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 June 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                                   July 31, 1999
 Common Stock, $.01 par value                               16,847,467


<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                 Six Months Ended
                                                               June 30,                          June 30,
                                                        1999              1998             1999              1998
                                                      -------           -------          -------           -------
Fee revenue:
     Lithotripsy:
          Fee revenues                                $21,577           $21,028         $ 41,073           $39,540
          Management fees                               1,411             1,289            2,762             2,358
          Equity income                                   601               672            1,163             1,250
                                                      -------           -------          -------           -------
                                                       23,589            22,989           44,998            43,148

     Manufacturing                                      4,473             1,728            7,873             4,161
     Prostatherapy                                        485               224            1,003               307
     Cardiac                                               61                88              116               208
                                                      -------           -------          -------           -------
        Total fee revenue                              28,608            25,029           53,990            47,824
                                                      -------           -------          -------           -------

Costs and expenses:
     Cost of services and general
       and administrative expense
          Lithotripsy                                   5,798             5,989           11,840            11,398
          Manufacturing                                 3,342             1,459            5,796             3,157
          Prostatherapy                                   371               161              828               269
          Cardiac                                          58                47              119               148
          Corporate                                     1,357             1,266            2,228             2,427
          Nonrecurring development and
            other costs                                  --                 --              --               1,617
                                                      -------           -------          -------           -------

                                                       10,926             8,922           20,811            19,016

     Depreciation and amortization                      2,553             2,605            5,028             5,173
                                                      -------           -------          -------           -------

                                                       13,479            11,527           25,839            24,189
                                                      -------           -------          -------           -------

Operating income                                       15,129            13,502           28,151            23,635

Other income (deductions):
     Interest and dividends                               333               403              738               586
     Interest expense                                  (2,325)           (2,331)          (4,654)           (4,114)
     Financing costs                                     --                --               --              (4,982)
     Release of contractual obligation                  1,140              --              1,140              --
     Other, net                                            47               176             (291)              332
                                                      -------           -------          -------           -------

                                                         (805)           (1,752)          (3,067)           (8,178)
                                                      -------           -------          -------           -------

Income before provision for income taxes
    and minority interest                              14,324            11,750           25,084            15,457

Minority interest in consolidated income                7,201             6,001           12,644            11,033
Provision for income taxes                              2,821             2,232            4,976             2,075
                                                      -------           -------          -------           -------

Net income                                            $ 4,302           $ 3,517          $ 7,464           $ 2,349
                                                      =======           =======          =======           =======

Basic earnings per share:
     Net income                                       $  0.25           $  0.18          $  0.43           $  0.12
                                                      =======           =======          =======           =======
     Weighted average shares outstanding               17,098            19,088           17,241            19,200
                                                      =======           =======          =======           =======

Diluted earnings per share:
     Net income                                       $  0.25           $  0.18          $  0.43           $  0.12
                                                      =======           =======          =======           =======
     Weighted average shares outstanding               17,196            19,223           17,344            19,344
                                                      =======           =======          =======           =======
</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>
                                                                                        June 30,         December 31,
                                                                                          1999              1998
                                                                                        --------          --------
ASSETS

Current assets:
     Cash                                                                               $ 36,101          $ 40,146
     Accounts receivable, less allowance
       for doubtful accounts of $968 in
       1999 and $966 in 1998                                                              24,893            22,321
     Other receivables                                                                     2,683             2,228
     Deferred income taxes                                                                 1,517             2,330
     Prepaid expenses and other current assets                                             5,001             2,774
                                                                                        --------          --------

          Total current assets                                                            70,195            69,799
                                                                                        --------          --------

Property and equipment:
     Equipment, furniture and fixtures                                                    37,284            34,485
     Building and leasehold improvements                                                   2,081             2,073
                                                                                        --------          --------

                                                                                          39,365            36,558

Less accumulated depreciation and
     amortization                                                                        (21,754)          (18,471)
                                                                                        --------          --------

     Property and equipment, net                                                          17,611            18,087


Other investments                                                                         10,716            11,491
Goodwill, at cost, net of amortization                                                   138,829           140,863
Other noncurrent assets                                                                    1,036               879
                                                                                        --------          --------

                                                                                       $ 238,387         $ 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>
                                                                                        June 30,          December 31,
                                                                                          1999              1998
                                                                                        --------          --------
LIABILITIES:

Current liabilities:

  Current portion of long-term debt                                                    $     797         $     890
  Accounts payable                                                                         4,558             6,208
  Accrued distributions to minority interests                                                 55             8,951
  Accrued expenses                                                                         9,124            12,051
                                                                                        --------          --------

     Total current liabilities                                                            14,534            28,100

Long-term debt, net of current portion                                                   101,701           100,987
Deferred income taxes                                                                      6,074             4,789
                                                                                        --------          --------
     Total liabilities                                                                   122,309           133,876

