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, 2000

            [ ] Transition Report Pursuant to Section 13 or 15(d) of

                     the Securities and 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, TX 78746

      (Address of principal executive office)              (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, 2000
     -------------------                                 -------------
 Common Stock, $.01 par value                              16,005,533

<PAGE>










                                     PART I

                              FINANCIAL INFORMATION




                                       2
<PAGE>

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

<TABLE>
<S>                                              <C>            <C>            <C>            <C>
                                                      Three Months Ended            Six Months Ended
                                                           June 30,                      June 30,
($ in thousands, except per share data)              2000           1999           2000           1999
                                                     ----           ----           ----           ----

Revenue:
     Lithotripsy:
         Fee revenues                              $19,213        $21,577        $38,283        $41,073
         Management fees                               934          1,411          1,828          2,762
         Equity income                                 665            601          1,235          1,163
                                                  --------       --------       --------       --------
                                                    20,812         23,589         41,346         44,998
     Manufacturing                                   5,577          4,473         11,104          7,873
     Refractive                                      6,561            -            9,496            -
     Prostatherapy                                     390            485            792          1,003
     Other                                              42             61             87            116
                                                  --------       --------       --------       --------
         Total revenue                              33,382         28,608         62,825         53,990
                                                  --------       --------       --------       --------

Cost of services and general and
     administrative expenses:
     Lithotripsy                                     5,735          5,737         11,130         11,779
     Manufacturing                                   4,282          3,342          8,572          5,796
     Refractive                                      3,326            -            4,827            -
     Prostatherapy                                     314            371            673            828
     Other                                              45             58             95            119
     Corporate                                       1,177          1,418          2,133          2,289
     Restructuring charges                             350            -              350            -
                                                  --------       --------       --------       --------
                                                    15,229         10,926         27,780         20,811
Depreciation and amortization                        3,434          2,553          6,354          5,028
                                                  --------       --------       --------       --------
                                                    18,663         13,479         34,134         25,839
                                                  --------       --------       --------       --------

Operating income                                    14,719         15,129         28,691         28,151

Other income (deductions):
     Interest and dividends                            197            333            555            738
     Interest expense                               (2,507)        (2,325)        (4,933)        (4,654)
     Loan fees                                         (24)           -             (107)           -
     Release of contractual obligation                 -            1,140            -            1,140
     Other, net                                         78             47             73           (291)
                                                  --------       --------       --------       --------
                                                    (2,256)          (805)        (4,412)        (3,067)
                                                  --------       --------       --------       --------
Income before provision for income
     taxes and minority interests                   12,463         14,324         24,279         25,084

Minority interest in consolidated income             6,845          7,201         13,300         12,644

Provision for income taxes                           2,303          2,821          4,367          4,976
                                                  --------       --------       --------       --------

Net income                                         $ 3,315        $ 4,302        $ 6,612        $ 7,464
                                                  ========       ========       ========       ========

Basic earnings per share:
     Net income                                     $ 0.20         $ 0.25         $ 0.41         $ 0.43
                                                  ========       ========       ========       ========
     Weighted average shares outstanding            16,218         17,098         16,327         17,241
                                                  ========       ========       ========       ========

Diluted earnings per share:
     Net income                                     $ 0.20         $ 0.25         $ 0.40         $ 0.43
                                                  ========       ========       ========       ========
     Weighted average shares outstanding            16,303         17,196         16,455         17,344
                                                  ========       ========       ========       ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       3
<PAGE>

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



                                                      June 30,      December 31,
($ in thousands)                                       2000             1999
                                                     --------         --------

ASSETS

Current assets:
    Cash and cash equivalents                        $ 12,770         $ 20,064
    Investments                                           500            4,120
    Accounts receivable, less allowance for doubtful
       accounts of $270 in 2000 and $224 in 1999       24,611           23,273
    Other receivables                                   4,064            3,491
    Deferred income taxes                                 788            1,066
    Prepaid expenses and other current assets           1,725            2,322
    Inventory                                           4,415            3,676
                                                     --------         --------

       Total current assets                            48,873           58,012
                                                     --------         --------

Property and equipment:
    Equipment, furniture and fixtures                  47,422           42,128
    Building and leasehold improvements                 2,649            2,092
                                                     --------         --------

                                                       50,071           44,220

    Less accumulated depreciation and amortization    (28,096)         (25,567)
                                                     --------         --------

       Property and equipment, net                     21,975           18,653
                                                     --------         --------

Other investments                                      18,504           18,963
Goodwill, at cost, net of amortization                165,290          149,088
Other noncurrent assets                                 2,402            2,110
                                                     --------         --------

                                                     $257,044         $246,826
                                                     ========         ========

          See accompanying notes to consolidated financial statements.


