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

                       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 September 30, 2001 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.

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<PAGE>

                                TABLE OF CONTENTS

PART I. Financial Information

                                                                            Page
                                                                            ----
     ITEM 1. Financial Statements:

     Consolidated Balance Sheets at September 30, 2001
        (unaudited) and June 30, 2001 (audited) ...........................    1

     Consolidated Statements of Operations for the
        Three Month Periods Ended September 30, 2001
        (unaudited) and 2000 (unaudited) ..................................    2

     Consolidated Statements of Stockholder's Equity
        for the Three Months Ended September 30, 2001 (unaudited) .........    3

     Consolidated Statements of Cash Flows for the
        Three Month Periods Ended September 30, 2001
        (unaudited) and 2000 (unaudited) ..................................    4

     Notes to Consolidated Financial Statements (unaudited) ...............  5-7

     ITEM 2. Management's Discussion and Analysis of Financial
        Condition and Results of Operations ...............................  8-9

     ITEM 3. Quantitative and Qualitative Disclosures About
        Market Risk ....................................................... 9-10

PART II. Other Information                                                    11

Signatures ................................................................   12

Index to Exhibits .........................................................  E-1
<PAGE>

             Atlantic Express Transportation Corp. and Subsidiaries

                           Consolidated Balance Sheets

                                                    September 30,    June 30,
                                                        2001           2001
                                                    ------------    ----------
                                                     (unaudited)     (audited)
Assets
Current:
   Cash and cash equivalents ....................   $  1,046,820   $  1,909,719
   Current portion of marketable securities .....      5,920,000      5,282,000
   Accounts receivable, net of allowance
     for doubtful accounts ......................     60,911,450     69,699,369
   Inventories ..................................     11,078,259     14,484,980
   Notes receivable .............................         40,337         33,459
   Prepaid expenses and other current assets ....     22,425,197     17,067,262
                                                    ------------   ------------
       Total current assets .....................    101,422,063    108,476,789
                                                    ------------   ------------
Property, plant and equipment, at cost,
   less accumulated depreciation ................    181,694,399    175,655,190
                                                    ------------   ------------
Other assets:
   Goodwill, net ................................     11,410,221     11,491,698
   Investments ..................................        488,150        488,150
   Marketable securities, net of current portion       4,520,822      6,697,337
   Transportation contract rights, net ..........     19,031,533     19,577,871
   Deferred financing and organization costs, net      7,937,739      8,791,385
   Due from parent company ......................        735,937        805,540
   Notes receivable .............................        155,982        166,541
   Deposits and other noncurrent assets .........      3,594,079      3,540,280
   Deferred tax assets ..........................     16,969,249     10,045,465
   Covenant not to compete, net .................        351,000        395,000
                                                    ------------   ------------
       Total other assets .......................     65,194,712     61,999,267
                                                    ------------   ------------
                                                    $348,311,174   $346,131,246
                                                    ============   ============
Liabilities and Stockholder's Equity
Current:
   Current portion of long-term debt ............   $  3,543,356   $  1,795,144
   Insurance financing payable ..................     14,501,736      9,724,226
   Accounts payable .............................      5,951,149      4,607,497
   Accrued compensation .........................     10,708,792     10,114,488
   Current portion of insurance reserve .........      6,340,000      6,330,000
   Accrued interest .............................      3,644,328      6,841,781
   Other accrued expenses and current liabilities     15,863,428     11,809,590
                                                    ------------   ------------
       Total current liabilities ................     60,552,789     51,222,726
                                                    ------------   ------------

Long-term debt, net of current portion ..........    241,030,672    244,637,001
                                                    ------------   ------------
Premium on bond issuance ........................        424,620        470,115
                                                    ------------   ------------
Other long-term liabilities .....................      2,668,968      1,873,272
                                                    ------------   ------------

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 ...................     62,198,517     56,698,517
   Accumulated deficit ..........................    (15,913,646)    (7,487,911)
   Accumulated other comprehensive loss .........     (2,900,746)    (1,532,474)
                                                    ------------   ------------
       Total stockholder's equity ...............     43,634,125     47,928,132
                                                    ------------   ------------
                                                    $348,311,174   $346,131,246
                                                    ============   ============

The accompanying notes to consolidated financial statements are an integral part
                            of these balance sheets.


