property and equipment:
Equipment, furniture and fixtures                       --           5,515         35,696            --          41,211
Building and leasehold improvements                     --             499          1,582            --           2,081
Less accumulated depreciation and amortization          --          (4,675)       (18,575)           --         (23,250)
                                                 ----------     ----------     ----------     ----------     ----------
Property and equipment, net                             --           1,339         18,703            --          20,042

Investment in subsidiaries and other
 investments                                        187,992         39,751            --        (207,892)        19,851
Goodwill, at cost, net of amortization                  --         139,860          8,670            --         148,530
Other noncurrent assets                              11,267            784          1,636        (10,913)         2,774
                                                 ----------     ----------     ----------     ----------     ----------
    Total assets                                 $  205,988     $  196,128     $   62,752     $ (218,805)    $  246,063
                                                 ==========     ==========     ==========     ==========     ==========

LIABILITIES:

Current liabilities:
Current portion of long-term debt                $      --      $      --      $    1,499     $     --       $    1,499
Accounts payable                                        540          1,277          1,290           --            3,107
Accrued distributions to minority interests             --             --              55           --               55
Accrued expenses                                      6,922          2,974          2,153           --           12,049
                                                 ----------     ----------     ----------     ----------     ----------
  Total current liabilities                           7,462          4,251          4,997           --           16,710
Long-term debt, net of current portion              100,000            162         14,136        (10,913)       103,385
Deferred income taxes                                 3,356          3,485           --             --            6,841
                                                 ----------     ----------     ----------     ----------     ----------
  Total liabilities                                 110,818          7,898         19,133        (10,913)       126,936
Minority interest                                       --             --             --          23,957         23,957


STOCKHOLDERS' EQUITY:

Common stock                                            194            --            --              --             194
Capital in excess of par value                       87,567            --            --              --          87,567
Accumulated earnings                                 30,416            --            --              --          30,416
Treasury stock                                      (23,007)           --            --              --         (23,007)
Subsidiary net equity                                   --         188,230         43,619       (231,849)           --
                                                 ----------     ----------     ----------     ----------     ----------
  Total stockholders' equity                         95,170        188,230         43,619       (231,849)        95,170
                                                 ----------     ----------     ----------     ----------     ----------
    Total liabilities and stockholders' equity   $  205,988     $  196,128     $   62,752     $ (218,805)    $  246,063
                                                 ==========     ==========     ==========     ==========     ==========

</TABLE>

                                      -16-


<PAGE>


                          PRIME MEDICAL SERVICES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1999
                                   (Unaudited)


5.   Condensed Financial Information Regarding Guarantor Subsidiaries, continued
--   ---------------------------------------------------------------------------

                 Condensed Consolidating Statement of Cash Flows
                                    <TABLE>
<S>                                             <C>            <C>            <C>            <C>            <C>
                                                          Nine Months Ended September 30, 1999

($ in thousands)                               Prime Medical    Guarantor    Non-Guarantor  Eliminating   Consolidated
                                               Services, Inc.  Subsidiaries  Subsidiaries     Entries         Total

     Net cash (used) provided by
        operating activities                     $  (20,170)    $   10,447     $   41,472     $     --       $   31,749
                                                 ----------     ----------     ----------     ----------     ----------

Cash flows from investing activities:
Purchases of equipment and leasehold
   improvements                                         --            (699)        (4,088)           --          (4,787)
Distributions from subsidiaries                      16,856         15,495            --         (32,351)           --
Distributions from investments                          --           2,062            --             --           2,062
Purchase of investments and entities                    --         (11,217)       (10,076)           --         (21,293)
Other                                                   --             192            372            --             564
                                                 ----------     ----------     ----------     ----------     ----------
     Net cash provided (used) by
        investing activities                         16,856          5,833        (13,792)       (32,351)       (23,454)
                                                 ----------     ----------     ----------     ----------     ----------