Minority interest                                                                         22,727            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                                                            87,440            87,380
Accumulated earnings                                                                      26,079            18,615
Treasury stock, at cost, 2,360,900 in 1999
  and 1,845,200 in 1998                                                                  (20,362)          (16,439)
                                                                                        --------          --------
     Total stockholders' equity                                                           93,351            89,750
                                                                                        --------          --------

                                                                                       $ 238,387         $ 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>
                                                                                             Six Months Ended
                                                                                                 June 30,
                                                                                         1999               1998
                                                                                       --------           --------

CASH FLOWS FROM OPERATING ACTIVITIES:
  Fee and other revenue collected                                                      $ 51,383           $ 45,792
  Cash paid to employees, suppliers
         of goods and others                                                            (28,545)           (24,695)
  Interest received                                                                         738                586
  Interest paid                                                                          (4,555)            (2,409)
  Income taxes paid                                                                      (3,147)            (6,312)
                                                                                       --------           --------
         Net cash provided by
         operating activities                                                            15,874             12,962
                                                                                       --------           --------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of equipment and
         leasehold improvements                                                          (2,081)            (2,068)
  Distributions from investments                                                          1,540              1,843
  Purchase of investments                                                                    -                (107)
  Other                                                                                     522                540
                                                                                       --------           --------
         Net cash provided by (used in)
         investing activities                                                               (19)               208
                                                                                       --------           --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings on notes payable                                                             1,508            100,025
  Payments on notes payable, exclusive of interest                                         (887)           (80,098)
  Distributions to minority interest                                                    (18,789)           (19,053)
  Contributions by minority interest                                                      2,138                -
  Purchase of treasury stock                                                             (3,923)            (6,126)
  Exercise of stock options                                                                  53                 70
                                                                                       --------           --------

         Net cash used in financing activities                                          (19,900)            (5,182)
                                                                                       --------           --------

NET INCREASE (DECREASE) IN CASH AND CASH
         EQUIVALENTS                                                                     (4,045)             7,988

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

Cash and cash equivalents, end of period                                                $ 36,101          $ 31,758
                                                                                        ========          ========



</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>
                                                                                            Six Months Ended
                                                                                                June 30,
                                                                                         1999              1998
                                                                                       --------          --------
Reconciliation of net income to
  cash provided by operating activities
    Net income                                                                         $  7,464          $  2,349

    Adjustments to reconcile net income
         to cash provided by
         operating activities:
            Minority interest in consolidated income                                     12,644            11,033
            Depreciation and amortization                                                 5,028             5,173
            Provision for deferred income taxes                                           2,098              (766)
            Equity in earnings of affiliates                                             (1,113)           (1,250)
            Other                                                                           (51)              --

            Changes in operating assets and
                  liabilities:
                    Accounts receivable                                                  (2,203)            (1,113)
                    Other receivables                                                    (1,024)              (426)
                    Other current assets                                                 (2,227)            (1,296)
                    Accounts payable                                                     (1,737)             2,677
                    Accrued expenses                                                     (3,005)            (3,419)

                                                                                       --------           --------
                    Total adjustments                                                     8,410             10,613
                                                                                       --------           --------

                  Net cash provided by
                    operating activities                                               $ 15,874           $ 12,962
                                                                                       ========           ========






</TABLE>
















                 See notes to consolidated financial statements

                                       -7-

<PAGE>
                          PRIME MEDICAL SERVICES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 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 June 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.       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. A reconciliation of such EPS
data is as follows:

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

Net income                                                                           $   7,464          $  7,464
                                                                                     =========         =========

Average number of shares outstanding                                                    17,241            17,241
Effect of dilutive options                                                                --                 103
                                                                                     ---------         ---------
Shares for EPS calculation                                                              17,241            17,344
                                                                                     =========         =========

Net income per share                                                                 $    0.43         $    0.43
                                                                                     =========         =========

Six Months Ended June 30, 1998

Net income                                                                           $   2,349         $   2,349
                                                                                     =========         =========

Average number of shares outstanding                                                    19,200            19,200
Effect of dilutive options                                                                 --                144
                                                                                     ---------         ---------
  Shares for EPS  calculation                                                           19,200            19,344
                                                                                     =========         =========

Net income per share                                                                 $    0.12         $    0.12
                                                                                     =========         =========
</TABLE>





                                       -8-


<PAGE>
                          PRIME MEDICAL SERVICES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1999
                                   (Unaudited)

2.       Earnings per share, continued
--       -----------------------------
<TABLE>

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

Net income                                                                            $  4,302          $  4,302
                                                                                     =========         =========

Average number of shares outstanding                                                    17,098            17,098
Effect of dilutive options                                                                 --                 98
                                                                                     ---------         ---------
  Shares for EPS calculation                                                            17,098            17,196
                                                                                     =========         =========

Net income per share                                                                  $   0.25          $   0.25
                                                                                     =========         =========

Three Months Ended June 30, 1998

Net income                                                                            $  3,517           $ 3,517
                                                                                     =========         =========

Average number of shares outstanding                                                    19,088            19,088
Effect of dilutive options                                                                 --                145
                                                                                     ---------         ---------
  Shares for EPS calculation                                                            19,088            19,223
                                                                                     =========         =========

Net income per share                                                                  $   0.18          $   0.18
                                                                                     =========         =========
</TABLE>

Unexercised  stock options to purchase  1,616,500  and  1,229,000  shares of the
Company's  common  stock as of June 30,  1999 and 1998 were not  included in the
computation of diluted EPS because the effect would be antidilutive.

