================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

      (Mark One )

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

      For the quarterly period ended December 31, 2000 or

      [ ]   Transition  report pursuant to Section 13 or 15(d) of the Securities
            Exchange Act of 1934


      For the transition period from ______________ to ______________

      Commission file number 0-24247
                             -------

                      ATLANTIC EXPRESS TRANSPORTATION CORP.
--------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

               New York                                   13-392-3467
----------------------------------------       ---------------------------------
    (State or Other Jurisdiction of                    (I.R.S. Employer
    Incorporation or Organization)                    Identification No.)

    7 North Street, Staten Island, New York,             10302-1205
--------------------------------------------------------------------------------
    (Address of Principal Executive Offices)             (Zip Code)

                                 (718) 442-7000
--------------------------------------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)

--------------------------------------------------------------------------------
         (Former Name, Former Address and Former Fiscal Year, if Changed
                               Since Last Report)

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

Yes X    No___

                   APPLICABLE ONLY TO REGISTRANTS INVOLVED IN
                        BANKRUPTCY PROCEEDINGS DURING THE
                              PRECEDING FIVE YEARS

      Indicate by check mark whether the  registrant has filed all documents and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.

Yes___   No___

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

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

100 Shares of Common Stock, no par value.

================================================================================


<PAGE>

                                TABLE OF CONTENTS

PART I. Financial Information

                                                                            Page
                                                                            ----

      ITEM 1. Financial Statements:

      Consolidated Balance Sheets at June 30, 2000 (audited)
        and December 31, 2000 (unaudited) ...............................      1

      Consolidated Statements of Operations for the Three Month
        and Six Month Periods Ended December 31,1999 (unaudited) and
        2000 (unaudited) ................................................      2

      Consolidated Statements of Stockholder's Equity for the
        Three Months and Six Months Ended December 31, 2000
        (unaudited) .....................................................      3

      Consolidated Statements of Cash Flows for the Six Month
        Periods Ended December 31, 1999 (unaudited) and
        2000 (unaudited) ................................................      4

      Notes to Consolidated Financial Statements (unaudited) ............    5-8

      ITEM 2. Management's Discussion and Analysis of Financial
        Condition and Results of Operations .............................   9-11

PART II. Other Information 12

Signatures ...............................................................    13

Index to Exhibits ........................................................   E-1


<PAGE>

             Atlantic Express Transportation Corp. and Subsidiaries

                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                                 June 30,              December 31,
                                                                                                   2000                   2000
                                                                                               -------------          -------------
                                                                                                 (audited)            (unaudited)
<S>                                                                                            <C>                    <C>
Assets
Current:
     Cash and cash equivalents ......................................................          $   5,585,901          $   1,985,989
     Current portion of marketable securities .......................................              1,461,000              4,320,000
     Accounts receivable, net of allowance for doubtful accounts ....................             57,911,467             57,521,943
     Inventories ....................................................................             10,675,606             20,844,952
     Notes receivable ...............................................................                 15,901                   --
     Prepaid expenses and other current assets ......................................              7,129,168              7,420,030
                                                                                               -------------          -------------
               Total current assets .................................................             82,779,043             92,092,914
                                                                                               -------------          -------------

Property, plant and equipment, less accumulated depreciation ........................            158,784,748            173,177,781
                                                                                               -------------          -------------

Other assets:
     Goodwill, net ..................................................................             11,817,606             11,654,652
     Investments ....................................................................                 35,000                 35,000
     Marketable securities ..........................................................              6,691,661              3,485,650
     Transportation contract rights, net ............................................             21,586,626             20,672,438
     Deferred financing and organization costs, net .................................              7,080,118              9,722,843
     Due from parent company ........................................................                837,300                917,219
     Deposit and other noncurrent assets ............................................              4,316,475              2,641,727
     Deferred tax assets ............................................................              3,954,168              9,855,190
     Covenant not to compete, net ...................................................                521,000                433,000
                                                                                               -------------          -------------
               Total other assets ...................................................             56,839,954             59,417,719
                                                                                               =============          =============
                                                                                               $ 298,403,745          $ 324,688,414
                                                                                               =============          =============
Liabilities and Stockholder's Equity
Current:
     Current portion of long-term debt ..............................................          $   1,907,563          $   2,921,313
     Accounts payable ...............................................................              2,759,257              3,068,707
     Accrued compensation ...........................................................              7,277,106              8,595,317
     Current portion of insurance reserve ...........................................              3,200,000              4,440,000
     Accrued interest ...............................................................              7,315,366              5,978,431
     Other accrued expenses and current liabilities .................................             10,491,120             14,321,376
                                                                                               -------------          -------------
               Total current liabilities ............................................             32,950,412             39,325,144
                                                                                               -------------          -------------

Long-term debt, net of current portion ..............................................            214,470,878            234,765,990
                                                                                               -------------          -------------
Premium on bond issuance ............................................................                771,750                561,105
                                                                                               -------------          -------------
Other long-term liabilities .........................................................              1,877,517                833,065
                                                                                               -------------          -------------

Commitments and contingencies

Stockholder's equity:
     Common stock, no par value, authorized shares 200; issued and
          outstanding 100 ...........................................................                250,000                250,000
     Additional paid-in capital .....................................................             46,698,517             56,698,517
     Accumulated earnings (deficit) .................................................                536,372             (6,675,989)
     Accumulated other comprehensive income (loss) ..................................                848,299             (1,069,418)
                                                                                               -------------          -------------
               Total stockholder's equity ...........................................             48,333,188             49,203,110
                                                                                               -------------          -------------
                                                                                               $ 298,403,745          $ 324,688,414
                                                                                               =============          =============
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       1
<PAGE>

             Atlantic Express Transportation Corp. and Subsidiaries

                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                        Three Months Ended                 Six Months Ended
                                                                            December 31,                      December 31,
                                                                   ------------------------------    ------------------------------
                                                                       1999             2000              1999             2000
                                                                   -------------    -------------    -------------    -------------
                                                                            (unaudited)                       (unaudited)
<S>                                                                <C>              <C>              <C>              <C>
Revenues:

     Transportation Operations .................................   $  85,653,330    $  94,185,767    $ 133,964,851    $ 155,427,131

     Bus Sales Operations ......................................      16,868,351       15,161,966       55,467,550       54,224,770
                                                                   -------------    -------------    -------------    -------------

Total revenues .................................................     102,521,681      109,347,733      189,432,401      209,651,901
                                                                   -------------    -------------    -------------    -------------

Costs and expenses:

     Cost of operations - Transportation Operations ............      67,724,029       76,147,751      112,377,483      131,570,254

     Cost of operations - Bus Sales Operations .................      15,427,313       14,107,431       50,055,774       49,823,785

     General and administrative ................................       7,572,573        7,349,842       14,231,971       14,405,141

     Depreciation and amortization .............................       4,498,468        5,639,414        8,566,862       11,542,517
                                                                   -------------    -------------    -------------    -------------
                                                                      95,222,383      103,244,438      185,232,090      207,341,697
                                                                   -------------    -------------    -------------    -------------

          Income (loss) from operations ........................       7,299,298        6,103,295        4,200,311        2,310,204

Interest expenses (net) ........................................      (6,368,902)      (7,767,898)     (12,419,448)     (14,657,478)

Other income (expense ..........................................        (377,483)        (641,108)        (702,982)        (766,109)
                                                                   -------------    -------------    -------------    -------------

          Income (loss) before provision (benefit) for
             income taxes and cumulative effect of a
             change in accounting principle ....................         552,913       (2,305,711)      (8,922,119)     (13,113,383)

Provision (benefit) for income taxes ...........................         248,810       (1,037,569)      (4,014,952)      (5,901,022)
                                                                   -------------    -------------    -------------    -------------

          Net income (loss) before cumulative effect of a
             change in accounting principle ....................   $     304,103    $  (1,268,142)   $  (4,907,167)   $  (7,212,361)
                                                                   -------------    -------------    -------------    -------------

Cumulative effect of a change in accounting principle,
     net of benefit from income taxes of $245,875 ..............              --               --          300,511               --
                                                                   -------------    -------------    -------------    -------------

          Net income (loss) ....................................   $     304,103    $  (1,268,142)   $  (5,207,678)   $  (7,212,361)
                                                                   =============    =============    =============    =============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       2
<PAGE>

             Atlantic Express Transportation Corp. and Subsidiaries

                 Consolidated Statements of Stockholder's Equity

                       Six months ended December 31, 2000

<TABLE>
<CAPTION>
                                                                                       Accumulated
                                                         Additional    Accumulated        other
                                         Common stock     paid-in        earnings      comprehensive   Comprehensive
                                         No par value     Capital       (deficit)         Income        income (loss)      Total
                                         ------------   ------------   ------------    -------------   -------------

<S>                                       <C>         <C>               <C>             <C>           <C>              <C>
Balance, June 30, 2000 ...............        250,000     46,698,517        536,372         848,299              --      48,333,188

Net loss .............................             --             --     (5,944,219)             --      (5,944,219)     (5,944,219)

Unrealized loss on
          marketable securities ......             --             --             --        (508,190)       (508,190)       (508,190)
                                                                                                       ------------

Comprehensive loss ...................             --             --             --              --    $ (6,452,409)             --
                                         ------------   ------------   ------------    ------------                    ------------

Balance, September 30, 2000 ..........   $    250,000   $ 46,698,517   $ (5,407,847)   $    340,109            --      $ 41,880,779


Net loss .............................             --             --     (1,268,142)             --      (1,268,142)     (1,268,142)

Contribution from parent company .....             --       10,000,000           --              --              --      10,000,000

Unrealized loss on
          marketable securities ......             --             --             --      (1,409,527)     (1,409,527)     (1,409,527)
                                                                                                       ------------

Comprehensive loss ...................             --             --             --              --    $ (9,130,078)             --
                                         ------------   ------------   ------------    ------------    ============    ------------

Balance, December 31, 2000 ...........   $    250,000   $ 56,698,517   $ (6,675,989)   $ (1,069,418)             --    $ 49,203,110
                                         ============   ============   ============    ============                    ============
</TABLE>





          See accompanying notes to consolidated financial statements.


                                       3
<PAGE>

             Atlantic Express Transportation Corp. and Subsidiaries

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                                          Six Months Ended
                                                                                                            December 31,
                                                                                                 ----------------------------------
                                                                                                     1999                  2000
                                                                                                 ------------          ------------
                                                                                                            (unaudited)
<S>                                                                                              <C>                   <C>
Cash flows from operating activities:
     Net loss ..........................................................................         $ (5,207,678)         $ (7,212,361)
Adjustments to reconcile net loss to net cash provided by
  (used in) operating activities:
          Gain on sale of marketable securities ........................................             (243,408)             (112,082)
          Deferred income taxes ........................................................           (4,260,829)           (5,901,022)
          Depreciation .................................................................            7,628,198            10,208,619
          Amortization .................................................................            1,849,367             2,874,329
          Reserve for doubtful accounts receivable .....................................               60,000                60,000
          Loss on sale of fixed assets .................................................               29,552               516,106
          Decrease (increase) in:
               Accounts receivable .....................................................            6,383,563               329,524
               Inventories .............................................................            3,540,019           (10,169,346)
               Prepaid expenses and other current assets ...............................              760,736              (290,862)
               Deferred lease expense ..................................................                8,062                  --
               Deposits and other noncurrent assets ....................................             (426,536)            1,674,748
          Increase (decrease) in:
               Accounts payable ........................................................              384,253               309,450
               Accrued expenses and other current liabilities ..........................             (815,918)            5,051,532
               Other long-term liabilities .............................................             (458,793)           (1,515,030)
                                                                                                 ------------          ------------
               Net cash provided by (used in) operating activities .....................            9,230,588            (4,176,395)
                                                                                                 ------------          ------------