Cash flows from financing activities:
Borrowings on notes payable                             --             --           3,673            --           3,673
Payments on notes payable, exclusive of interest        --             --          (1,078)           --          (1,078)
Distribution to minority interest                       --             --             --         (25,685)       (25,685)
Contributions by minority interest                      --             --           2,138            --           2,138
Purchase of treasury stock                           (6,567)           --             --             --          (6,567)
Other                                                    79            --             --             --              79
Distributions to equity owners                          --         (16,856)       (41,180)        58,036            --
                                                 ----------     ----------     ----------     ----------     ----------
     Net cash provided (used) by
        financing activities                        (6,488)        (16,856)       (36,447)        32,351        (27,440)
                                                 ----------     ----------     ----------     ----------     ----------
     Net increase (decrease) in cash and
        cash equivalents                            (9,802)           (576)        (8,767)           --         (19,145)
Cash and cash equivalents at beginning
   of period                                        15,798           7,585         16,763            --          40,146
                                                 ----------     ----------     ----------     ----------     ----------
Cash and cash equivalents at end of
   period                                        $    5,996     $    7,009     $    7,996     $      --      $   21,001
                                                 ==========     ==========     ==========     ==========     ==========

</TABLE>



                                      -17-


<PAGE>


                          PRIME MEDICAL SERVICES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1999
                                   (Unaudited)

5.   Condensed Financial Information Regarding Guarantor Subsidiaries, continued
--   ---------------------------------------------------------------------------

                 Condensed Consolidating Statement of Cash Flows
<TABLE>
<S>                                             <C>            <C>            <C>            <C>            <C>
                                                           Nine Months Ended September 30, 1998

($ in thousands)                               Prime Medical    Guarantor    Non-Guarantor  Eliminating   Consolidated
                                               Services, Inc.  Subsidiaries   Subsidiaries    Entries         Total

     Net cash (used) provided by
        operating activities                     $  (15,563)    $    8,667     $   34,205     $      --      $   27,309
                                                 ----------     ----------     ----------     ----------     ----------

Cash flows from investing activities:
Purchases of equipment and leasehold
   improvements                                         --            (670)        (2,973)           --          (3,643)
Distributions from subsidiaries                      23,846         14,638            --         (38,484)           --
Investments                                            (408)         2,336            --             --           1,928
Other                                                    43             97            153            --             293
                                                 ----------     ----------     ----------     ----------     ----------
     Net cash provided (used) by
        investing activities                         23,481         16,401         (2,820)       (38,484)        (1,422)
                                                 ----------     ----------     ----------     ----------     ----------

Cash flows from financing activities:
Payments on notes payable, exclusive of interest    (79,000)            (5)        (1,387)           --         (80,392)
Borrowings on notes payable                         100,000            --              25            --         100,025
Distribution to minority interest                      --              --             --         (24,892)       (24,892)
Purchase of treasury stock                          (11,905)           --             --             --         (11,905)
Other                                                    70            --             --             --              70
Distributions to equity owners                         --          (23,846)       (39,530)        63,376             --
                                                 ----------     ----------     ----------     ----------     ----------
     Net cash provided (used) by
        financing activities                          9,165        (23,851)       (40,892)        38,484        (17,094)
                                                 ----------     ----------     ----------     ----------     ----------
     Net increase (decrease) in cash and
        cash equivalents                             17,083          1,217         (9,507)           --           8,793
Cash and cash equivalents at beginning
   of period                                            18           6,260         17,492            --          23,770
                                                 ----------     ----------     ----------     ----------     ----------
Cash and cash equivalents at end of
   period                                        $   17,101     $    7,477     $    7,985     $      --      $   32,563
                                                 ==========     ==========     ==========     ==========     ==========

</TABLE>



                                      -18-



<PAGE>



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

Results of Operations

Revenues
--------

For  the  nine  months  ended  September  30,  1999,  total  revenues  increased
$7,862,000  (10%)  as  compared  to the  same  period  in  1998.  Revenues  from
manufacturing  increased $5,774,000 (77%) due to increased sales of MRI trailers
and sales of cath lab trailers.  During 1998 the  manufacturing  facility became
certified  by GE to  provide  trailers  for  GE  MRI  equipment.  Revenues  from
lithotripsy  operations  increased by $432,000 (1%) due to a slight  increase in
procedures  performed  partially  offset  by a slight  decrease  in the  average
reimbursement per procedure.  Revenues from prostatherapy  operations  increased
$758,000  (116%) due to additional  routes which were added during late 1998 and
early 1999.  During the 3rd quarter the Company  entered the  refractive  vision
correction  (RVC)  field  through  two  acquisitions.   As  a  result  of  these
acquisitions,  the Company recognized refractive revenues of $987,000, including
equity income of $114,000.