                                       1
<PAGE>

             Atlantic Express Transportation Corp. and Subsidiaries

                      Consolidated Statements of Operations

                                                       Three Months Ended
                                                          September 30,
                                                --------------------------------
                                                    2001               2000
                                                -------------     -------------
                                                          (unaudited)
Revenues:
   Transportation Operations ...............    $  59,825,490     $  61,241,364
   Bus Sales Operations ....................       35,702,096        39,062,804
                                                -------------     -------------
Total revenues .............................       95,527,586       100,304,168
                                                -------------     -------------

Costs and expenses:
   Cost of operations - Transportation
     Operations ............................       57,443,947        55,422,503
   Cost of operations - Bus Sales
     Operations ............................       32,572,649        35,716,354
   General and administrative ..............        7,280,035         7,055,299
   Depreciation and amortization ...........        6,382,418         5,903,103
                                                -------------     -------------
Total operating costs and expenses .........      103,679,049       104,097,259
                                                -------------     -------------
       Loss from operations ................       (8,151,463)       (3,793,091)
Interest expense (net) .....................       (7,071,451)       (6,889,580)
Other expense ..............................          (96,605)         (125,001)
                                                -------------     -------------
       Loss before benefit from
         income taxes ......................      (15,319,519)      (10,807,672)
Benefit from income taxes ..................        6,893,784         4,863,453
                                                -------------     -------------
Net loss ...................................    $  (8,425,735)    $  (5,944,219)
                                                =============     =============

The accompanying notes to consolidated financial statements are an integral part
                              of these statements.


                                       2
<PAGE>

             Atlantic Express Transportation Corp. and Subsidiaries

                 Consolidated Statements of Stockholder's Equity

                      Three months ended September 30, 2001

<TABLE>
<CAPTION>
                                                                        Accumulated
                                          Additional                       other
                            Common stock   paid-in     Accumulated     comprehensive  Comprehensive
                            no par value   capital       deficit            loss           loss         Total
                            ------------  ----------   -----------     -------------  -------------  -----------
<S>                           <C>        <C>           <C>             <C>            <C>            <C>
Balance, June 30, 2001 ....   $250,000   $56,698,517   $ (7,487,911)   $(1,532,474)                  $47,928,132

Contribution from parent
   company ................         --     5,500,000             --             --    $        --      5,500,000


Net loss ..................         --            --     (8,425,735)            --     (8,425,735)    (8,425,735)

Unrealized loss on
   marketable securities ..         --            --             --     (1,368,272)    (1,368,272)    (1,368,272)
                                                                                      -----------
Comprehensive loss ........         --            --             --             --    $(9,794,007)            --
                              --------   -----------   ------------    -----------    ===========    -----------

Balance, September 30, 2001   $250,000   $62,198,517   $(15,913,646)   $(2,900,746)                  $43,634,125
                              ========   ===========   ============    ===========                   ===========
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
                              of these statements.