                                       4
<PAGE>
                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS (continued)
                                   (Unaudited)



                                                      June 30,      December 31,
($ in thousands, except share data)                    2000             1999
                                                     --------         --------

LIABILITIES

Current liabilities:
     Current portion of long-term debt                $ 1,887          $ 1,763
     Accounts payable                                   5,445            3,290
     Accrued distributions to minority interests          -              8,332
     Accrued expenses                                   5,464            7,108
                                                     --------         --------

          Total current liabilities                    12,796           20,493

Long-term debt, net of current portion                113,146          103,797
Deferred income taxes                                   7,832            6,400
                                                     --------         --------

          Total liabilities                           133,774          130,690

Minority interest                                      23,644           19,454

STOCKHOLDERS' EQUITY

Preferred stock, $.01 par value;
    1,000,000 shares authorized;
    none outstanding                                      -                -
Common stock, $0.01 par value;
    40,000,000 shares authorized;
    19,524,533 shares issued in 2000
    and 19,367,267 shares issued in 1999                  194              194
Capital in excess of par value                         88,859           87,655
Accumulated earnings                                   40,267           33,654
Treasury stock, at cost; 3,469,400 shares
    in 2000 and 2,875,300 shares in 1999              (29,694)         (24,821)
                                                     --------         --------

          Total stockholders' equity                   99,626           96,682
                                                     --------         --------

                                                     $257,044         $246,826
                                                     ========         ========

          See accompanying notes to consolidated financial statements.


                                       5
<PAGE>
                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)



                                                     Six Months Ended June 30,
($ in thousands)                                       2000            1999
                                                     --------         --------

CASH FLOWS FROM OPERATING ACTIVITIES:
    Fee and other revenue collected                  $ 59,228         $ 51,383
    Cash paid to employees, suppliers of
        goods and others                              (28,654)         (28,545)
    Proceeds from sales and maturities of
        investments                                     3,704              -
    Interest received                                     471              738
    Interest paid                                      (4,932)          (4,555)
    Taxes paid                                         (2,946)          (3,147)
                                                     --------         --------

         Net cash provided by operating
             activities                                26,871           15,874
                                                     --------         --------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of operating entities                    (18,229)             -
    Purchases of equipment and leasehold
       improvements                                    (4,712)          (2,081)
    Distributions from investments                      2,094            1,540
    Other                                                 112              522
                                                     --------         --------

          Net cash used in investing activities       (20,735)             (19)
                                                     --------         --------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Borrowings on notes payable                        10,276            1,508
    Payments on notes payable, exclusive
        of interest                                      (804)            (887)
    Distributions to minority interest                (18,537)         (18,789)
    Contributions by  minority interest,
        net of buyouts                                    345            2,138
    Purchases of treasury stock                        (4,874)          (3,923)
    Exercise of stock options, and sales
        and purchases of put options                      164               53
                                                     --------         --------

         Net cash used in financing activities        (13,430)         (19,900)
                                                     --------         --------

NET DECREASE IN CASH AND CASH EQUIVALENTS              (7,294)          (4,045)

Cash and cash equivalents, beginning of period         20,064           40,146
                                                     --------         --------

Cash and cash equivalents, end of period             $ 12,770         $ 36,101
                                                     ========         ========

          See accompanying notes to consolidated financial statements.



                                       6
<PAGE>
                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                                   (Unaudited)



                                                     Six Months Ended June 30,
($ in thousands)                                       2000             1999
                                                     --------         --------

Reconciliation of net income to cash
    provided by operating activities:
    Net income                                        $ 6,612         $  7,464
    Adjustments to reconcile net income
        to cash provided by operating activities:
      Minority interest in consolidated income         13,300           12,644
      Depreciation and amortization                     6,354            5,028
      Provision for deferred income taxes               1,317            2,098
      Equity in earnings of affiliates                 (1,934)          (1,113)
      Other                                               (69)             (51)

Changes in operating assets and liabilities,
  net of effect of purchase transactions:
   Investments                                         (1,293)             -
   Accounts receivable                                  3,619           (2,203)
   Other receivables                                     (573)          (1,024)
   Other assets                                          (213)          (2,227)
   Accounts payable                                     1,236           (1,737)
   Accrued expenses                                    (1,485)          (3,005)
                                                     --------         --------

 Total adjustments                                     20,259            8,410
                                                     --------         --------

Net cash provided by operating activities            $ 26,871         $ 15,874
                                                     ========         ========


          See accompanying notes to consolidated financial statements.



                                       7
<PAGE>


                          PRIME MEDICAL SERVICES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 30, 2000

                                   (Unaudited)

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

The accompanying  unaudited consolidated financial statements have been prepared
in conformity with the accounting  principles for interim  financial  statements
and with the  instructions  to Form 10-Q and Rule 10-01 of Regulation S-X. These
statements  reflect all  adjustments  which are,  in the opinion of  management,
necessary for a fair statement of the financial position as of June 30, 2000 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,  1999  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.

The Financial  Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities"  ("SFAS No. 133") in June 1998. SFAS No. 133  establishes  reporting
standards for  derivative  instruments  and hedging  activities  that require an
entity to recognize all  derivatives as assets or  liabilities  measured at fair
value and is effective for financial  statements  issued for all fiscal quarters
of fiscal years beginning after June 15, 2000. If certain  conditions are met, a
derivative may be specifically  designated as a hedge of the exposure to changes
in the  fair  market  value,  variable  cash  flow,  or  foreign  currency  of a
recognized   asset  or  liability  or  certain  other   transactions   and  firm
commitments.  The effect of adopting SFAS No. 133 is currently being  evaluated,
however,  the Company does not believe the effects of adoption  will be material
to its financial position or results of operations.