Total revenues for the three months ended September 30, 1999 increased$1,696,000
(6%) as  compared  to the same  period  in  1998.  Revenues  from  manufacturing
increased  $2,062,000 (62%) and revenues from lithotripter  operations decreased
by  $1,418,000   (6%).  In  addition  to  a  slight   decrease  in  the  average
reimbursement  per procedure,  procedure  volume  decreased for the three months
ended  September 30, 1999 as compared to the same period in 1998.  Revenues from
prostatherapy  operations  increased  $62,000 (18%) because of additional routes
added  during  late 1998 and early  1999,  partially  offset by a decline in the
procedures  performed by the North Carolina  unit.

Expenses
--------

For the nine months  ended  September  30,  1999,  costs and  expenses
(excluding  depreciation and amortization)  remained constant at 39% of revenues
and increased by $2,801,000 (9%) in absolute  terms,  primarily due to increased
activity in 1999 in prostatherapy  operations and the  manufacturing  segment as
well as the addition of RVC operations, partially offset by certain nonrecurring
development and other costs incurred in 1998 of $1,617,000. Cost of services and
general and  administrative  expenses  associated with  manufacturing  increased
$3,888,000  due to the  increase  in sales.  Cost of  services  associated  with
lithotripter operations decreased $231,000 (1%) in absolute terms as a result of
a decrease in repairs and maintenance  expenses due to economies of scale offset
by increased lithotripsy operations. These expenses decreased from 26% to 25% of
lithotripter revenues. Corporate expenses decreased $376,000 (9%) and from 5% to
4%  of  revenues  as  the  Company   continues  to  successfully   grow  without
proportionately adding overhead.

Costs and expenses (excluding depreciation and amortization) for the three
months  ended  September  30, 1999  increased  from 38% to 39% of  revenues  and
increased  $1,006,000  (9%) in  absolute  terms,  compared to the same period in
1998. This increase is primarily  attributed to the growth in the  manufacturing
segment and the Company's  entrance into the RVC field, both of which have lower
margins as compared to lithotripsy operations.  Cost of services and general and
administrative expenses associated with manufacturing increased $1,249,000 (42%)
due to the  increase in sales of MRI  trailers  and sales of cath lab  trailers.
Costs of services  associated with lithotripter  operations  decreased  $897,000
(14%) in absolute terms and decreased from 25% to 23% of lithotripter  revenues.
Cost of services  associated with  prostatherapy  operations  increased  $73,000
(28%) due to the additional routes discussed above.  Corporate expenses remained
constant at 5% of revenues,  while increasing $47,000 (4%) in absolute terms, as
the Company  continues  to  successfully  grow  without  proportionately  adding
overhead.







                                      -19-


<PAGE>



Other Income (Deductions)
-------------------------

For the nine  months  ended  September  30,  1999,  other  deductions  decreased
$5,177,000  compared to the same period in 1998.  This decrease is the result of
financing  costs  recognized  in 1998 of  $4,982,000  associated  with  the $100
million  debt  offering  and the $50 million  increase  in the senior  revolving
credit facility,  as well as income recognition in 1999 of $1,140,000 due to the
release  of  a  contractual   obligation  related  to  a  management   incentive
compensation  program accrued at December 31, 1998.  Interest expense  increased
$584,000 (9%) due to the higher  principal  balances in 1999 related to the $100
million debt offering,  which closed in March 1998. Interest income increased by
$54,000 (5%)  resulting  from higher cash  balances.  Other  expenses  increased
$415,000 primarily due to a write-off of costs related to a proposed acquisition
that was not consummated.