                                       3
<PAGE>

             Atlantic Express Transportation Corp. and Subsidiaries

                      Consolidated Statements of Cash Flows

                                                        Three Months Ended
                                                           September 30,
                                                   -----------------------------
                                                       2001            2000
                                                   ------------    ------------
                                                            (unaudited)
Cash flows from operating activities:
     Net loss ..................................   $ (8,425,735)   $ (5,944,219)
Adjustments to reconcile net loss to net
  cash provided by (used in) operating
  activities:
   (Gain) loss on sale of marketable
     securities and investments ................        117,994         (86,560)
   Loss on sale of fixed assets ................             11              --
   Deferred income taxes .......................     (6,923,784)     (4,863,453)
   Depreciation ................................      5,681,378       5,238,874
   Amortization ................................      1,501,750       1,137,528
   Reserve for doubtful accounts
     receivable ................................         30,000          30,000
   Decrease (increase) in:
       Accounts receivable .....................      8,757,919       1,275,055
       Inventories .............................      3,406,721         365,732
       Prepaid expenses and other
         current assets ........................     (5,357,935)       (106,250)
       Deposits and other noncurrent assets ....        (53,799)        631,896
   Increase (decrease) in:
       Accounts payable ........................      1,343,652       1,712,201
       Accrued expenses and other current
         liabilities ...........................      1,470,689       3,749,659
       Other long-term liabilities .............        795,696        (766,156)
                                                   ------------    ------------
   Net cash provided by (used in)
     operating activities ......................      2,344,557       2,374,307
                                                   ------------    ------------

Cash flows from investing activities:
   Proceeds from sale of fixed assets ..........          1,750         185,012
   Additions to property, plant
     and equipment .............................    (11,732,346)    (16,019,754)
   Purchase of transportation
     contract rights ...........................        (21,786)        (38,626)
   Due from parent company .....................         69,603          70,912
   Notes receivable ............................          3,681          15,901
   Marketable securities and investments .......         52,249        (877,655)
                                                   ------------    ------------
       Net cash used in investing activities ...    (11,626,849)    (16,664,210)
                                                   ------------    ------------

Cash flows from financing activities:
   Capital contributed from parent company .....      5,500,000              --
   Revolving lines of credit ...................     (1,600,739)     11,753,000
   Principal payments on long-term debt, net ...       (257,378)       (311,326)
   Insurance financing payable .................      4,777,510              --
   Deferred financing and organization costs ...             --        (105,111)
                                                   ------------    ------------
       Net cash provided by financing
         activities ............................      8,419,393      11,336,563
                                                   ------------    ------------
Net increase (decrease) in cash and
  cash equivalents .............................       (862,899)     (2,953,340)
Cash and cash equivalents, beginning
  of period ....................................      1,909,719       5,585,901
                                                   ------------    ------------
Cash and cash equivalents, end of period .......   $  1,046,820    $  2,632,561
                                                   ============    ============
Supplemental disclosures of cash flow
  information:
   Cash paid during the period for:
       Interest ................................   $  9,482,261    $ 10,094,192
       Income taxes ............................        147,766         140,791
                                                   ============    ============
Supplemental schedule of noncash
  investing and financing activities:
   Loans incurred for purchase of
     property, plant and equipment .............   $         --    $     88,500

The accompanying notes to consolidated financial statements are an integral part
                              of these 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,  2001 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:

                                             September 30,       June 30,
                                                 2001              2001
                                             ------------      -----------
      Parts and fuel .................       $ 5,177,288       $ 5,235,312
      Buses held for sale ............         5,900,971         9,249,668
                                             -----------       -----------
                                             $11,078,259       $14,484,980
                                             ===========       ===========

3. Receivable Agreement

      In July  2001 the  Company  entered  into an  agreement  (the  "Receivable
Agreement")  with  Congress  Financial  Corp.  ("Congress"),  to sell  Congress,
without recourse, up to approximately $5.9 million of accounts receivable of the
Company.  Under the Receivable Agreement,  Congress purchases receivables at the
gross  amount of such  accounts  (less three and  one-quarter  percent  purchase
commission) and immediately credits 85% of this amount to the Company,  with the
balance paid to the Company upon Congress  receiving  cumulative  collections on
all receivables  purchased in excess of the purchase price previously  credited.
This Agreement  which was to expire on October 31, 2001, was extended to May 31,
2002.

4. Equity Contribution

      In September 2001,  Atlantic Express  Transportation  Group, Inc. ("AETG")
made an additional capital contribution to the Company of $5.5 million.