2.   Earnings per share
--   ------------------

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

                                              Basic                    Diluted
                                             earnings                 earnings
($ in thousands, except per share data)     per share                 per share
                                            ---------                 ---------

Six Months Ended June 30, 2000
------------------------------

Net income                                    $6,612                     $6,612
                                              ======                     ======

Weighted average shares outstanding           16,327                     16,327
Effect of dilutive securities                    -                          128
                                              ------                     ------
     Shares for EPS calculation               16,327                     16,455
                                              ======                     ======

Net income per share                           $0.41                      $0.40
                                               =====                      =====


                                       8
<PAGE>


                          PRIME MEDICAL SERVICES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                            JUNE 30, 2000 (continued)

                                   (Unaudited)

2.   Earnings per share (continued)
--   ------------------------------
                                             Basic                    Diluted
                                            earnings                  earnings
($ in thousands, except per share data)    per share                 per share
                                           ---------                 ---------

Six Months Ended June 30, 1999
------------------------------

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

Weighted average shares outstanding          17,241                     17,241
Effect of dilutive securities                   -                          103
                                            -------                    -------
     Shares for EPS calculation              17,241                     17,344
                                            =======                    =======

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

Three Months Ended June 30, 2000
--------------------------------

Net income                                   $3,315                     $3,315
                                             ======                     ======

Weighted average shares outstanding          16,218                     16,218
Effect of dilutive securities                   -                           85
                                            -------                    -------
     Shares for EPS calculation              16,218                     16,303
                                            =======                    =======

Net income per share                          $0.20                      $0.20
                                            =======                    =======

Three Months Ended June 30, 1999
--------------------------------

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

Weighted average shares outstanding          17,098                     17,098
Effect of dilutive securities                   -                           98
                                            -------                    -------
     Shares for EPS calculation              17,098                     17,196
                                            =======                    =======

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


Unexercised  stock  options and  warrants to purchase  1,358,000  and  1,616,500
shares  of the  Company's  common  stock as of June 30,  2000 and 1999  were not
included  in the  computation  of  diluted  EPS  because  the  effect  would  be
antidilutive.


                                       9
<PAGE>

                          PRIME MEDICAL SERVICES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                            JUNE 30, 2000 (continued)

                                   (Unaudited)

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

The  Company  has three  reportable  segments:  lithotripsy,  manufacturing  and
refractive.  The lithotripsy  segment provides services related to the operation
of  the  lithotripters,   including  scheduling,   staffing,  training,  quality
assurance,  maintenance,  regulatory  compliance  and  contracting  with payors,
hospitals and surgery centers. The manufacturing segment provides  manufacturing
services and  installation,  upgrade,  refurbishment and repair of major medical
equipment for mobile medical service providers.  The refractive segment provides
services  related to the  operations of refractive  vision  correction  centers.
Other  operating  segments,  which do not meet the  quantitative  thresholds for
reportable segments, include prostatherapy services.

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)                       Lithotripsy        Manufacturing        Refractive        Other
                                       -----------        -------------        ----------        -----

Six Months Ended June 30, 2000
------------------------------

Revenue from

external customers                        $41,346             $11,104             $9,496         $879

Intersegment revenues                        -                    226                -            -

Segment profit                             13,915               1,726              1,384           33


Six Months Ended June 30, 1999
------------------------------


Revenue from

external customers                        $44,998              $7,873               -         $1,119

Intersegment revenues                         -                   148               -            -

Segment profit (loss)                      16,646               1,367               -            (14)
</TABLE>


                                       10
<PAGE>


                          PRIME MEDICAL SERVICES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                            JUNE 30, 2000 (continued)

                                   (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
operations:

                                                   Six Months ended June 30,
($ in thousands)                                 2000                    1999
                                                 ----                    ----

Total segment profit                           $17,058                 $17,999

Unallocated corporate expenses:

    General and administrative                  (2,133)                 (2,289)

    Net interest expense                        (3,430)                 (3,926)

    Loan fees                                     (107)                    -

    Restructuring charges                         (350)                    -

    Release of contractual obligation             -                      1,140

    Other, net                                     (59)                   (484)
                                               --------               --------

Total unallocated corporate expenses            (6,079)                 (5,559)
                                               --------               --------

Income before income taxes                     $10,979                 $12,440
                                               ========               ========
<TABLE>
<S>                                   <C>                <C>                  <C>               <C>

($ in thousands)                       Lithotripsy        Manufacturing        Refractive        Other
                                       -----------        -------------        ----------        -----

Three Months Ended June 30, 2000
--------------------------------

Revenue from

external customers                        $20,812              $5,577             $6,561         $432

Intersegment revenues                        -                    131                -            -