Other deductions for the three months ended September 30, 1999 decreased $66,000
compared to the same period in 1998.  Interest income decreased  $98,000 as cash
balances  decreased  this  quarter as a result of the two RVC  acquisitions  and
interest  expense  increased  $44,000  relating  to  new  partnership  debt  for
equipment purchases.

Minority Interest In Consolidated Income
----------------------------------------

Minority interest in consolidated income for the nine months ended September 30,
1999 increased  $1,447,000 compared to the same period in 1998, primarily due to
an  increase  in  operating  income  of  applicable  entities.  Earnings  before
interest, taxes, depreciation and amortization (EBITDA) attributable to minority
interests was  $21,718,000 for the nine months ended September 30, 1999 compared
to $20,398,000 for the same period in 1998.  EBITDA is not intended to represent
net income or cash flows from operating  activities in accordance with generally
accepted  accounting  principles  and should not be  considered a measure of the
Company's profitability or liquidity.

Minority  interest in  consolidated  income for the three months ended September
30, 1999 decreased $164,000 compared to the same period in 1998. Earnings before
interest, taxes, depreciation and amortization (EBITDA) attributable to minority
interests was $6,660,000 for the three months ended  September 30, 1999 compared
to $7,852,000  for the same period in 1998.  EBITDA is not intended to represent
net income or cash flows from operating  activities in accordance with generally
accepted  accounting  principles  and should not be  considered a measure of the
Company's profitability or liquidity.

Provision for income taxes
--------------------------

Income tax expense  for the nine  months  ended  September  30,  1999  increased
$3,206,000  compared to the same period in 1998 and  increased  $305,000 for the
three months ended  September  30, 1999 due  primarily to the increase in pretax
earnings in 1999.

Liquidity and Capital Resources
-------------------------------

Cash was  $21,001,000  and  $40,146,000  at September  30, 1999 and December 31,
1998,  respectively.  Cash  provided by  operations  for the nine  months  ended
September 30, 1999 was  $31,749,000  compared to cash provided by operations for
the nine months ended  September 30, 1998 of  $27,309,000.  The increase in cash
from  operation  results from  increased fee revenue  collections  attributed to
higher fee revenues during 1999, and lower income tax payments and the timing of
interest expense payments in 1999.











                                      -20-


<PAGE>



Cash used in investing  activities for the nine months ended  September 30, 1999
was  $23,454,000  compared  to cash used in  investing  activities  for the nine
months  ended  September  30,  1998 of  $1,422,000.  The  change  was  primarily
attributed  to an increase in  purchases  of  equipment  in 1999,  a decrease in
distributions  from equity  investments  from 1998 to 1999 and purchases of both
LASIK and lithotripsy operations in 1999 of $21,293,000.  Cash used in financing
activities for the nine months ended  September 30, 1999 was  $27,440,000  which
included  distributions to minority interest totaling  $25,685,000,  purchase of
treasury stock of $6,567,000 and payments on notes payable of $1,078,000,  which
was  partially   offset  by  borrowings  on  notes  payable  of  $3,673,000  and
contributions  by  minority  interest  of  $2,138,000.  Cash  used in  financing
activities  for the nine  months  ended  September  30,  1998  was  $17,094,000,
primarily due to distributions to minority interests of $24,892,000 and purchase
of  treasury  stock  of  $11,905,000  partially  offset  by  new  borrowings  of
$100,025,000 less payments on notes payable of $80,392,000.

The Company's  existing  senior credit facility is comprised of a revolving line
of credit.  The revolving line of credit has a borrowing  limit of $100 million,
none of which was drawn at September 30 and October 31, 1999.

On March 27, 1998,  the Company  completed an offering of $100 million of senior
subordinated notes due 2008 (the "Notes") to qualified institutional buyers. The
net proceeds from the offering of  approximately  $96 million were used to repay
all  outstanding  indebtedness  under  the  Company's  bank  facility,  with the
remainder to be used for general corporate purposes, including acquisitions.  In
connection therewith, the Company recorded a charge to earnings of approximately
$4.4 million for debt issuance costs  associated with the Notes.  The Notes bear
interest at 8.75% and interest is payable semi-annually on April 1st and October
1st. Principal is due April 2008.