Cash flows from investing activities:
     Acquisition of subsidiaries (net of cash acquired of $2,376) ......................           (3,966,985)                 --
     Proceeds from sale of fixed assets ................................................              561,885               191,332
     Additions to property, plant and equipment ........................................          (23,398,686)          (19,122,991)
     Purchase of transportation contract rights ........................................              (49,092)             (146,914)
     Additions to covenant not to compete ..............................................             (125,000)                 --
     Due from parent ...................................................................                 --                 (79,919)
     Notes receivable ..................................................................               20,605                15,901
     Marketable securities sold (purchased), net .......................................            1,920,240            (1,458,624)
                                                                                                 ------------          ------------
               Net cash used in investing activities ...................................          (25,037,033)          (20,601,215)
                                                                                                 ------------          ------------

Cash flows from financing activities:
     Additional paid-in capital ........................................................           19,850,000             4,547,980
     Proceeds of additional borrowings .................................................            8,891,654            96,382,866
     Principal payments on borrowings ..................................................           (6,878,397)          (75,337,504)
     Deferred financing and organization costs
                                                                                                       (5,431)           (4,415,644)
                                                                                                 ------------          ------------
          Net cash provided by financing activities ....................................           21,857,826            21,177,698
                                                                                                 ------------          ------------
Net increase (decrease) in cash and cash equivalents ...................................            6,051,381            (3,599,912)
Cash and cash equivalents, beginning of period .........................................            2,581,372             5,585,901
                                                                                                 ------------          ------------
Cash and cash equivalents, end of period ...............................................            8,632,753             1,985,989
                                                                                                 ============          ============

Supplemental  disclosures of cash flow information:
     Cash paid during the period for:
          Interest .....................................................................         $ 11,001,653          $ 13,257,794
          Income taxes .................................................................              103,423               177,354

Supplemental schedule of noncash investing and financing activities:
     Loans incurred for purchase of property, plant and equipment ......................         $  1,225,152          $    734,078
     Liability incurred for acquisition of contract rights .............................              415,320                  --
     Additional paid-in capital contributed for buses ..................................                 --               5,452,020
</TABLE>

                 See accompanying notes to financial statements.


                                       4
<PAGE>

             Atlantic Express Transportation Corp. and Subsidiaries

                   Notes to Consolidated Financial Statements

1. Basis of Accounting

      These consolidated financial statements should be read in conjunction with
the  consolidated  financial  statements  and  related  notes  contained  in the
Company's  financial  statements  as of and for the year ended June 30,  2000 as
filed on Form 10-K. In the opinion of management,  all  adjustments and accruals
(consisting only of normal recurring adjustments) which are necessary for a fair
presentation of operating  results are reflected in the  accompanying  financial
statements.  Operating  results for the periods  presented  are not  necessarily
indicative of the results for the full fiscal year.

2. Inventories

      Inventories comprised the following:

                                                   June 30,     December 31,
                                                     2000          2000
                                                  -----------   ------------
      Parts and fuel .....................        $ 5,735,321   $ 5,485,931
      Buses ..............................          4,940,285    15,359,021
                                                  -----------   -----------
                                                  $10,675,606   $20,844,952
                                                  ===========   ===========

      On August  11,  1999,  after  receiving  a fairness  opinion  issued by an
investment bank of national standing,  Central New York Coach Sales and Service,
Inc. and Jersey Bus Sales,  Inc., both wholly-owned  subsidiaries of the Company
(collectively   "Central")   entered  into  an  agreement   with   Atlantic  Bus
Distributors,  Inc.  ("ABD"),  a wholly  owned  subsidiary  of Atlantic  Express
Transportation Group, Inc. ("AETG") (the parent company), to order certain buses
through ABD.  Central is required to deposit twenty percent of the cost of these
vehicles   simultaneously   with  ABD's  receipt  of  these  vehicles  from  the
manufacturers  and pay the  balance  to ABD  upon  Central's  delivery  of these
vehicles to its customers or within one hundred and twenty days, whichever comes
first.  The purchase  price of each bus equals the price at which ABD  purchased
such  bus,  together  with any  costs  incurred  by ABD in  connection  with the
purchase  of any such  vehicles.  During the  quarters  ended  September  30 and
December  31,  2000,  total  payments  made  by  Central  were  $28,041,324  and
$18,202,677,  respectively.  In addition,  as of December 31, 2000,  Central was
obligated to purchase $5,718,068 of vehicles from ABD.

      As of December 31, 2000,  $1,114,914 of deposits are classified as prepaid
expenses.

3. Offer to Purchase and Consent Solicitation

      On December 21, 2000, the holders of a majority in principal amount of the
Company's  103/4% Senior  Secured  Notes due 2004 (the "Notes")  consented to an
Offer to Purchase (the "Offer") and Consent Solicitation (the "Consent") whereby
the Company purchased $30.0 million aggregate  principal amount of the Notes and
the Note holders  consented to an amendment to the Indenture  which in substance
permitted the Company to increase the amount of debt that may be incurred  under
the Indenture,  without regard to the Interest Coverage Ratio, to $125.0 million
from $30.0 million (see Note 4). In connection therewith, the Company received a
capital  contribution  from  AETG  (see  Note  5) of (i) all of the  issued  and
outstanding shares of capital stock of Atlantic Transit,  Corp. ("ATC") and (ii)
$10.0 million of  additional  equity  (collectively  the  "Contribution").  As a
result of the Contribution, ATC and its subsidiaries have pledged their stock to
secure the Notes and have  become  guarantors  of the Notes.  In  addition,  the
Indenture has been amended to include (i) an annual leverage test,  which if not
met by the Company, could increase the interest rate payable by 0.50% per annum;
(ii) a provision that provides for  limitation of  acquisition  debt incurred by
the  Company  in any  fiscal  year and (iii)  amendments  to the  limitation  on
restricted payments and limitations on transactions with affiliates covenants.