5. Paratransit Agreement

      In  August  2001,  the  Company  signed  an  Assignment,   Assumption  and
Subcontract  of  Paratransit  Services (the  "Paratransit  Agreement")  with the
Southeastern  Pennsylvania   Transportation  Authority  ("SEPTA")  and  Anderson
Travel,  Inc. (the  "Assignee")  whereby the Company granted the Assignee all of
its rights,  obligation  and interest to and under a  paratransit  contract with
SEPTA  which was due to expire on March 15, 2002 and in  addition  retained  the
Assignee to perform all of its obligations under a second  paratransit  contract
between  the  Company  and SEPTA  which was due to expire in October  2001.  The
Company  negotiated the  Paratransit  Agreement when SEPTA declined to reimburse
the Company for material amounts of automobile liability insurance costs for the
paratransit  operations in  Pennsylvania  which would have caused the Company to
incur significant losses in the operations of these two contracts.  Revenues for
these contracts  totaled  approximately  $12.7 million and $13.0 million for the
fiscal years ended June 30, 2001 and June 30, 2000, respectively.

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 Company's
10 3/4%  Senior  Secured  Notes  due 2004 as of and for the three  months  ended


                                       5
<PAGE>

September 30, 2001,  and a  consolidating  balance sheet as of June 30, 2001 and
consolidating statements of operations and cash flows for the three months ended
September 30, 2000.

                      Condensed Consolidating Balance Sheet
                               September 30, 2001

<TABLE>
<CAPTION>
                                             Atlantic
                                             Express                                Non-
                                          Transportation      Guarantor          Guarantor          Elimination
                                              Corp.          Subsidiaries       Subsidiaries          Entries          Consolidated
                                          --------------     ------------       ------------        -----------        ------------
<S>                                       <C>                <C>                <C>                <C>                 <C>
Current assets .....................      $   5,674,230      $  90,951,131      $   6,434,952      $  (1,638,250)      $ 101,422,063
Investment in affiliates ...........         82,856,673                 --                 --        (82,856,673)                 --
Total assets .......................        291,851,154        303,001,581         11,663,868       (258,205,429)        348,311,174
Current liabilities ................          3,400,796         50,774,603          8,015,640         (1,638,250)         60,552,789
Total liabilities ..................        239,009,471        255,772,489         10,440,783       (200,545,694)        304,677,049
Stockholder's equity ...............         52,841,683         47,229,092          1,223,085        (57,659,735)         43,634,125
</TABLE>

                 Condensed Consolidating Statement of Operations
                      Three months ended September 30, 2001

<TABLE>
<CAPTION>
                                             Atlantic
                                             Express                                Non-
                                          Transportation      Guarantor          Guarantor          Elimination
                                              Corp.          Subsidiaries       Subsidiaries          Entries          Consolidated
                                          --------------     ------------       ------------        -----------        ------------
<S>                                       <C>                <C>                <C>                <C>                 <C>
Net revenues ........................     $         --       $ 95,552,691       $  1,613,145       $ (1,638,250)       $ 95,527,586
Loss from operations ................               --         (8,075,274)           (76,189)                --          (8,151,463)
Loss before income taxes ............               --        (15,243,330)           (76,189)                --         (15,319,519)
Net loss of subsidiaries ............       (8,425,735)                --                 --          8,425,735                  --
Net loss ............................       (8,425,735)        (8,383,831)           (41,904)         8,425,735          (8,425,735)
</TABLE>

                 Condensed Consolidating Statement of Cash Flows
                      Three months ended September 30, 2001

<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 ..............     $  7,476,492       $ (4,451,686)      $   (680,249)      $     --     $  2,344,557
Net cash provided by (used in)
  investing activities ..............       (9,415,744)        (2,263,354)            52,249             --      (11,626,849)
Net cash provided by (used in)
  financing activities ..............        1,899,261          6,520,132                 --             --        8,419,393
Increase (decrease) in cash and
  cash equivalents ..................          (39,991)          (194,908)          (628,000)            --         (862,899)
Cash and cash equivalents,
  beginning of period ...............           86,000            775,719          1,048,000             --        1,909,719
                                          ----------------------------------------------------------------------------------
Cash and cash equivalents,
  end of period .....................           46,009            580,811            420,000             --        1,046,820
</TABLE>