3.       Segment Reporting
--       -----------------

The Company has two reportable segments:  Medical,  which includes  lithotripsy,
prostatherapy 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; 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 THE CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1999
                                   (Unaudited)

3.       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)          Six Months Ended          Six Months Ended          Six Months Ended          Six Months Ended
                               June 30, 1999             June 30, 1999             June 30, 1998             June 30, 1998
                               -------------             -------------             -------------             -------------

                                  Medical                Manufacturing                Medical                Manufacturing
                                  -------                -------------                -------                -------------
Revenue from
external customers                $46,117                    $7,873                   $43,663                    $4,161

Intersegment
revenues                              -                         148                       -                         210

Segment profit                     16,870                     1,443                    16,721                       898
</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>
                                                                                    Six  months ended June 30,
                                                                                      1999              1998
                                                                                    -------           -------
                                                                                         ($ in thousands)

Total segment profit                                                                $18,313           $17,619

Unallocated corporate expenses:
     General and administrative expenses                                             (2,228)           (2,427)
     Net interest expense                                                            (3,926)           (3,635)
     Financing costs                                                                    -              (4,982)
     Nonrecurring development and other costs                                           -              (1,617)
     Release of contractual obligation                                                1,140               -
     Other, net                                                                        (859)             (534)
                                                                                    -------           -------

Income before income taxes                                                          $12,440           $ 4,424
                                                                                    =======           =======
</TABLE>
<TABLE>
<S>                           <C>                       <C>                       <C>                       <C>
    ($ in thousands)          Three Months Ended        Three Months Ended        Three Months Ended        Three Months Ended
                               June 30, 1999             June 30, 1999             June 30, 1998             June 30, 1998
                               -------------             -------------             -------------             -------------

                                  Medical                Manufacturing                Medical                Manufacturing
                                  -------                -------------                -------                -------------
Revenue from
external customers                $24,135                    $4,473                   $23,301                    $1,728

Intersegment
revenues                              -                        102                        -                          75

Segment profit                      8,858                      783                      8,834                       176
</TABLE>


                                      -10-

<PAGE>
                          PRIME MEDICAL SERVICES, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1999
                                   (Unaudited)

3.       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 June 30,
                                                                                       1999             1998
                                                                                     -------           -------
                                                                                         ($ in thousands)

Total segment profit                                                                 $ 9,641           $ 9,010

Unallocated corporate expenses:
     General and administrative expenses                                              (1,357)           (1,266)
     Net interest expense                                                             (1,986)           (1,963)
     Release of contractual obligation                                                 1,140               -
     Other, net                                                                         (315)              (32)
                                                                                     -------           -------

Income before income taxes                                                           $ 7,123           $ 5,749
                                                                                     =======           =======
</TABLE>
4.       Condensed Financial Information Regarding Guarantor Subsidiaries
--       ----------------------------------------------------------------
Condensed consolidating  financial information regarding the Company,  Guarantor
Subsidiaries  and  Non-guarantor  Subsidiaries  for  June  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. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1999
                                   (Unaudited)