                                       5
<PAGE>

4. New Credit Facility

      On December 21, 2000,  concurrently with the Offer to Purchase and Consent
Solicitation  referred to in Note 3, the Company  terminated  its existing $30.0
million credit facility with Congress  Financial  Corporation  ("Congress")  and
entered into a new three year,  $125.0 million  revolving  credit  facility (the
"Facility")  with  Congress.  Borrowings  under the Facility are  available  for
working capital,  acquisitions and general corporate purposes, including letters
of credit,  subject to the borrowing  conditions  contained therein.  Borrowings
also were used to fund the Offer and the Consent payment, as well as expenses of
the Offer and Consent.

      The  Facility  is  secured by first  priority  security  interests  in all
present and future  assets of the Company  except for the stock of the Company's
direct and indirect  subsidiaries which are required to be pledged to secure the
Notes. As required by the Indenture,  the Notes are secured by a second priority
security interest in the same collateral. The interest rate per annum applicable
to the Facility is either prime rate, as announced by First Union  National Bank
plus  0.75%,  or at the  Company's  option,  the  adjusted  Eurodollar  rate (as
defined)  plus 2.75%.  The Company is required to pay certain fees in connection
with the  Facility  including  but not limited to an unused line fee of 0.50% on
the undrawn portion of the Facility.

      The Facility contains negative covenants similar to those contained in the
Notes plus the  requirement to maintain  minimum  annual  adjusted net worth and
earnings  before  income taxes,  depreciation  and  amortization,  (EBITDA) plus
customary events of default.

5. Equity Contribution

      In connection with the Offer to Purchase and Consent  Solicitation and the
new Facility (see Notes 3 and 4) the Company received a capital  contribution of
all of the issued and outstanding  shares of ATC. Since both the Company and ATC
were owned by a common  shareholder this acquisition was treated as a pooling of
interests for accounting purposes.

      In addition the Company  received an equity  contribution of $10.0 million
from AETG.

6. Supplemental Financial Information

      The following are unaudited condensed  consolidating  financial statements
regarding the Company (on a stand-alone  basis and on a consolidated  basis) and
its subsidiaries  which are Guarantors and Non-Guarantors of the Notes as of and
for the six months ended December 31, 2000, and a consolidating balance sheet as
of June 30, 2000 and consolidating statements of operations for the three months
ended December 31, 2000 and 1999.

                      Condensed Consolidating Balance Sheet
                                December 31, 2000

<TABLE>
<CAPTION>
                               Atlantic
                                Express                            Non-
                             Transportation      Guarantor       Guarantor      Elimination
                                 Corp.         Subsidiaries    Subsidiaries        Entries      Consolidated
                           ----------------    -------------   -------------   -------------    -------------
<S>                        <C>                 <C>             <C>             <C>              <C>
Current assets .........   $     663,217       $  86,842,864   $   4,586,833   $          --    $  92,092,914
Investment in affiliates      97,499,920                  --              --     (97,499,420)              --
Total assets ...........     279,138,186         303,871,251       8,248,478    (266,569,501)     324,688,414
Current liabilities ....       6,213,595          28,654,231       4,457,318              --       39,325,144
Total liabilities ......     233,851,015         247,795,077       4,925,490    (211,086,278)     275,485,304
Stockholder's equity ...      45,287,171          56,076,174       3,322,988     (55,483,223)      49,203,110
</TABLE>


                                       6
<PAGE>

                 Condensed Consolidating Statement of Operations
                      Three months ended December 31, 2000

<TABLE>
<CAPTION>
                                      Atlantic
                                       Express                             Non-
                                    Transportation      Guarantor       Guarantor     Elimination
                                        Corp.         Subsidiaries     Subsidiaries      Entries        Consolidated
                                    --------------   -------------    -------------   -------------    -------------
<S>                                 <C>              <C>              <C>             <C>              <C>
Net revenues ....................   $          --    $ 109,272,294    $   1,075,297   $    (999,858)   $ 109,347,733
Income from operations ..........              --        6,077,226           26,069              --        6,103,295
Income (loss) before income taxes              --       (2,331,780)          26,069              --       (2,305,711)
Net loss of subsidiaries ........      (1,268,142)              --               --       1,268,142               --
Net income ......................      (1,268,142)      (1,282,480)          14,338       1,268,142       (1,268,142)
</TABLE>

                 Condensed Consolidating Statement of Operations
                       Six months ended December 31, 2000

<TABLE>
<CAPTION>
                                      Atlantic
                                       Express
                                    Transportation      Guarantor         Non-         Elimination
                                        Corp.         Subsidiaries     Guarantors        Entries        Consolidated
                                    --------------   -------------    -------------   -------------    -------------
<S>                                 <C>              <C>              <C>             <C>              <C>
Net revenues ....................   $          --    $ 209,426,241    $   2,225,376   $  (1,999,716)   $ 209,651,901
Income from operations...........              --        2,184,910          125,294              --        2,310,204
Income (loss) before income taxes              --      (13,238,677)         125,294              --      (13,238,677)
Net income (loss) of subsidiaries      (7,212,361)              --               --       7,212,361               --
Net income (loss) ...............      (7,212,361)      (7,281,273)          68,912       7,212,361       (7,212,361)
</TABLE>

                 Condensed Consolidating Statement of Cash Flows
                       Six months ended December 31, 2000