Segment profit                              7,036                 860              1,103           24


Three Months Ended June 30, 1999
--------------------------------

Revenue from

external customers                        $23,589              $4,473                -           $546

Intersegment revenues                         -                   102                -            -

Segment profit (loss)                       8,756                 746                -              4
</TABLE>


                                       11
<PAGE>


                          PRIME MEDICAL SERVICES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                            JUNE 30, 2000 (continued)

                                   (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
operations:

                                                 Three Months ended June 30,
($ in thousands)                                2000                    1999
                                                ----                    ----

Total segment profit                           $9,023                  $9,506

Unallocated corporate expenses:

    General and administrative                 (1,177)                 (1,418)

    Net interest expense                       (1,824)                 (1,987)

    Loan fees                                     (24)                    -

    Restructuring charges                        (350)                    -

    Release of contractual obligation             -                     1,140

Other, net                                        (30)                   (118)
                                              --------                --------

Total unallocated corporate expenses           (3,405)                 (2,383)
                                              --------                --------

Income before income taxes                      $5,618                  $7,123
                                              ========                ========

4.   Acquisitions
--   ------------

Effective  March 1,  2000  the  Company  purchased  a 60%  interest  in the Mann
Berkeley Caplan Laser Center of Austin,  Texas, a refractive  vision  correction
center. The Company paid approximately $3,765,000 in cash and issued warrants to
purchase 27,000 shares of common stock,  and has accounted for this  transaction
using the purchase method of accounting.  Additionally in conjunction  with this
transaction,  the Company  issued  warrants to purchase  28,000 shares of common
stock  to a third  party.  Total  goodwill  recognized  of  $3,773,000  is being
amortized over twenty-five years.

Effective  March 1, 2000 the Company  purchased a 60% interest in the Caster Eye
Center, a refractive vision correction  center.  The Company paid  approximately
$5,828,000 in cash,  and has accounted for this  transaction  using the purchase
method of accounting.  Additionally in conjunction  with this  transaction,  the
Company  issued  warrants to purchase  44,000  shares of common stock to a third
party.  Total goodwill  recognized of $5,894,000 is being amortized over fifteen
years.

Effective  April 1, 2000 the Company  purchased  a 65%  interest in New York Eye
Specialists,   a  refractive   vision  correction   center.   The  Company  paid
approximately  $8,872,000 in cash, and has accounted for this transaction  using
the  purchase  method  of  accounting.  Additionally  in  conjunction  with this
transaction,  the Company  issued  warrants to purchase  67,000 shares of common
stock  to a third  party.  Total  goodwill  recognized  of  $9,014,000  is being
amortized over fifteen years.

The  proforma  effects  of these  acquisitions  on an  aggregated  basis are not
material.


                                       12
<PAGE>

                          PRIME MEDICAL SERVICES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                            JUNE 30, 2000 (continued)

                                   (Unaudited)

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

Condensed consolidating  financial information regarding the Company,  Guarantor
Subsidiaries  and  Non-guarantor  Subsidiaries  for  June  30,  2000 and 1999 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.



                                       13
<PAGE>


                 PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   Condensed Consolidating Statement of Income
                        Six Months Ended June 30, 2000
                                   (Unaudited)



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

Revenue:
  Lithotripsy:
    Fee revenues                                  $    -          $  8,174       $  30,109       $     -          $  38,283
    Management fees                                    -             1,019             809             -              1,828
    Equity income                                   13,779           8,847             233         (21,624)           1,235
                                           ---------------  --------------  --------------  --------------   --------------
                                                    13,779          18,040          31,151         (21,624)          41,346
  Manufacturing                                        -               -            11,104             -             11,104
  Refractive                                         1,238           1,789           8,718          (2,249)           9,496
  Prostatherapy                                        -               -               792             -                792
  Other                                                -                87             -               -                 87
                                           ---------------  --------------  --------------  --------------   --------------
    Total revenue                                   15,017          19,916          51,765         (23,873)          62,825
                                           ---------------  --------------  --------------  --------------   --------------

Cost of services and general and
  administrative expenses:
    Lithotripsy                                        -               182          10,948             -             11,130
    Manufacturing                                      -               -             8,572             -              8,572
    Refractive                                         -                17           4,810             -              4,827
    Prostatherapy                                      -              (144)            817             -                673
    Other                                              -                95             -               -                 95
    Corporate                                           24           2,109             -               -              2,133
    Restructuring charges                              -               350             -               -                350
                                           ---------------  --------------  --------------  --------------   --------------
                                                        24           2,609          25,147             -             27,780
Depreciation and amortization                          -             3,198           3,156             -              6,354
                                           ---------------  --------------  --------------  --------------   --------------
                                                        24           5,807          28,303             -             34,134
                                           ---------------  --------------  --------------  --------------   --------------

Operating income                                    14,993          14,109          23,462         (23,873)          28,691
                                           ---------------  --------------  --------------  --------------   --------------