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

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



Fee revenue:
Lithotripsy:
     Fee revenues                       $      -       $    9,899     $   31,174     $      -       $   41,073
     Management fees                           -            1,725          1,037            -            2,762
     Equity income                          17,286          9,718             -         (25,841)         1,163
                                        ----------     ----------     ----------     ----------     ----------
                                            17,286         21,342         32,211        (25,841)        44,998
Manufacturing                                  -              -            7,873            -            7,873
Prostatherapy                                  -              -            1,003            -            1,003
Cardiac                                        -              116             -             -              116
                                        ----------     ----------     ----------     ----------     ----------
          Total revenues                    17,286         21,458         41,087        (25,841)        53,990
                                        ----------     ----------     ----------     ----------     ----------
Costs and expenses:
Cost of services and general and
   administrative expenses:
     Lithotripsy                               -            1,135         10,705            -           11,840
     Manufacturing                             -              -            5,796            -            5,796
     Prostatherapy                             -              -              828            -              828
     Cardiac                                   -              119            -              -              119
     Corporate                                 147          2,081            -              -            2,228
                                        ----------     ----------     ----------     ----------     ----------
          Total costs and expenses             147          3,335         17,329            -           20,811
Depreciation and amortization                    3          2,436          2,589            -            5,028
                                        ----------     ----------     ----------     ----------     ----------
                                               150          5,771         19,918            -           25,839
                                        ----------     ----------     ----------     ----------     ----------
Operating income                            17,136         15,687         21,169        (25,841)        28,151
                                        ----------     ----------     ----------     ----------     ----------
Other income (deductions):
Interest income                                352            280            106            -              738
Interest expense                            (4,554)           -             (100)           -           (4,654)
Release of contractual obligation              -            1,140            -              -            1,140
Other, net                                    (726)           417             18            -             (291)
                                        ----------     ----------     ----------     ----------     ----------
          Total other income
             (deductions)                   (4,928)         1,837             24            -           (3,067)
Income before provision for income
   taxes and minority interest              12,208         17,524         21,193        (25,841)        25,084
Minority interest in consolidated
   income                                       -             -              -           12,644         12,644
Provision for income taxes                   4,744            238             (6)           -            4,976
                                        ----------     ----------     ----------     ----------     ----------
          Net income                    $    7,464     $   17,286     $   21,199     $  (38,485)    $    7,464
                                        ==========     ==========     ==========     ==========     ==========
</TABLE>

                                      -12-

<PAGE>
                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1999
                                   (Unaudited)

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

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



Fee revenue:
Lithotripsy:
     Fee revenues                       $      -       $   10,602     $   28,938     $      -       $   39,540
     Management fees                           -            1,367            991            -            2,358
     Equity income                          14,062          8,972            -          (21,784)         1,250
                                        ----------     ----------     ----------     ----------     ----------
                                            14,062         20,941         29,929        (21,784)        43,148
Manufacturing                                  -              -            4,161            -            4,161
Prostatherapy                                  -              -              307            -              307
Cardiac                                        -              208            -              -              208
                                        ----------     ----------     ----------     ----------     ----------
          Total revenues                    14,062         21,149         34,397        (21,784)        47,824
                                        ----------     ----------     ----------     ----------     ----------
Costs and expenses:
Cost of services and general and
   administrative expenses:
     Lithotripsy                               -            1,692          9,706            -           11,398
     Manufacturing                             -              -            3,157            -            3,157
     Prostatherapy                             -              -              269            -              269
     Cardiac                                   -              148            -              -              148
     Corporate                                  75          2,352            -              -            2,427
        Nonrecurring development
            and other costs                  1,617             -             -              -            1,617
                                        ----------     ----------     ----------     ----------     ----------
          Total costs and expenses           1,692          4,192         13,132            -           19,016
Depreciation and amortization                    3          2,620          2,550            -            5,173
                                        ----------     ----------     ----------     ----------     ----------
Operating income                            12,367         14,337         18,715        (21,784)        23,635
                                        ----------     ----------     ----------     ----------     ----------
Other income (deductions):
Interest income                                253            125            208            -              586
Interest expense                            (3,992)            (3)          (119)           -           (4,114)
Financing costs                             (4,982)           -              -              -           (4,982)
Other, net                                       3            328              1            -              332
                                        ----------     ----------     ----------     ----------     ----------
          Total other income
             (deductions)                   (8,718)           450             90            -           (8,178)
Income before provision for
   income taxes and minority interest        3,649         14,787         18,805        (21,784)        15,457
Minority interest in consolidated
   income                                      -              -              -           11,033         11,033
Provision for income taxes                   1,300            725             50            -            2,075
                                        ----------     ----------     ----------     ----------     ----------
          Net income                    $    2,349     $   14,062     $   18,755     $  (32,817)    $    2,349
                                        ==========     ==========     ==========     ==========     ==========
</TABLE>
                                      -13-

<PAGE>
                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1999
                                   (Unaudited)

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

                   Condensed Consolidating Statement of Income
                                    <TABLE>
<S>                                     <C>            <C>            <C>            <C>            <C>
                                                         Three Months Ended June 30, 1999