<TABLE>
<CAPTION>
                                      Atlantic
                                       Express                             Non-
                                    Transportation      Guarantor       Guarantor     Elimination
                                        Corp.         Subsidiaries     Subsidiaries      Entries        Consolidated
                                    --------------   -------------    -------------   -------------    -------------
<S>                                 <C>              <C>              <C>             <C>              <C>
Net cash provided by (used in)
     operating activities ....      $  5,430,765    $ (9,446,784)     $   (160,376)   $         --     $ (4,176,395)
Net cash provided by (used in)
     investing activities ....       (93,748,285)     74,605,694        (1,458,624)             --      (20,601,215)
Net cash provided by (used in)
     financing activities ....        88,215,202     (67,037,504)             --                --       21,177,698
Decrease in cash and cash
     equivalents .............          (102,318)     (1,878,594)       (1,619,000)             --       (3,599,912)
Cash and cash equivalents,
     beginning of period .....           150,000       3,696,901         1,739,000              --        5,585,901
                                    ------------    ------------      ------------    ------------     ------------
Cash and cash equivalents,
     end of period ...........            47,682       1,818,307           120,000              --        1,985,989
</TABLE>

                      Condensed Consolidating Balance Sheet
                                  June 30, 2000

<TABLE>
<CAPTION>
                                      Atlantic
                                       Express                             Non-
                                    Transportation      Guarantor       Guarantor     Elimination
                                        Corp.         Subsidiaries     Subsidiaries      Entries        Consolidated
                                    --------------   -------------    -------------   -------------    -------------
<S>                                 <C>              <C>              <C>             <C>              <C>
Current assets .........            $   5,460,699    $  74,061,252    $   3,257,092   $          --    $  82,779,043
Investment in affiliates              104,712,281              --                --    (104,712,281)              --
Total assets ...........              265,224,047      272,777,993       10,209,264    (249,807,859)     298,403,745
Current liabilities ....                6,785,671       22,956,740        3,208,001              --       32,950,412
Total liabilities ......              222,724,515      209,420,546        5,819,797    (187,894,301)     250,070,557
Stockholder's equity ...               42,499,532       63,357,447        4,389,467     (61,913,258)      48,333,188
</TABLE>


                                       7
<PAGE>

                 Condensed Consolidating Statement of Operations
                      Three months ended December 31, 1999

<TABLE>
<CAPTION>
                                      Atlantic
                                       Express                             Non-
                                    Transportation      Guarantor       Guarantor     Elimination
                                        Corp.         Subsidiaries     Subsidiaries      Entries        Consolidated
                                    --------------   -------------    -------------   -------------    -------------
<S>                                 <C>              <C>              <C>             <C>              <C>
Net revenues .............          $          --     $102,215,155    $    306,526   $          --      $102,521,681
Income from operations....                     --        7,039,880         259,418              --         7,299,298
Income before income taxes                     --          293,495         259,418              --           552,913
Net income of subsidiaries                304,103               --             --         (304,103)               --
Net income ...............                304,103          161,423         142,680        (304,103)          304,103
</TABLE>

                 Condensed Consolidating Statement of Operations
                       Six months ended December 31, 1999

<TABLE>
<CAPTION>
                                      Atlantic
                                       Express                             Non-
                                    Transportation      Guarantor       Guarantor     Elimination
                                        Corp.         Subsidiaries     Subsidiaries      Entries        Consolidated
                                    --------------   -------------    -------------   -------------    -------------
<S>                                 <C>              <C>              <C>             <C>              <C>
Net revenues ....................   $          --    $ 189,061,376    $     371,025   $          --    $ 189,432,401
Income from operations ..........              --        3,925,155          275,156              --        4,200,311
Income (loss) before income taxes              --       (9,197,275)         275,156              --       (8,922,119)
Cumulative effect of a change in
     accounting principle, net of
     benefit from income taxes ..              --          300,511               --              --          300,511
Net loss of subsidiaries ........      (5,207,678)              --               --       5,207,678               --
Net income (loss) ...............      (5,207,678)      (5,359,014)         151,336       5,207,678       (5,207,678)
</TABLE>

                 Condensed Consolidating Statement of Cash Flows
                       Six months ended December 31, 1999

<TABLE>
<CAPTION>
                                      Atlantic
                                       Express                             Non-
                                    Transportation      Guarantor       Guarantor     Elimination
                                        Corp.         Subsidiaries     Subsidiaries      Entries        Consolidated
                                    --------------   -------------    -------------   -------------    -------------
<S>                                  <C>             <C>              <C>             <C>              <C>
Net cash provided by (used in)
     operating activities ....       $  1,609,507    $  9,463,321     $ (1,842,240)   $       --       $  9,230,588
Net cash used in investing
     activities ..............           (300,258)    (26,657,015)       1,920,240            --        (25,037,033)
Net cash provided by (used in)
     financing activities ....          4,116,654      17,741,172             --              --         21,857,826
Increase in cash and cash
     equivalents .............          5,425,903         547,478           78,000            --          6,051,381
Cash and cash equivalents,
     beginning of period .....           (324,134)      2,247,506          658,000            --          2,581,372
                                     ------------    ------------     ------------    ----------       ------------
Cash and cash equivalents,
     end of period ...........          5,101,769       2,794,984          736,000            --          8,632,753

</TABLE>


                                       8
<PAGE>

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

      The following  discussion contains  forward-looking  statements within the
meaning of the federal  securities  laws and as such  involve  known and unknown
risks and uncertainties.  These statements may use forward-looking words such as
"anticipate",  "estimate",  "expect",  "will"  or  other  similar  words.  These
statements discuss future  expectations or contain projections of future events.
Actual  results may differ  materially  from those  expressed  or implied by the
forward-looking  statements  for various  reasons,  including  general  economic
conditions,  reliance on suppliers,  labor relations and other factors,  many of
which are beyond the Company's control. Readers are cautioned not to place undue
reliance on such forward-looking statements

      In connection with the Offer to Purchase and Consent  Solicitation and the
new Facility (see Notes 3 and 4 of Notes to Consolidated  Financial  Statements)
the Company received a capital contribution of all of the issued and outstanding
shares of Atlantic Transit,  Corp. ("ATC").  Since both the Company and ATC were
owned by a common  shareholder  this  acquisition  was  treated  as a pooling of
interests  for  accounting  purposes.  Accordingly  the prior  years and current
periods  financial  statements  have been restated to include the  operations of
ATC.