                                       6
<PAGE>

                      Condensed Consolidating Balance Sheet
                                  June 30, 2001

<TABLE>
<CAPTION>
                                             Atlantic
                                             Express                                Non-
                                          Transportation      Guarantor          Guarantor        Elimination
                                              Corp.          Subsidiaries       Subsidiaries        Entries         Consolidated
                                          --------------     ------------       ------------      -----------       ------------
<S>                                       <C>                <C>                <C>             <C>                 <C>
Current assets .....................      $   4,725,601      $ 100,566,814      $   6,460,874   $  (3,276,500)      $ 108,476,789
Investment in affiliates ...........         92,492,921                 --                 --     (92,492,921)                 --
Total assets .......................        301,839,696        307,402,943         13,832,020    (276,943,413)        346,131,246
Current liabilities ................         15,963,375         28,912,128          9,623,723      (3,276,500)         51,222,726
Total liabilities ..................        253,271,435        251,790,020         11,198,759    (218,057,100)        298,203,114
Stockholder's equity ...............         48,568,261         55,612,923          2,633,261     (58,886,313)         47,928,132
</TABLE>

                 Condensed Consolidating Statement of Operations
                      Three months ended September 30, 2000

<TABLE>
<CAPTION>
                                             Atlantic
                                             Express                                Non-
                                          Transportation      Guarantor          Guarantor      Elimination
                                              Corp.          Subsidiaries       Subsidiaries      Entries       Consolidated
                                          --------------     ------------       ------------    -----------     ------------
<S>                                       <C>                <C>                <C>             <C>             <C>
Net revenues .........................    $          --      $ 100,153,947      $   1,150,079   $ (999,858)     $ 100,304,168
Income (loss) from operations ........               --         (3,892,316)            99,225           --         (3,793,091)
Income (loss) before income
  taxes ..............................               --        (10,906,897)            99,225           --        (10,807,672)
Net loss of subsidiaries .............       (5,944,219)                --                 --    5,944,219                 --
Net income (loss) ....................       (5,944,219)        (5,998,793)            54,574    5,944,219         (5,944,219)
</TABLE>

                 Condensed Consolidating Statement of Cash Flows
                      Three months ended September 30, 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 ..............     $ (9,514,939)      $ 11,890,591       $     (1,345)     $          --     $  2,374,307
Net cash provided by (used in)
  investing activities ..............         (342,061)       (15,444,494)          (877,655)                --      (16,664,210)
Net cash provided by (used in)
  financing activities ..............        9,753,000          1,583,563                 --                 --       11,336,563
Increase (decrease) in cash
  and cash equivalents ..............         (104,000)        (1,970,340)          (879,000)                --       (2,953,340)
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 .....................           46,000          1,726,561            860,000                 --        2,632,561
</TABLE>


                                       7
<PAGE>

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

      The Company believes that this report 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.

Three months ended September 30, 2001 compared to three months ended
September 30, 2000.

      Revenues.  Revenues from Transportation  Operations were $59.8 million for
the three  months ended  September  30, 2001  compared to $61.2  million for the
three months ended  September 30, 2000, a decrease of $1.4 million or 2.3%. This
decrease  was  due  primarily  to  the  Paratransit  Agreement  (see  Note  5 to
consolidated  financial statements) which reduced revenues by $2.3 million and a
$1.2 million decrease due to exit from an  under-performing  contract  partially
offset by a $0.6  million net  increase in other new  contracts,  a $1.4 million
increase in summer  revenues and $0.1  million in contract  rate  increases  and
service  requirements of existing contracts.  Revenues from Bus Sales Operations
were $35.7  million for the three months ended  September  30, 2001  compared to
$39.1 million for the three months ended  September 30, 2000, a decrease of $3.4
million or 8.6%.  This  decrease was primarily due to decreases in new bus sales
occurring primarily in the month of September.