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



Fee revenue:
Lithotripsy:
     Fee revenues                       $      -       $    4,890     $   16,687     $      -       $   21,577
     Management fees                           -              937            474            -            1,411
     Equity income                           9,289          5,284            -          (13,972)           601
                                        ----------     ----------     ----------     ----------     ----------
                                             9,289         11,111         17,161        (13,972)        23,589
Manufacturing                                  -              -            4,473            -            4,473
Prostatherapy                                  -              -              485            -              485
Cardiac                                        -               61            -              -               61
                                        ----------     ----------     ----------     ----------     ----------
          Total revenues                     9,289         11,172         22,119        (13,972)        28,608
                                        ----------     ----------     ----------     ----------     ----------
Costs and expenses:
Cost of services and general and
   administrative expenses:
     Lithotripsy                               -              590          5,208            -            5,798
     Manufacturing                             -              -            3,342            -            3,342
     Prostatherapy                             -              -              371            -              371
     Cardiac                                   -               58            -              -               58
     Corporate                                 118          1,239            -              -            1,357
                                        ----------     ----------     ----------     ----------     ----------
          Total costs and expenses             118          1,887          8,921            -           10,926
Depreciation and amortization                    2          1,230          1,321            -            2,553
                                        ----------     ----------     ----------     ----------     ----------
                                               120          3,117         10,242            -           13,479
                                        ----------     ----------     ----------     ----------     ----------
Operating income                             9,169          8,055         11,877        (13,972)        15,129
                                        ----------     ----------     ----------     ----------     ----------
Other income (deductions):
Interest income                                147            141             45            -              333
Interest expense                            (2,273)           -              (52)           -           (2,325)
Release of contractual obligation              -            1,140            -              -            1,140
Other, net                                    (119)           152             14            -               47
                                        ----------     ----------     ----------     ----------     ----------
          Total other income
             (deductions)                   (2,245)         1,433              7            -             (805)
Income before provision for income
   taxes and minority interest               6,924          9,488         11,884        (13,972)        14,324
Minority interest in consolidated
   income                                      -              -              -            7,201          7,201
Provision for income taxes                   2,622            199            -              -            2,821
                                        ----------     ----------     ----------     ----------     ----------
          Net income                    $    4,302     $    9,289     $   11,884     $  (21,173)    $    4,302
                                        ==========     ==========     ==========     ==========     ==========
</TABLE>

                                      -14-

<PAGE>
                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1999
                                   (Unaudited)

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

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



Fee revenue:
Lithotripsy:
     Fee revenues                       $      -       $    5,797     $   15,231     $      -       $   21,028
     Management fees                           -              690            599            -            1,289
     Equity income                           7,406          4,664            -          (11,398)           672
                                        ----------     ----------     ----------     ----------     ----------
                                             7,406         11,151         15,830        (11,398)        22,989
Manufacturing                                  -              -            1,728            -            1,728
Prostatherapy                                  -              -              224            -              224
Cardiac                                        -               88            -              -               88
                                        ----------     ----------     ----------     ----------     ----------
          Total revenues                     7,406         11,239         17,782        (11,398)        25,029
                                        ----------     ----------     ----------     ----------     ----------
Costs and expenses:
Cost of services and general and
   administrative expenses:
     Lithotripsy                               -            1,220          4,769            -            5,989
     Manufacturing                             -              -            1,459            -            1,459
     Prostatherapy                             -              -              161            -              161
     Cardiac                                   -               47            -              -               47
     Corporate                                  26          1,240            -              -            1,266
                                        ----------     ----------     ----------     ----------     ----------

          Total costs and expenses              26          2,507          6,389            -            8,922
Depreciation and amortization                    1          1,244          1,360            -            2,605
                                        ----------     ----------     ----------     ----------     ----------
                                                27          3,751          7,749            -           11,527
                                        ----------     ----------     ----------     ----------     ----------
Operating income                             7,379          7,488         10,033        (11,398)        13,502
                                        ----------     ----------     ----------     ----------     ----------
Other income (deductions):
Interest income                                240             66             97            -              403
Interest expense                            (2,265)            12            (78)           -           (2,331)
Other, net                                       3            197            (24)           -              176
                                        ----------     ----------     ----------     ----------     ----------
          Total other income
             (deductions)                   (2,022)           275             (5)           -           (1,752)
Income before provision for
   income taxes and minority interest        5,357          7,763         10,028        (11,398)        11,750
Minority interest in consolidated
   income                                      -              -              -            6,001          6,001
Provision for income taxes                   1,840            357             35            -            2,232
                                        ----------     ----------     ----------     ----------     ----------
          Net income                    $    3,517     $    7,406     $    9,993     $  (17,399)    $    3,517
                                        ==========     ==========     ==========     ==========     ==========
</TABLE>

                                      -15-


<PAGE>
                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1999
                                   (Unaudited)

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

                      Condensed Consolidating Balance Sheet

<TABLE>
<S>                                     <C>            <C>            <C>            <C>            <C>
($ in thousands)                                                          June 30, 1999

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

ASSETS:

Current assets:
Cash                                    $   15,566     $   14,050     $    6,485     $      -       $   36,101
Accounts receivable, net                       -            4,261         20,632            -           24,893
Other receivables                              -            2,683            -              -            2,683
Deferred income taxes                          790            727            -              -            1,517
Prepaid expenses and other current assets       51            300          4,650            -            5,001
                                        ----------     ----------     ----------     ----------     ----------
  Total current assets                      16,407         22,021         31,767            -           70,195
                                        ----------     ----------     ----------     ----------     ----------

Property and equipment:
Equipment, furniture and fixtures              -            5,263         32,021            -           37,284
Building and leasehold improvements            -              499          1,582            -            2,081
Less accumulated depreciation
  and amortization                             -           (4,508)       (17,246)           -          (21,754)
                                        ----------     ----------     ----------     ----------     ----------