The Company intends to increase the number of its lithotripsy and RVC operations
primarily through acquisitions.  The Company believes that the fragmented nature
of the lithotripsy  industry,  combined with operational  challenges  created by
increasing regulatory and business complexities, including Stark II, the Illegal
Remuneration   Statute  and  similar  state  laws,   will  provide   significant
lithotripsy acquisition opportunities.  Where appropriate, the Company will seek
to  increase  its  ownership  interest  in  current  lithotripsy  operations  by
purchasing  interests of urologists and other investors who desire to divest due
to concerns over regulatory  issues,  to realize a return on their investment or
to  retire.   The  Company  intends  to  fund  the  purchase  price  for  future
acquisitions  using  borrowings  under its senior credit  facility and cash flow
from operations.  In addition, the Company may use shares of its common stock in
such acquisitions where appropriate.

During 1998,  the Company  announced a stock  repurchase  program of up to $25.0
million of common stock. From time to time, the Company may purchase  additional
shares  of its  common  stock  where,  in the  judgment  of  management,  market
valuations  of its  stock  do not  accurately  reflect  the  Company's  past and
projected results of operations.  The Company intends to fund any such purchases
using available cash, cash flow from operations and borrowings  under its senior
credit facility. The Company has purchased 2,791,300 shares of stock for a total
of $24,008,000 as of October 31, 1999.

The Company's ability to make scheduled  payments of principal of, or to pay the
interest on, or to  refinance,  its  indebtedness,  or to fund  planned  capital
expenditures will depend on its future performance,  which, to a certain extent,
is subject to general economic, financial, competitive,  legislative, regulatory
and other  factors that are beyond its control.  Based upon the current level of
operations and anticipated cost savings and revenue growth,  management believes
that cash flow from  operations  and available  cash,  together  with  available
borrowings  under its  senior  credit  facility,  will be  adequate  to meet the
Company's future  liquidity needs for at least the next several years.  However,
there can be no assurance that the Company's  business will generate  sufficient
cash flow  from  operations,  that  anticipated  revenue  growth  and  operating
improvements  will be realized or that future borrowings will be available under
the senior  credit  facility  in an amount  sufficient  to enable the Company to
service its indebtedness or to fund its other liquidity needs.





                                      -21-


<PAGE>



Impact of Inflation
-------------------

The assets of the Company are not  significantly  affected by inflation  because
the Company is not required to make large investments in fixed assets.  However,
the rate of inflation  will affect  certain of the Company's  expenses,  such as
employee compensation and benefits.

Year 2000 Compliance
--------------------

The "Year  2000 " issue  refers to the  phenomenon  whereby  computer  programs,
having been written using two digits  rather than four to define the  applicable
year, may  erroneously  recognize a date using "00" as the year 1900 rather than
the year  2000.  This  error  could  potentially  result in a system  failure or
miscalculations  causing  disruptions  of  operations,  including,  among  other
things,  a  temporary  inability  to process  transactions  or engage in similar
normal business activities.

The Company  formed a Year 2000 Committee in mid 1998. The Committee was charged
with  examining  (1)  internal  hardware  and  software  systems;   (2)  medical
equipment;  (3) physical facilities;  and (4) outside suppliers,  as these items
relate to potential  problems  that could be caused by the  inability to process
dates beyond December 31, 1999.

The  Committee  divided  its task  into  four  parts -  assessment,  remediation
planning,  implementation  and testing  and  contingency  planning.  Assessment,
remediation  planning and  implementation  and testing  have been  substantially
completed for all four phases of the project.  Contingency planning is discussed
below.

Internal hardware and software systems: The Company has completed  substantially
all of the needed upgrades to its hardware and software systems.

Medical equipment:  A review of the Company's  lithotripters has determined that
their operation is not affected directly by the Year 2000 issue. The Company has
completed review of the  miscellaneous  ancillary medical equipment to determine
compliance. Several back up pieces of ancillary equipement may present incorrect
dates,  but none are  critical in the daily  operations  and  failure  would not
affect the ability to perform necessary procedures.