      Gross Profit. Gross profit from Transportation Operations was $2.4 million
for the three months ended  September  30, 2001 compared to $5.8 million for the
three months ended September 30, 2000, a decrease of $3.4 million or 59.1%. As a
percentage  of  revenues,  gross  profit  decreased to 4.0% for the three months
ended  September  30, 2001 from 9.5% for the three  months ended  September  30,
2000.  This  decrease  was  primarily  due  to  increased  automobile  liability
insurance  costs  (3.0%)  and labor  costs  (2.5%)  partially  offset by reduced
vehicle maintenance costs (1.0%).  Labor costs increases resulted primarily from
a reduction of two revenue days in New York City in September  2001  compared to
September 2000 with no reduction in driver and escort payroll days. Gross profit
from Bus Sales  Operations was $3.1 million for the three months ended September
30, 2001 compared to $3.3 million for the three months ended September 30, 2000,
a decrease of $0.2 million or 6.5%.  As a percentage  of revenues,  gross profit
increased to 8.8 % for the three months ended  September  30, 2001 from 8.6% for
the three months ended September 30, 2000. This increase was primarily due to an
increase  in  proportion  of  sales  made  in the  New  York  market  which  has
historically  higher  margins  than the New  Jersey  market  and a  decrease  in
proportion of sales of commercial  vehicles which have lower margins than school
buses.

      General and administrative  expenses.  General and administrative expenses
for the  Transportation  Operations were $6.2 million for the three months ended
September 30, 2001 compared to $6.1 million for the three months ended September
30, 2000,  an increase of $0.1 million or 2.4%.  This increase was primarily due
to an increase of $0.3 million in professional  fees partially  offset by a $0.2
million  decrease in advertising  and recruitment  expenses.  As a percentage of
revenues,  general and administrative  expenses increased to 10.4% for the three
months ended  September 30, 2001 from 9.9% for the three months ended  September
30, 2000. General and  administrative  expenses for the Bus Sales Operations for
the three months  ended  September  30, 2001 were $1.1 million  compared to $1.0
million for the three  months  ended  September  30,  2000,  an increase of $0.1
million  or 7.8%.  As a  percentage  of  revenues,  general  and  administrative
expenses  increased to 3.0% for the three months ended  September  30, 2001 from
2.5% for the three months ended September 30, 2000.

      Depreciation  and  amortization  expenses.  Depreciation  and amortization
expenses  for the  Transportation  Operations  were $6.2  million  for the three
months ended  September  30, 2001  compared to $5.7 million for the three months
ended September 30, 2000, an increase of $0.5 million or 8.5%. This increase was
primarily  due  to (i) a $0.2  million  increase  in  depreciation  relating  to
purchase of new vehicles;  and (ii) a $0.3 million  increase in  amortization of
deferred  financing costs.  Depreciation  and


                                       8
<PAGE>

amortization  expenses  for the Bus Sales  Operations  were $0.2 million for the
three months ended September 30, 2001 and September 30, 2000, respectively.

      Loss from operations.  Loss from operations was $8.2 million for the three
months ended  September  30, 2001  compared to $3.8 million for the three months
ended September 30, 2000, an increase of $4.4 million.  This increase was due to
the net effect of the items discussed above.

      Net interest expense.  Net interest expense was $7.1 million for the three
months ended  September  30, 2001  compared to $6.9 million for the three months
ended September 30, 2000, an increase of $0.2 million or 2.6%. This increase was
due primarily to higher average indebtedness outstanding during the three months
ended September 30, 2001, partially offset by reductions in interest rates.