Property and equipment, net                    -            1,254         16,357            -           17,611
Investment in subsidiaries and other
 investments                               184,072         30,183            -         (203,539)        10,716
Goodwill, at cost, net of amortization         -          138,829            -              -          138,829
Other noncurrent assets                        197            640           199             -            1,036
                                        ----------     ----------     ----------     ----------     ----------
    Total assets                        $  200,676     $  192,927     $   48,323     $ (203,539)    $  238,387
                                        ==========     ==========     ==========     ==========     ==========


LIABILITIES:

Current liabilities
Current portion of long-term debt       $      -       $      -       $      797     $      -       $      797
Accounts payable                               540          2,225          1,793            -            4,558
Accrued distributions to minority interests    -              -               55            -               55
Accrued expenses                             4,196          3,151          1,777            -            9,124
                                        ----------     ----------     ----------     ----------     ----------
  Total current liabilities                  4,736          5,376          4,422            -           14,534
Long-term debt, net of current portion     100,000            162          1,539            -          101,701
Deferred income taxes                        2,589          3,485            -              -            6,074
                                        ----------     ----------     ----------     ----------     ----------
  Total liabilities                        107,325          9,023         5,961             -          122,309
Minority interest                              -              -             -            22,727         22,727


STOCKHOLDERS' EQUITY:

Common stock                                   194            -             -               -              194
Capital in excess of par value              87,440            -             -               -           87,440
Accumulated earnings                        26,079            -             -               -           26,079
Treasury stock                             (20,362)           -             -               -          (20,362)
Subsidiary net equity                          -          183,904         42,362       (226,266)           -
                                        ----------     ----------     ----------     ----------     ----------
  Total stockholders' equity                93,351        183,904         42,362       (226,266)        93,351
                                        ----------     ----------     ----------     ----------     ----------
    Total liabilities and
       stockholders' equity             $  200,676     $  192,927     $   48,323     $ (203,539)    $  238,387
                                        ==========     ==========     ==========     ==========     ==========

</TABLE>

                                      -16-

<PAGE>
                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1999
                                   (Unaudited)

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

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


     Net cash (used) provided by
        operating activities            $   (8,221)    $    5,335     $   18,760     $      -       $   15,874
                                        ----------     ----------     ----------     ----------     ----------

Cash flows from investing activities:
Purchases of equipment and leasehold
   improvements                                -             (141)        (1,940)           -           (2,081)
Distributions from subsidiaries             11,859         11,440            -          (23,299)           -
Distributions from investments                 -            1,540            -              -            1,540
Other                                          -              150            372            -              522
                                        ----------     ----------     ----------     ----------     ----------
     Net cash provided (used) by
        investing activities                11,859         12,989         (1,568)       (23,299)           (19)
                                        ----------     ----------     ----------     ----------     ----------

Cash flows from financing activities:
Borrowings on notes payable                    -              -            1,508            -            1,508
Payments on notes payable,
   exclusive of interest                       -              -             (887)           -             (887)
Distribution to minority interest              -              -              -          (18,789)       (18,789)
Contributions by minority interest             -              -            2,138            -            2,138
Purchase of treasury stock                  (3,923)           -              -              -           (3,923)
Other                                           53            -              -              -               53
Distributions to equity owners                 -          (11,859)       (30,229)        42,088            -
                                        ----------     ----------     ----------     ----------     ----------
     Net cash provided (used) by
        financing activities                (3,870)       (11,859)       (27,470)        23,299        (19,900)
                                        ----------     ----------     ----------     ----------     ----------
     Net increase (decrease) in cash and
        cash equivalents                      (232)         6,465        (10,278)           -           (4,045)
Cash and cash equivalents at beginning
   of period                                15,798          7,585         16,763            -           40,146
                                        ----------     ----------     ----------     ----------     ----------
Cash and cash equivalents at end of
   period                               $   15,566     $   14,050     $    6,485     $      -       $   36,101
                                        ==========     ==========     ==========     ==========     ==========




</TABLE>














                                      -17-

<PAGE>
                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1999
                                   (Unaudited)

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

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


     Net cash (used) provided by
        operating activities            $  (11,580)    $    2,891     $   21,651     $      -       $   12,962
                                        ----------     ----------     ----------     ----------     ----------

Cash flows from investing activities:
Purchases of equipment and leasehold
   improvements                                -             (606)        (1,462)           -           (2,068)
Distributions from subsidiaries             16,277         11,149            -          (27,426)           -
Investments                                   (107)         1,843            -              -            1,736
Other                                          136            254            150            -              540
                                        ----------     ----------     ----------     ----------     ----------
     Net cash provided (used) by
        investing activities                16,306         12,640         (1,312)       (27,426)           208
                                        ----------     ----------     ----------     ----------     ----------