Three months ended December 31, 2000 compared to three months ended December 31,
1999.

      Revenues.  Revenues from Transportation  Operations were $94.2 million for
the three months ended December 31, 2000 compared to $85.7 million for the three
months  ended  December 31,  1999,  an increase of $8.5  million or 10.0%.  This
increase  was due  primarily  to (i) $6.5  million  of revenue  in  relation  to
acquisitions of new subsidiaries; (ii) $4.3 million as a result of new contracts
awarded;  and (iii) $1.6  million net  increase  in  contract  rates and service
requirements.  The foregoing  increases were partially offset by $3.9 million in
contracts lost including $2.0 million due to the Company's early  termination of
its Paratransit  contract in Colorado.  Revenues from Bus Sales  Operations were
$15.2  million for the three  months ended  December 31, 2000  compared to $16.9
million for the three months ended December 31, 1999, a decrease of $1.7 million
or 10.1%. This decrease was primarily due to a decrease in new bus sales of $1.4
million and used bus sales of $0.3 million.

      Gross  Profit.  Gross  profit  from  Transportation  Operations  was $18.0
million for the three months ended  December 31, 2000  compared to $17.9 million
for the three  months ended  December  31, 1999,  an increase of $0.1 million or
1.0%. As a percentage of revenues, gross profit decreased to 19.2% in the second
quarter of 2000 from 20.9% in the second  quarter of 1999. The decrease in gross
profit  percentage  was due  primarily to increased  fuel costs (1.3%) and labor
costs (1.2%) partially offset by a decrease in sub-contract  labor costs (0.6%).
Gross  profit from Bus Sales  Operations  was $1.1  million for the three months
ended  December  31, 2000  compared to $1.4  million for the three  months ended
December  31, 1999,  a decrease of $0.4  million or 26.8%.  As a  percentage  of
revenues, gross profit decreased to 7.0% for the three months ended December 31,
2000 from 8.5% for the three months ended  December 31, 1999.  The  reduction in
gross profit  percentage was due primarily to an increase in the three months of
the  proportion  of sales made of commercial  vehicles  which have lower margins
than school buses and increased competition (primarily in the New Jersey Market)
which has reduced margins.

      General and administrative  expenses.  General and administrative expenses
for the  Transportation  Operations were $6.3 million for the three months ended
December 31, 2000  compared to $6.6 million for the three months ended  December
31, 1999, a decrease of $0.3 million or 4.8%. This decrease was primarily due to
a decrease in professional  fees ($0.2 million) and  recruitment  expenses ($0.2
million)  partially offset by an increase in utility taxes ($0.1 million) due to
increased  revenues in New York City. As a percentage  of revenues,  general and
administrative  expenses  decreased to 6.7% for the three months ended  December
31, 2000 from 7.7% for the three  months ended  December  31, 1999.  General and
administrative  expenses for the Bus Sales  Operations were $1.1 million for the
three  months  ended  December  31, 2000  compared to $1.0 million for the three
months  ended  December  31,  1999,  an increase of $0.1  million or 9.5%.  As a
percentage of revenues,  general and  administrative  expenses increased to 7.0%
for the three  months  ended  December  31, 2000 from 5.7% for the three  months
ended December 31, 1999 due to decreased revenues.


                                       9
<PAGE>

      Depreciation  and  amortization  expenses.  Depreciation  and amortization
expenses  for the  Transportation  Operations  were $5.4  million  for the three
months  ended  December  31, 2000  compared to $4.3 million for the three months
ended  December 31, 1999, an increase of $1.1 million.  This increase was due to
(i) $0.6 million of depreciation of fixed assets of newly acquired subsidiaries;
(ii) $0.4  million of  additional  depreciation  relating to the purchase of new
vehicles and (iii) a $0.1 million  increase in  amortization  of contract rights
primarily in relation to newly acquired subsidiaries.

      Income (loss) from operations. Income from operations was $6.1 million for
the three months ended  December 31, 2000 compared to $7.3 million for the three
months ended  December 31, 1999, a decrease of $1.2  million.  This decrease was
due to the net effect of the items discussed above.

      Net interest expense.  Net interest expense was $7.8 million for the three
months  ended  December  31, 2000  compared to $6.4 million for the three months
ended December 31, 1999, an increase of $1.4 million or 22.0%. This increase was
due to (i) an  increase  in  indebtedness  of $20  million  in  relation  to the
acquisition of newly  acquired  subsidiaries;  (ii) higher average  indebtedness
outstanding  and (iii) an increase  in the  write-off  of prior  years  deferred
financing costs of $0.7 million  primarily due to the new financing  referred to
in Note 4 of Notes to Consolidated Financial Statements.

      Income (loss) before cumulative change in accounting  principle and taxes.
Loss before cumulative change in accounting principle and taxes was $2.3 million
for the three months ended December 31, 2000 compared to $0.6 million income for
the three months ended December 31, 1999, a decrease of $2.9 million.

      Net income  (loss).  The Company  generated a net loss of $1.3 million for
the three  months  ended  December  31,  2000  compared  to a net income of $0.3
million for the three months ended December 31, 1999, a decrease of $1.6 million
due to the net effect of the items discussed above.

Six months  ended  December 31, 2000  compared to six months ended  December 31,
1999.

      Revenues.  Revenues from Transportation Operations were $155.4 million for
the six months ended  December 31, 2000  compared to $134.0  million for the six
months  ended  December 31, 1999,  an increase of $21.5  million or 16.0%.  This
increase  was due  primarily  to (i) $11.3  million of revenue  in  relation  to
acquisitions of new subsidiaries; (ii) $7.2 million as a result of new contracts
awarded; (iii) $6.0 million increase in contract rates and service requirements;
and (iv) $2.9 million in additional  summer  revenues.  The foregoing  increases
were  partially  offset by $5.9 million in contracts lost including $3.8 million
due to the Company's early termination of its Paratransit  contract in Colorado.
Revenues from Bus Sales  Operations  were $54.2 million for the six months ended
December 31, 2000  compared to $55.5  million for the six months ended  December
31, 1999, a decrease of $1.3 million or 2.2%. This decrease was due primarily to
a decrease of $1.5 million in new bus sales  partially  offset by an increase of
$0.5 million in parts and other sales.