Other income (deductions):
  Interest and dividends                               177             162             216             -                555
  Interest expense                                  (4,581)            813          (1,165)            -             (4,933)
  Loan fees                                           (107)            -               -               -               (107)
  Other, net                                            52             (58)             79             -                 73
                                           ---------------  --------------  --------------  --------------   --------------
    Total other income (deductions)                 (4,459)            917            (870)            -             (4,412)
                                           ---------------  --------------  --------------  --------------   --------------

Income before provision for income
  taxes and minority interest                       10,534          15,026          22,592         (23,873)          24,279

Minority interest in consolidated income               -               -               -            13,300           13,300

Provision for income taxes                           3,922               9             436             -              4,367
                                           ---------------  --------------  --------------  --------------   --------------

Net income                                        $  6,612        $ 15,017       $  22,156       $ (37,173)       $   6,612
                                           ===============  ==============  ==============  ==============   ==============
</TABLE>


                                       14
<PAGE>

                 PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   Condensed Consolidating Statement of Income
                        Six Months Ended June 30, 1999
                                   (Unaudited)



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

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
  Other                                                -               116             -               -                116
                                           ---------------  --------------  --------------  --------------   --------------
    Total revenue                                   17,286          21,458          41,087         (25,841)          53,990
                                           ---------------  --------------  --------------  --------------   --------------

Cost of services and general and
  administrative expenses:
    Lithotripsy                                        -             1,074          10,705             -             11,779
    Manufacturing                                      -               -             5,796             -              5,796
    Prostatherapy                                      -               -               828             -                828
    Other                                              -               119             -               -                119
    Corporate                                          147           2,142             -               -              2,289
                                           ---------------   -------------  --------------  --------------   --------------
                                                       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 and dividends                               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>


                                       15
<PAGE>

                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   Condensed Consolidating Statement of Income
                        Three Months Ended June 30, 2000
                                   (Unaudited)



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

Revenue:
  Lithotripsy:
    Fee revenues                                 $     -        $    3,977       $  15,236      $      -         $   19,213
    Management fees                                    -               496             438             -                934
    Equity income                                    6,841           4,587             118         (10,881)             665
                                           ---------------  --------------  --------------  --------------   --------------
                                                     6,841           9,060          15,792         (10,881)          20,812
  Manufacturing                                        -               -             5,577             -              5,577
  Refractive                                           950           1,387           6,135          (1,911)           6,561
  Prostatherapy                                        -               -               390             -                390
  Other                                                -                42             -               -                 42
                                           ---------------  --------------  --------------  --------------   --------------
    Total revenue                                    7,791          10,489          27,894         (12,792)          33,382
                                           ---------------  --------------  --------------  --------------   --------------

Cost of services and general and
 administrative expenses:
  Lithotripsy                                          -              (166)          5,901             -              5,735
  Manufacturing                                        -               -             4,282             -              4,282
  Refractive                                           -                17           3,309             -              3,326
  Prostatherapy                                        -               (72)            386             -                314
  Other                                                -                45             -               -                 45
  Corporate                                             15           1,162             -               -              1,177
  Restructuring charges                                -               350             -               -                350
                                           ---------------  --------------  --------------  --------------   --------------
                                                        15           1,336          13,878             -             15,229
Depreciation and amortization                          -             1,766           1,668             -              3,434
                                           ---------------  --------------  --------------  --------------   --------------
    Total operating expenses                            15           3,102          15,546             -             18,663
                                           ---------------  --------------  --------------  --------------   --------------

Operating income                                     7,776           7,387          12,348         (12,792)          14,719
                                           ---------------  --------------  --------------  --------------   --------------

Other income (deductions):
  Interest and dividends                                28              63             106             -                197
  Interest expense                                  (2,322)            406            (591)            -             (2,507)
  Loan fees                                            (24)            -               -               -                (24)
  Other, net                                            55             (56)             79             -                 78
                                           ---------------  --------------  --------------  --------------   --------------
   Total other income (deductions)                  (2,263)            413            (406)            -             (2,256)
                                           ---------------  --------------  --------------  --------------   --------------

Income before provision for income
 taxes and minority interest                         5,513           7,800          11,942         (12,792)          12,463

Minority interest in consolidated income               -               -               -             6,845            6,845

Provision for income taxes                           2,198               9              96             -              2,303
                                           ---------------  --------------  --------------  --------------   --------------

Net income                                       $   3,315       $   7,791       $  11,846       $ (19,637)       $   3,315
                                           ===============  ==============  ==============  ==============   ==============

</TABLE>

                                       16
<PAGE>

                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   Condensed Consolidating Statement of Income
                        Three Months Ended June 30, 1999
                                   (Unaudited)



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

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
  Other                                                -                61             -               -                 61
                                           ---------------  --------------  --------------  --------------   --------------
    Total revenue                                    9,289          11,172          22,119         (13,972)          28,608
                                           ---------------  --------------  --------------  --------------   --------------

Cost of services and general and
  administrative expenses:
    Lithotripsy                                        -               529           5,208             -              5,737
    Manufacturing                                      -               -             3,342             -              3,342
    Prostatherapy                                      -               -               371             -                371
    Other                                              -                58             -               -                 58
    Corporate                                          118           1,300             -               -              1,418
                                           ---------------   -------------  --------------  --------------   --------------
                                                       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 and dividends                               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>