Cash flows from financing activities:
Payments on notes payable,
   exclusive of interest                   (79,000)            (5)        (1,093)           -          (80,098)
Borrowings on notes payable                100,000            -               25            -          100,025
Distribution to minority interest              -              -              -          (19,053)       (19,053)
Purchase of treasury stock                  (6,126)           -              -              -           (6,126)
Other                                           70            -              -              -               70
Distributions to equity owners                 -          (16,277)       (30,202)        46,479             -
                                        ----------     ----------     ----------     ----------     ----------
     Net cash provided (used) by
        financing activities                14,944        (16,282)       (31,270)        27,426         (5,182)
                                        ----------     ----------     ----------     ----------     ----------
     Net increase (decrease) in cash and
        cash equivalents                    19,670           (751)       (10,931)           -            7,988
Cash and cash equivalents at beginning
   of period                                    18          6,260         17,492            -           23,770
                                        ----------     ----------     ----------     ----------     ----------
Cash and cash equivalents at end of
   period                               $   19,688     $    5,509     $    6,561     $      -       $   31,758
                                        ==========     ==========     ==========     ==========     ==========

</TABLE>

















                                      -18-


<PAGE>
                      Management's Discussion and Analysis
                           of Financial Condition and
                              Results of Operations

Results of Operations

Revenues
--------

For the six months  ended June 30, 1999,  total  revenues  increased  $6,166,000
(13%) as  compared  to the same  period  in 1998.  Revenues  from  manufacturing
increased  $3,712,000  (89%).  During  1998 the  manufacturing  facility  became
certified by GE to provide  trailers for GE MRI equipment  which has resulted in
increased sales.  Revenues from lithotripsy  operations  increased by $1,850,000
(4%) due to an increase in  procedures  performed  and a slight  increase in the
average reimbursement per procedure. The increase in the procedures performed is
the result of both the  formation of several new  partnerships  during late 1998
and early 1999,  and increased  performance at existing  partnerships.  Revenues
from prostatherapy  operations  increased $696,000 (227%) because the California
unit did not become  operational until June 1998.  Revenues from cardiac centers
decreased  $92,000  primarily due to two  discontinued  cardiac  centers.

Total revenues for the three  months  ended June 30, 1999  increased  $3,579,000
(14%) as  compared  to the same  period  in 1998.  Revenues  from  manufacturing
increased $2,745,000 (159%) and revenues from lithotripter  operations increased
by $600,000 (3%).  Revenues from  prostatherapy  operations  increased  $261,000
(117%) because the California unit did not become  operational  until June 1998,
offset by a decline in the  procedures  performed  by the North  Carolina  unit.
Revenues from cardiac centers decreased $27,000 (31%).

Expenses
--------

For  the  six  months  ended  June  30,  1999,  costs  and  expenses  (excluding
depreciation  and  amortization)  decreased  from  40% to 39%  of  revenues  and
increased  by  $1,795,000  (9%) in absolute  terms,  primarily  due to increased
activity  in 1999 in  prostatherapy  operations  and the  manufacturing  segment
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 $2,639,000 due to the increase in sales.
Cost of services associated with lithotripter operations increased $442,000 (4%)
in  absolute  terms as a  result  of  increased  lithotripsy  operations.  These
expenses  remained  constant at 26% of lithotripter  revenues.  Cost of services
associated  with cardiac centers  decreased  $29,000 (20%).  Corporate  expenses
decreased 199,000 (8%) 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  June  30,  1999  increased  from  36% to 38% of  revenues  and  increased
$2,004,000  (22%) in absolute  terms,  compared to the same period in 1998. This
increase is primarily  attributed to the growth in manufacturing sales which has
lower  margins as  compared to  lithotripsy  operations.  Cost of  services  and
general and  administrative  expenses  associated with  manufacturing  increased
$1,883,000  (129%)  due to the  increase  in  sales  of MRI  trailers.  Costs of
services  associated with  lithotripter  operations  decreased  $191,000 (3%) in
absolute terms and decreased from 26% to 25% of lithotripter  revenues.  Cost of
services associated with prostatherapy  operations increased $210,000 (130%) due
to the California unit discussed above. Cost of services associated with cardiac
centers increased $11,000 (23%).  Corporate  expenses remained constant at 5% of
revenues,  while  increasing  $91,000  (7%) in  absolute  terms,  as the Company
continues to successfully grow without proportionately adding overhead.







                                      -19-

<PAGE>
Other Income (Deductions)
-------------------------

For the six months ended June 30, 1999,  other deductions  decreased  $5,111,000
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  $540,000 (13%) due to
the higher principal balances in 1999 related to the $100 million debt offering,
which  closed  in March  1998.  Interest  income  increased  by  $152,000  (26%)
resulting from higher cash balances. Other expenses increased $623,000 primarily
due to a write-  off of costs  related to a  proposed  acquisition  that was not
consummated.