      Net loss.  The Company  generated a net loss of $8.4 million for the three
months ended  September  30, 2001 compared to a net loss of $5.9 million for the
three  months  ended  September  30,  2000,  an increase of $2.5  million.  This
increase was due to the net effect of the items discussed above.

 Liquidity and Capital Resources

      Management  anticipates  total  capital  expenditures  of $18.5 million in
fiscal 2002 of which  approximately  $11.7  million were made by  September  30,
2001. This included  approximately $9.2 million for purchase of new vehicles and
$2.5 million for other property and equipment.

      Net Cash Provided By Operating Activities.  Net cash provided by operating
activities  of $2.3  million  for the three  months  ended  September  30,  2001
resulted primarily from $9.6 million of increases in source of funds for working
capital plus non-cash items of depreciation and amortization of $7.2 million and
$0.8 million of  increases in other  sources of funds offset by (i) the net loss
of $8.4 million; and (ii) a $6.9 million increase in deferred income tax asset.

      Net  Cash  Used in  Investing  Activities.  For  the  three  months  ended
September 30, 2001,  the Company made $11.7 million of capital  expenditures  to
acquire additional vehicles, other property and equipment.

      Net Cash Provided by Financing Activities.  Net cash provided by financing
activities  totaled $8.4 million for the three months ended  September 30, 2001,
due  primarily to (i) a $5.5 million  capital  contribution  from the  Company's
parent,  AETG; and (ii) $4.8 million of insurance premium  financing,  partially
offset by a $1.6  million net  reduction  in the  Company's  revolving  lines of
credit and $0.3 million of principal payments on borrowings.

      The Company continues to experience higher automobile  liability insurance
costs which are impacting profit margins.

      The first quarter is historically the period of the Company's greatest use
of its revolving line of credit due to the purchase of vehicles for the upcoming
school year and seasonal  lower revenues in this quarter.  The Company  believes
that its Receivable  Agreement along with its borrowing  capacity under its $125
million  revolving  credit  facility  (of which  $9.9  million  was  undrawn  at
September 30, 2001), and the equity contribution received from AETG in September
2001 will provide it with sufficient liquidity to conduct its operations for the
balance of the year.

      At September 30, 2001, the Company's total debt and  stockholder's  equity
were $244.6 million and $43.6 million respectively.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

      The Company is exposed to market risk from fluctuations in interest rates,
which could impact its consolidated  financial  position,  results of operations
and cash flows.  The Company  manages  the  exposure to market risk  through its
regular operating and financing activities.  The Company does not use derivative


                                       9
<PAGE>

financial  instruments for speculative or trading purposes and does not maintain
such instruments that may expose it to significant market risk.

      Our earnings are  sensitive to changes in short-term  interest  rates as a
result of our borrowings under variable rate debt. If interest rates increase by
10 percent  for the year  ending  June 30,  2002,  our  interest  expense  would
increase,  and income before income taxes would decrease,  by approximately $0.9
million.  This  analysis  does not consider the effects of the reduced  level of
overall  economic  activity,  or  other  factors  that  could  exist  in such an
environment.  Further,  in the event of a change of such  magnitude,  management
could take actions to further mitigate its exposure to the change.  However, due
to the  uncertainty  of the  specific  actions  that  would be taken  and  their
possible effects,  the sensitivity  analysis assumes no changes in our financial
structure.

      In addition,  the Company manages its fuel costs to reduce its exposure to
market  changes.  Fuel  costs are  sensitive  to market  changes  as well as the
overall growth or decline of the Company's business. Changes in fuel costs would
result in an  increase or decrease in the  Company's  gross  margin  percentage.
Based on a  hypothetical  10 percent  increase  in fuel costs for the year ended
June 30,  2001,  the total costs would be  equivalent  to an increase in cost of
$1.6 million, or .37% of total revenues.


                                       10
<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 - None.


                                       11
<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

November 19, 2001


                                       12
<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.

Exhibit                                                          Sequential Page
 Number                          Exhibit                             Number
 ------                          -------                             ------

      None


                                      E-1