      Gross  Profit.  Gross  profit  from  Transportation  Operations  was $23.9
million for the six months ended December 31, 2000 compared to $21.6 million for
the six months ended December 31, 1999, an increase of $2.3 million or 10.5%. As
a  percentage  of revenues,  gross profit  decreased to 15.4% for the six months
ended  December 31, 2000 from 16.1% for the six months ended  December 31, 1999.
The  decrease in gross profit  percentage  was due  primarily to increased  fuel
costs  (1.2%)  and  labor  costs  (0.6%)  partially  offset  by  a  decrease  in
sub-contract labor costs (0.7%). Gross profit from Bus Sales Operations was $4.4
million for the six months ended  December 31, 2000 compared to $5.4 million for
the six months  ended  December  31,  1999, a decrease of $1.0 million or 18.7%.
This  reduction  was due  primarily  to an  increase  in the six  months  of the
proportion  of sales made of commercial  vehicles  which have lower margins than
school buses and  increased  competition  (primarily  in the New Jersey  market)
which has reduced margins.

      General and administrative  expenses.  General and administrative expenses
for the  Transportation  Operations  were $12.4 million for the six months ended
December 31, 2000  compared to $12.3  million for the six months ended  December
31,  1999,  a decrease of $0.1  million.  This  decrease  was  primarily  due to
decreases in professional fees and data processing  expenses partially offset by
increases in  recruitment  expenses,  administrative  payroll in relation to new
contracts and utility taxes. As a percentage of revenues,


                                       10
<PAGE>

general and  administrative  expenses decreased to 8.0% for the six months ended
December 31, 2000 from 9.2% for the six months ended December 31, 1999.  General
and  administrative  expenses for the Bus Sales  Operations was $2.0 million for
the six months  ended  December 31, 2000 as compared to $1.9 million for the six
months  ended  December  31,  1999,  an increase of $0.1  million or 7.4%.  As a
percentage of revenues,  general and administrative  expenses were 3.8% and 3.4%
for the six months ended December 31, 2000 and 1999, respectively.

      Depreciation  and  amortization  expenses.  Depreciation  and amortization
expenses for the Transportation Operations were $11.1 million for the six months
ended  December  31,  2000  compared to $8.1  million  for the six months  ended
December 31, 1999,  an increase of $3.0  million.  This  increase was due to (i)
$1.3  million  increase  in  depreciation  of fixed  assets  of  newly  acquired
subsidiaries; (ii) $1.3 million additional depreciation relating to the purchase
of new  vehicles  and (iii) an  increase  of $0.4  million of  amortization  due
primarily to the amortization of contract rights of newly acquired subsidiaries.
Depreciation and amortization expenses of Bus Sales Operations were $0.4 million
for the six months ended December 31, 2000 and 1999, respectively.

      Income (loss) from operations. Income from operations was $2.3 million for
the six months  ended  December  31, 2000  compared to $4.2  million for the six
months ended  December 31, 1999, a decrease of $1.9  million.  This decrease was
due to the net effect of the items discussed above.

      Net interest  expense.  Net interest expense was $14.7 million for the six
months  ended  December  31, 2000  compared to $12.4  million for the six months
ended  December 31, 1999, an increase of $2.2 million.  This increase was due to
(i) an increase in  indebtedness of $12.9 million in relation to the acquisition
of newly acquired subsidiaries; (ii) higher average indebtedness outstanding and
(iii) an increase in the write-off of prior years  deferred  financing  costs of
$0.6 million  primarily due to the new financing  referred to in Note 4 of Notes
to Consolidated Financial Statements.

      Loss before  cumulative  change in accounting  principle  and taxes.  Loss
before cumulative change in accounting principle and taxes was $13.1 million for
the six months  ended  December  31, 2000  compared to $8.9  million for the six
months ended December 31, 1999, an increase of $4.2 million.

      Net loss.  The Company  generated  a net loss of $7.2  million for the six
months ended  December  31, 2000  compared to a net loss of $5.2 million for the
six months ended  December 31, 1999,  an increase of $2.3 million due to the net
effect of the items discussed above.

Liquidity and Capital Resources

      Management  anticipates  total  capital  expenditures  of $28.3 million in
fiscal 2001,  including  approximately $5.6 million for the purchase of vehicles
in relation to new contracts and maintenance capital expenditures for the fiscal
year  ending  June 30,  2002.  These  vehicles  will be  purchased  prior to the
Company's fiscal year end due to the availability of the inventory and favorable
pricing.  Approximately $19.9 million of these capital expenditures were made by
December 31, 2000. This included approximately $15.7 million for purchase of new
vehicles and $4.2  million for other  property  and  equipment.  In addition the
Company  received $5.5 million of vehicles which were previously  leased as part
of a $10.0  million  capital  contribution  from  AETG  (see  Note 5 of Notes to
Consolidated Financial Statements).

         Net Cash  Used By  Operating  Activities.  Net cash  used by  operating
activities was $4.2 million for the six months ended December 31, 2000 primarily
due to the  following:  (i) a net loss of $7.2  million  plus non cash  items of
depreciation  and  amortization of $13.1 million less a $5.9 million increase in
deferred  tax  benefit and (ii) $4.8  million  use of cash for  working  capital
offset by $0.6 million other sources of funds.

      Net Cash Used in Investing  Activities.  For the six months ended December
31, 2000,  the Company  made $19.9  million of capital  expenditures  to acquire
additional  vehicles and equipment.  Of these capital  expenditures $0.7 million
were  directly  financed.  In  addition,  the Company  made $1.5  million in net
purchases of marketable securities.