Other  deductions  for the three months ended June 30, 1999  decreased  $947,000
compared to the same period in 1998, primarily due to 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.

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

Minority interest in consolidated  income for the six months ended June 30, 1999
increased  $1,611,000  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  $15,057,660  for the six months ended June 30, 1999 compared to $12,546,000
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 June 30,
1999 increased  $1,200,000  compared to the same period in 1998. Earnings before
interest, taxes, depreciation and amortization (EBITDA) attributable to minority
interests  was  $8,454,000  for the three months ended June 30, 1999 compared to
$6,440,000 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 six months ended June 30, 1999  increased  $2,901,000
compared to the same period in 1998 and increased  $589,000 for the three months
ended June 30, 1999 due primarily to the increase in pretax earnings in 1999.

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

Cash was  $36,101,000  and  $40,146,000  at June 30, 1999 and December 31, 1998,
respectively. Cash provided by operations for the six months ended June 30, 1999
was $15,874,000 compared to cash provided by operations for the six months ended
June 30, 1998 of $12,962,000.  The increase in cash from operation  results from
increased fee revenue collections  attributed to higher fee revenues during 1999
and lower  income  tax  payments  in 1999,  offset by  higher  interest  expense
payments due to $100 million in debt incurred in March 1998.

Cash used in  investing  activities  for the six months  ended June 30, 1999 was
$19,000  compared to cash  provided by investing  activities  for the six months
ended  June 30,  1998 of  $208,000.  The change was  primarily  attributed  to a
decrease  in  distributions  from  equity  investments  from  1998 to 1999 and a
purchase of investments in 1998 of $107,000.  Cash used in financing  activities
for  the  six  months  ended  June  30,  1999  was  $19,900,000  which  included
distributions to minority  interest totaling  $18,789,000,  purchase of treasury
stock of  $3,923,000  and  payments  on notes  payable  of  $887,000,  which was
partially offset by borrowings on notes payable of $1,508,000 and  contributions
by minority  interest of $2,138,000.  Cash used in financing  activities for the
six months ended June 30, 1998 was $5,182,000, primarily due to distributions to
minority  interests of $19,053,000  and purchase of treasury stock of $6,126,000
offset by new  borrowings  of  $100,025,000  less  payments on notes  payable of
$80,098,000.

                                      -20-

<PAGE>
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 June 30 and July 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  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,  remaining
proceeds  from the  offering  of the Notes 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 2,511,800 shares of stock for a total
of $21,530,000 as of July 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.

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.



                                      -21-

<PAGE>
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 and
remediation  planning have been  substantially  completed for all four phases of
the project.  Implementation and testing and contingency  planning are discussed
below.

Internal hardware and software systems: The Company has completed  substantially
all of the needed upgrades to its hardware and software  systems.  The remaining
hardware  and  software  upgrades/replacements  are  expected  to be complete by
September 30, 1999.

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 is
currently  reviewing the miscellaneous  ancillary medical equipment to determine
compliance and expects to be completed by September 30, 1999.

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 September
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 is currently  inquiring 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.  This survey is expected to be
complete by September 30, 1999.

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.  Upon  completion of the  implementation  and
testing phases of the plan, the Company will formalize plans 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.

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.

                                      -22-

<PAGE>
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 judgements 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.
-------   ----------------------------------------------------

On June 9, 1999 an annual meeting of the  shareholders  of the Company was held
to consider  and vote on the two  proposals  described  below.  Proxies for this
meeting were solicited pursuant to Regulation 14 under the Act.

   1) Election of six directors to the board of directors;

     The nominees for director were:

     William E. Foree,M.D., Joseph Jenkins,M.D.,J.D.,  J.A. McEntire IV, William
     A. Searles, Kenneth S. Shifrin, and Michael J. Spalding, M.D.

   All nominees were elected.  The voting was as follows:

   Nominee                          Votes For    Votes Against  Votes Withheld
   -------                          ---------    -------------  --------------
   William E. Foree, M.D.           17,605,051        --           1,072,275
   Joseph Jenkins, M.D., J.D.       17,605,051        --           1,072,275
   J.A. McEntire IV                 17,605,051        --           1,072,275
   William A. Searles               17,605,051        --           1,072,275
   Kenneth S. Shifrin               17,605,051        --           1,072,275
   Michael J. Spalding, M.D.        17,605,051        --           1,072,275

    2)  Amendment  to the  Company's  1993  Stock  Option  Plan  increasing  the
   aggregate number of shares that may to be issued thereunder by 400,000.

   There were  15,960,621  affirmative  votes,  2,110,317  negative  votes and
   606,388 abstentions with respect to this proposal.

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:  August 13, 1999
                                                    By: /s/ Cheryl Williams
                                                    ---------------------------
                                                    Cheryl Williams
                                                    Chief Financial Officer


                                      -26-