Physical facilities:  The Committee has evaluated its non-computer equipment and
has determined that, except for its telephone system, there are no devices whose
failure  would  materially  affect the ability to carry out the  business of the
Company.  A compliant  telephone  system is expected to be installed by November
30, 1999. The outside  managers of the Company's  office buildings have reported
that all aspects of the  physical  facilities  -  elevators,  fire and  security
systems,  etc. are compliant.  Their further inquiry of those  supplying  public
utilities  have  produced  assurances  of  best  efforts  but  no  guarantee  of
performance.

Outside  suppliers:  The  Company  has  inquired  about  the  state of Year 2000
readiness of those outside  suppliers who were  determined to be critical to the
Company's  ability to carry out its  business.  The Company  continues to survey
non-critical suppliers.

Contingency  planning:  The Company cannot be certain that it has identified and
will be successful in bringing into  compliance  all Year 2000 issues within its
control.  It can be even less  certain of critical  services  being  supplied by
third parties beyond its control.  The Company has formal  contingency plans for
critical areas for carrying on its business in the event of  unanticipated  Year
2000-related failures.  Presently, the Company believes that the most reasonably
likely worst case scenario  would be a failure of relatively  short  duration of
basic  third  party  services  such as the power  grid.  With such a failure the
Company's planning will be directed toward a temporary  suspension of operations
followed by plans for resumption  and catch up operations.  Due to the magnitude
of the uncertainties related to Year 2000 issues, the Company is unable to fully
assess the consequences of Year 2000 failures and, consequently,  there could be
a material  adverse  effect on the Company's  results of  operations,  financial
position and cash flows.


                                      -22-



<PAGE>



To date, the Company has not experienced  significant  costs associated with the
Year 2000 issue and does not expect significant costs to be incurred in order to
correct the Year 2000 issue.

Forward-Looking Statements
--------------------------

The  statements  contained  in this  Report  on Form  10-Q  that are not  purely
historical are  forward-looking  statements within the meaning of Section 27A of
the  Securities  Act of 1933 and Section 21E of the  Securities  Exchange Act of
1934,  including  statements   regarding  the  Company's   expectation,   hopes,
intentions or strategies  regarding the future.  Readers  should not place undue
reliance on forward-looking  statements. All forward-looking statements included
in this document are based on  information  available to the Company on the date
hereof, and the Company assumes no obligation to update any such forward-looking
statements.  It is important to note that the  Company's  actual  results  could
differ materially from those in such forward-looking  statements. In addition to
any risks and uncertainties specifically identified in the text surrounding such
forward-looking  statements,  the reader should consult the Company's reports on
Form 10-K and other filings under the  Securities Act of 1933 and the Securities
Exchange  Act of 1934,  for factors  that could cause  actual  results to differ
materially from those presented.

The forward-looking  statements included herein are necessarily based on various
assumptions  and  estimates  and are  inherently  subject to  various  risks and
uncertainties,  including  risks  and  uncertainties  relating  to the  possible
invalidity of the underlying  assumptions and estimates and possible  changes or
developments  in  social,  economic,   business,  industry,  market,  legal  and
regulatory circumstances and conditions and actions taken or omitted to be taken
by  third  parties,  including  customers,   suppliers,  business  partners  and
competitors and  legislative,  judicial and other  governmental  authorities and
officials.  Assumptions related to the foregoing involve judgments with respect
to, among other things,  future economic,  competitive and market conditions and
future business  decisions,  all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company.  Any of such
assumptions  could be inaccurate and  therefore,  there can be no assurance that
the  forward-looking  statements included in this Report on Form 10-Q will prove
to be accurate.





























                                      -23-


<PAGE>
















                                     PART II


                                OTHER INFORMATION






























                                      -24-


<PAGE>



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

NONE.

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

(a)  Exhibits

     12.      Computation of ratio of earnings to fixed charges
     27.      Financial Data Schedule

(b)  Current Reports on Form 8-K

     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.
                                                    PRIME MEDICAL SERVICES, INC.



Date:  November 12, 1999
                                                    By: /s/ Cheryl Williams
                                                    ---------------------------
                                                    Cheryl Williams
                                                    Chief Financial Officer


                                      -26-