                                       17
<PAGE>

                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      Condensed Consolidating Balance Sheet
                                 June 30, 2000
                                   (Unaudited)



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

ASSETS

Current assets:
  Cash                                           $     849      $    2,541       $   9,380       $     -          $  12,770
  Investments                                          500             -               -               -                500
  Accounts receivable, net                             -             3,194          21,417             -             24,611
  Other receivables                                    291           1,792           1,981             -              4,064
  Deferred income taxes                                 61             727             -               -                788
  Prepaid expenses and other current                    56             525           1,144             -              1,725
  Inventory                                            -               -             4,415             -              4,415
                                           ---------------  --------------  --------------  --------------   --------------
    Total current assets                             1,757           8,779          38,337             -             48,873
                                           ---------------  --------------  --------------  --------------   --------------

Property and equipment:
  Equipment, furniture and fixtures                    -             5,647          41,775             -             47,422
  Building and leasehold improvements                  -               533           2,116             -              2,649
                                           ---------------  --------------  --------------  --------------   --------------
                                                       -             6,180          43,891             -             50,071
 Less accumulated depreciation
   and amortization                                    -            (4,150)        (23,946)            -            (28,096)
                                           ---------------  --------------  --------------  --------------   --------------
  Property and equipment, net                          -             2,030          19,945             -             21,975
                                           ---------------  --------------  --------------  --------------   --------------

Investment in subsidiaries
  and other investments                            212,618          52,744             -          (246,858)          18,504
Goodwill, at cost, net of amortization                 -           155,963           9,327             -            165,290
Other noncurrent assets                                362             641           1,399             -              2,402
                                           ---------------  --------------  --------------  --------------   --------------
                                                $  214,737      $  220,157      $   69,008      $ (246,858)      $  257,044
                                           ===============  ==============  ==============  ==============   ==============

LIABILITIES

Current liabilities:
  Current portion of long-term debt             $      -         $     -         $   1,887     $      -          $    1,887
  Accounts payable                                     -             1,516           3,929            -               5,445
  Accrued expenses                                   3,728             533           1,203            -               5,464
                                           ---------------  --------------  --------------  --------------   --------------
    Total current liabilities                        3,728           2,049           7,019            -              12,796

Long-term debt, net of current portion             109,000             162           3,984            -             113,146
Deferred income taxes                                2,383           5,328             121            -               7,832
                                           ---------------  --------------  --------------  --------------   --------------
    Total liabilities                              115,111           7,539          11,124            -             133,774
                                           ---------------  --------------  --------------  --------------   --------------

Minority interest                                      -               -               -            23,644           23,644

STOCKHOLDERS' EQUITY

Common stock                                           194             -               -               -                194
Capital in excess of par value                      88,859             -               -               -             88,859
Accumulated earnings                                40,267             -               -               -             40,267
Treasury stock                                     (29,694)            -               -               -            (29,694)
Subsidiary net equity                                  -           212,618          57,884        (270,502)             -
                                           ---------------  --------------  --------------  --------------   --------------
    Total stockholders' equity                      99,626         212,618          57,884        (270,502)          99,626
                                           ---------------  --------------  --------------  --------------   --------------
                                                $  214,737      $  220,157      $   69,008     $  (246,858)      $  257,044
                                           ===============  ==============  ==============  ==============   ==============
</TABLE>



                                       18
<PAGE>

                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 Condensed Consolidating Statement of Cash Flows
                        Six Months Ended June 30, 2000
                                   (Unaudited)



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

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net cash provided by
    operating activities                         $  (6,953)       $  8,321       $  25,503         $   -          $  26,871
                                           ---------------  --------------  --------------  --------------   --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of operating entities                       -           (18,229)            -               -            (18,229)
  Purchases of equipment and leasehold
    improvements                                       -              (878)         (3,834)            -             (4,712)
  Distributions from subsidiaries                   10,469           9,908             -           (20,377)             -
  Investments in subsidiaries                       (9,000)            -               -             9,000              -
  Distributions from investments                       -             2,094             -               -              2,094
  Other                                                -               112             -               -                112
                                           ---------------  --------------  --------------  --------------   --------------

  Net cash provided by (used in)
    investing activities                             1,469          (6,993)         (3,834)        (11,377)         (20,735)
                                           ---------------  --------------  --------------  --------------   --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings on notes payable                        9,000             -             1,276             -             10,276
  Payments on notes payable exclusive of
    interest                                           -               -              (804)            -               (804)
  Contributions by minority interest,
    net of buyouts                                     -               -               345             -                345
  Distributions to minority interest                   -               -               -           (18,537)         (18,537)
  Purchases of treasury stock                       (4,874)            -               -               -             (4,874)
  Exercise of stock options, and sales and
    purchases of put options                           164             -               -               -                164
  Contributions by parent                              -             9,000             -            (9,000)             -
  Distributions to equity owners                       -           (10,469)        (28,445)         38,914              -
                                           ---------------  --------------  --------------  --------------   --------------