                                       11
<PAGE>

      Net Cash Provided by Financing Activities.  Net cash provided by financing
activities totaled $21.2 million for the six months ended December 31, 2000, due
to a  $4.5  million  cash  contribution  as  part  of a  $10.0  million  capital
contribution  from AETG and $96.4  million in  additional  borrowings  partially
offset by $45.3 million of principal payments on borrowings,  repayment of $30.0
million of the Company's 103/4% Senior Secured Notes due 2004 (the "Notes"), and
$4.4 million of deferred  financing  costs.  In addition AETG  contributed  $5.5
million of  vehicles  to the  Company.  The  Company  incurred  $0.7  million of
indebtedness to directly  finance capital  expenditures for the six months ended
December 31, 2000.

      Due to the current difficult  insurance  climate,  the Company renewed its
workers compensation policy for calendar year 2001 at substantially higher rates
than  those of the  previous  policy.  This  increase  could  have an  impact of
approximately  an  additional  $1.0  million in  insurance  costs.  The  Company
anticipates higher costs for automobile  liability  insurance when the Company's
current policy expires on March 1, 2001. At this time the Company is not able to
quantify  the  effect on  margins  and  earnings  of the  expected  increase  in
automobile liability insurance costs.

      The Company  continues  to  experience  higher fuel costs and higher labor
costs due to a tight labor market which is impacting margins.

      On  December  21,  2000,  concurrently  with the  Offer to  Purchase  (the
"Offer") and Consent Solicitation (the "Consent") referred to in Note 3 of Notes
to Consolidated Financial Statements,  the Company terminated its existing $30.0
million credit facility with Congress  Financial  Corporation  ("Congress")  and
entered into a new three year,  $125.0 million  revolving  credit  facility (the
"Facility")  with  Congress.  Borrowings  under the Facility are  available  for
working capital,  acquisitions and general corporate purposes, including letters
of credit,  subject to the borrowing  conditions  contained therein.  Borrowings
also were used to fund the Offer and the Consent payment, as well as expenses of
the Offer and Consent.

      The  Facility  is  secured by first  priority  security  interests  in all
present and future  assets of the Company  except for the stock of the Company's
direct and indirect  subsidiaries which are required to be pledged to secure the
Notes. As required by the Indenture,  the Notes are secured by a second priority
security interest in the same collateral. The interest rate per annum applicable
to the Facility is either prime rate, as announced by First Union  National Bank
plus  0.75%,  or at the  Company's  option,  the  adjusted  Eurodollar  rate (as
defined)  plus 2.75%.  The Company is required to pay certain fees in connection
with the  Facility  including  but not limited to an unused line fee of 0.50% on
the undrawn portion of the Facility.

      The Facility contains negative covenants similar to those contained in the
Notes plus the  requirement to maintain  minimum  annual  adjusted net worth and
earnings  before  income taxes,  depreciation  and  amortization,  (EBITDA) plus
customary events of default.

      Management  believes  that the  Facility  (of  which  approximately  $18.2
million  was  undrawn at  December  31,  2000) will  provide  the  Company  with
sufficient liquidity to conduct its operations for the balance of the year.

      At December 31, 2000, the Company's  total debt and  stockholder's  equity
were $237.7 million and $49.2 million, respectively.


                                       12
<PAGE>

PART II OTHER INFORMATION

Item 1. Legal Proceedings

      None.

Item 2. Changes in Securities and Use of Proceeds

      None.

Item 3. Defaults Upon Senior Securities

      None.

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

      None.

Item 5. Other Information

      None.

Item 6. Exhibits and Reports on Form 8-K

      a) Exhibits

      See Exhibit Index on Page E-1 for exhibits  filed with this report on Form
      10-Q.

      b) Reports on Form 8-K.

      The Company  filed a Current  Report on Form 8-K dated  November  27, 2000
      regarding the initiation of the Offer and Consent.

      The Company  filed a Current  Report on Form 8-K dated  December  19, 2000
      regarding the successful completion of the Consent.

      The Company  filed a Current  Report on Form 8-K dated  December  22, 2000
      regarding the Facility, Offer and Consent.


                                       13
<PAGE>

                                   SIGNATURES

      In accordance with the  requirements of the Securities and Exchange Act of
1934,  the  Company  has duly  caused  this report to be signed on behalf by the
undersigned, thereunto duly authorized.

                                           ATLANTIC EXPRESS TRANSPORTATION CORP.

                                           By: /s/ NATHAN SCHLENKER
                                               ---------------------------------
                                               Nathan Schlenker
                                               Chief Financial Officer

February 13, 2001


                                       14
<PAGE>

                                Index to Exhibits

      The  following  documents  are exhibits to this  Quarterly  Report on Form
10-Q. For convenient reference,  each exhibit is listed according to the Exhibit
Table of Regulation  S-K. The page number,  if any,  listed  opposite an exhibit
indicates  the page number in the  sequential  numbering  system on the manually
signed original of this Quarterly  Report on Form 10-Q where such exhibit can be
found.

<TABLE>
<CAPTION>
    Exhibit                                                                        Sequential Page
    Number                                   Exhibit                                    Number
    ------                                   -------                               ---------------

<S>               <C>
     10.33        Fifth Supplemental Indenture,  dated as of December 20, 2000,
                  among the Company,  the Guarantors  (as defined  therein) and
                  The Bank of New York, as trustee

     10.34        Fourth Amendment to Security Agreement,  dated as of December
                  22,  2000,  among the  Company,  the  Guarantors  (as defined
                  therein) and The Bank of New York, as trustee

     10.35        The Loan and  Security  Agreement,  dated as of December  22,
                  2000,  among the  Company,  subsidiaries  of the  Company and
                  Congress Financial Corporation

     27.1         Financial Data Schedule
</TABLE>


                                      E-1