  Net cash provided by (used in)
    financing activities                             4,290          (1,469)        (27,628)         11,377          (13,430)
                                           ---------------  --------------  --------------  --------------   --------------

NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                              (1,194)           (141)         (5,959)           -              (7,294)

Cash and cash equivalents, beginning
  of period                                          2,043           2,682          15,339            -              20,064
                                           ---------------  --------------  --------------  --------------   --------------

Cash and cash equivalents, end of period         $     849       $   2,541       $   9,380       $    -           $  12,770
                                           ===============  ==============  ==============  ==============   ==============


</TABLE>


                                       19
<PAGE>

                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 Condensed Consolidating Statement of Cash Flows
                        Six Months Ended June 30, 1999
                                   (Unaudited)



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

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net cash provided by (used in)
    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 by (used in)
    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)
  Contributions by minority interest,
    net of buyouts                                     -               -             2,138             -              2,138
  Distributions to minority interest                   -               -               -           (18,789)         (18,789)
  Purchases of treasury stock                       (3,923)            -               -               -             (3,923)
  Exercise of stock options, and sales and
    purchases of put options                            53             -               -               -                 53
  Distributions to equity owners                       -           (11,859)        (30,229)         42,088              -
                                           ---------------  --------------  --------------  --------------   --------------

  Net cash provided by (used in)
    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, beginning
  of period                                         15,798           7,585          16,763             -             40,146
                                           ---------------  --------------  --------------  --------------   --------------

Cash and cash equivalents, end of period         $  15,566       $  14,050      $    6,485       $     -          $  36,101
                                           ===============  ==============  ==============  ==============   ==============


</TABLE>

                                       20
<PAGE>


                      Management's Discussion and Analysis

                           of Financial Condition and

                              Results of Operations

Revenues
--------

For the six months  ended June 30, 2000,  total  revenues  increased  $8,835,000
(16%)  as  compared  to the same  period  in 1999.  Revenues  from  lithotripter
operations  decreased by  $3,652,000  (8%)  primarily  due to an  unusually  low
procedure  volume  in  April  and  fluctuations  in  payor  mix.  Revenues  from
manufacturing  increased $3,231,000 (41%) due to increased sales of MRI trailers
as well as expansion into other  modalities.  Revenues from refractive  services
were  $9,496,000,  due to procedures from centers acquired since September 1999,
the acquisition of 60% of the Mann Berkeley Caplan Laser Center  effective March
1, 2000,  the  acquisition  of 60% of the Caster Eye Center  effective  March 1,
2000, and the acquisition of 65% of New York Eye Specialists  effective April 1,
2000.  Revenues from  prostatherapy  operations  declined  $211,000 (21%) due to
lower procedure volume.

Total  revenues for the three months  ended June 30, 2000  increased  $4,774,000
(17%)  as  compared  to the same  period  in 1999.  Revenues  from  lithotripter
operations  decreased  by  $2,777,000  (12%)  and  revenues  from  manufacturing
increased  $1,104,000 (25%).  Revenues from refractive services were $6,561,000,
due to the acquisitions discussed above. Revenues from prostatherapy  operations
declined $95,000 (20%) due to lower procedure volume.

Expenses
--------

For  the  six  months  ended  June  30,  2000,  costs  and  expenses  (excluding
depreciation and amortization) increased from 39% to 44% of revenues,  primarily
due to increases in the manufacturing and refractive  operations,  both of which
have lower operating margins than the lithotripsy operations.  Costs of services
associated with lithotripsy operations decreased $649,000 (5%) in absolute terms
and slightly increased from 26% to 27% of lithotripsy revenues due to the levels
of fixed costs  relative to a lower revenue  base.  Cost of services and general
and administrative  expenses associated with manufacturing  increased $2,776,000
(48%) due to  increased  sales.  Cost of  services  associated  with  refractive
operations  were  $4,827,000.  Cost of services  associated  with  prostatherapy
operations  decreased  $155,000 (19%) due to lower procedure  volume.  Corporate
expenses  decreased  from  4% to 3% of  revenues,  decreasing  $156,000  (7%) in
absolute  terms due to lower  variable  expenses  during the first half of 2000.
During the second quarter the Company recorded restructuring charges of $350,000
for the relocation of its central  business  office (CBO) from North Carolina to
Texas.  The relocation of the CBO is being done in conjunction with the purchase
and implementation of a new practice management system.

Costs and  expenses  (excluding  depreciation  and  amortization)  for the three
months ended June 30, 2000 increased from 38% to 46% of revenues,  primarily due
to increases in the manufacturing and refractive operations,  both of which have
lower  operating  margins  than the  lithotripsy  operations.  Costs of services
associated with lithotripsy  operations  remained constant in absolute terms and
increased from 24% to 28% of lithotripsy revenues.  Cost of services and general
and administrative  expenses  associated with  manufacturing  increased $940,000
(28%) due to  increased  sales.  Cost of  services  associated  with  refractive
operations  were  $3,326,000.  Cost of services  associated  with  prostatherapy
operations  decreased  $57,000 (15%) due to lower  procedure  volume.  Corporate
expenses  decreased  from 5% to 4% of  revenues,  decreasing  $241,000  (17%) in
absolute terms due to lower variable expenses during the second quarter of 2000.


                                       21
<PAGE>


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

For the six months ended June 30, 2000,  other deductions  increased  $1,345,000
(44%)  compared  to the  same  period  in  1999,  primarily  due  to a one  time
recognition  of income  related to a 1999  release of a  contractual  obligation
related to a management incentive compensation program. Also contributing to the
increase in expense was $107,000  related to a  restructuring  of the  Company's
$100 million  revolving  credit  facility,  and a $279,000  increase in interest
expense due to higher outstanding debt balances,  partially offset by a decrease
in other expense as the 1999 balance  included a write-off of costs related to a
proposed acquisition.

Other  deductions for the three months ended June 30, 2000 increased  $1,451,000
(180%)  compared  to the  same  period  in  1999  primarily  due  to a one  time
recognition  of income  related to a 1999  release of a  contractual  obligation
related to a management incentive compensation program.

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

Minority interest in consolidated  income for the six months ended June 30, 2000
increased $656,000 compared to the same period in 1999, primarily as a result of
the  refractive  acquisitions  and  the  reengineering  of  certain  lithotripsy
partnerships.  Earnings before  interest,  taxes,  depreciation and amortization
(EBITDA)  attributable  to minority  interest was $15,472,000 for the six months
ended June 30, 2000 compared to $15,058,000 for the same period in 1999.

Minority  interest in  consolidated  income for the three  months ended June 30,
2000 decreased $356,000 compared to the same period in 1999, which is consistent
with the  decrease  in  operating  income  for those  periods.  Earnings  before
interest, taxes, depreciation and amortization (EBITDA) attributable to minority
interest was  $8,095,000  for the three  months ended June 30, 2000  compared to
$8,454,000 for the same period in 1999.

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
--------------------------

Provision  for income  taxes for the six months  ended June 30,  2000  decreased
$609,000  and for the  three  months  ended  June 30,  2000  decreased  $518,000
compared to the same  periods in 1999 due to a decrease in taxable  income.  The
effective  tax rate  includes  the  impact  of the  Federal  tax rate as well as
numerous  state tax rates for the  Company,  and the impact of the  Federal  and
state rates for a partially owned consolidated corporation, which is required to
file separate tax returns.

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

Cash was  $12,770,000  and  $20,064,000  at June 30, 2000 and December 31, 1999,
respectively. Cash provided by operations for the six months ended June 30, 2000
was $26,871,000 compared to cash provided by operations for the six months ended
June 30,  1999 of  $15,874,000.  The  increase  was  attributable  to  increased
operations as well as proceeds received from sales and maturities of investments
of $3,704,000.


                                       22
<PAGE>


Cash used in  investing  activities  for the six months  ended June 30, 2000 was
$20,735,000  compared to cash used in  investing  activities  for the six months
ended June 30, 1999 of  $19,000.  The  increase  was  attributable  to the three
refractive acquisitions effective during 2000 and an increase in the purchase of
equipment.  Cash used in financing  activities for the six months ended June 30,
2000 was $13,430,000  compared to cash used for financing activities for the six
months ended June 30, 1999 of $19,900,000.  The decrease in cash used was due to
additional  borrowings,  primarily  $9,000,000  on the  Company's  senior credit
facility.  Additionally,  contributions  provided by minority interest decreased
and cash used to purchase treasury stock increased.

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,
$9 million of which was drawn at June 30, 2000 and July 31, 2000.

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 was used to repay
all  outstanding  indebtedness  under  the  Company's  bank  facility,  with the
remainder used for general corporate purposes, including acquisitions. 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  and the  number of its  refractive  operations
through  both  acquisitions  and  development.  The Company  intends to fund the
purchase price for future  acquisitions and developments  using borrowings under
its senior  credit  facility and cash flow from  operations.  In  addition,  the
Company  may  use  shares  of  its  common  stock  in  such  acquisitions  where
appropriate.

During 1998,  the Company  announced a stock  repurchase  program of up to $25.0
million of common stock.  In February 2000 the Company  announced an increase in
the authorized  repurchase amount from $25.0 million to $35.0 million. 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  3,519,000  shares of stock for a total of  $30,106,000 as of July 31,
2000.

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.


                                       23
<PAGE>


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

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

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

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

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


                                       24
<PAGE>

                                     PART II

                                OTHER INFORMATION



                                       25
<PAGE>


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

(a)      Exhibits

12.      Computation of ratio of earnings to fixed charges.

(b)      Current Reports on Form 8-K

         NONE



                                       26
<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 14, 2000                             By: /s/ Cheryl L. Williams
                                                         ----------------------
                                      Cheryl L. Williams, Senior Vice President
                                                    and Chief Financial Officer


                                       27
<PAGE>