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

                       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 March 31, 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.

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


<PAGE>

                                TABLE OF CONTENTS

PART I. Financial Information

                                                                      Page
                                                                      ----
     ITEM 1. Financial Statements:

     Consolidated Balance Sheets at June 30, 2000
       and March 31, 2001 ..........................................    1

     Consolidated Statements of Operations for the
       Three Month and Nine Month Periods
       Ended March 31, 2000 and 2001 ...............................    2

     Consolidated Statements of Stockholder's Equity for
       the Nine Months Ended March 31, 2001 ........................    3

     Consolidated Statements of Cash Flows for the
       Nine Month Periods Ended March 31, 2000 and 2001 ............    4

     Notes to Consolidated Financial Statements ....................  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,       March 31,
                                                                       2000            2001
                                                                  -------------   -------------
<S>                                                               <C>             <C>
Assets
Current:
  Cash and cash  equivalents ..................................   $   5,585,901   $   1,612,688
  Current portion of marketable securities ....................       1,461,000       4,768,000
  Accounts receivable, net of allowance for doubtful accounts .      57,911,467      61,610,534
  Inventories .................................................      10,675,606      16,438,987
  Notes receivable ............................................          15,901              --
  Prepaid expenses and other current assets ...................       7,129,168      13,234,026
                                                                  -------------   -------------
    Total current assets ......................................      82,779,043      97,664,235
                                                                  -------------   -------------
Property, plant and equipment, less accumulated depreciation ..     158,784,748     177,077,107
                                                                  -------------   -------------
Other assets:
  Goodwill, net ...............................................      11,817,606      11,573,175
  Investments .................................................          35,000          35,000
  Marketable securities .......................................       6,691,661       6,985,933
  Transportation contract rights, net .........................      21,586,626      20,164,052
  Deferred financing and organization costs, net ..............       7,080,118       9,310,378
  Due from parent company .....................................         837,300         917,219
  Deposit and other noncurrent assets .........................       4,316,475       3,301,705
  Deferred tax assets .........................................       3,954,168      10,981,348
  Covenant not to compete, net ................................         521,000         439,000
                                                                  -------------   -------------
    Total other assets ........................................      56,839,954      63,707,810
                                                                  -------------   -------------
                                                                  $ 298,403,745   $ 338,449,152
                                                                  =============   =============
Liabilities and Stockholder's Equity
Current:
  Current portion of long-term debt ...........................   $   1,907,563   $   2,729,685
  Insurance premium financing .................................              --       8,145,517
  Accounts payable ............................................       2,759,257       5,559,674
  Accrued compensation ........................................       7,277,106      15,190,303
  Current portion of insurance reserve ........................       3,200,000       5,200,000
  Accrued interest ............................................       7,315,366       3,024,163
  Other accrued expenses and current liabilities ..............      10,491,120       9,286,218
                                                                  -------------   -------------
    Total current liabilities .................................      32,950,412      49,135,560
                                                                  -------------   -------------
Long-term debt, net of current portion ........................     214,470,878     241,450,083
                                                                  -------------   -------------
Premium on bond issuance ......................................         771,750         515,610
                                                                  -------------   -------------
Other long-term liabilities ...................................       1,877,517         854,898
                                                                  -------------   -------------
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      (8,052,403)
  Accumulated other comprehensive income (loss) ...............         848,299      (2,403,113)
                                                                  -------------   -------------
    Total stockholder's equity ................................      48,333,188      46,493,001
                                                                  -------------   -------------
                                                                  $ 298,403,745   $ 338,449,152
                                                                  =============   =============
</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                 Nine Months Ended
                                                                    March 31,                         March 31,
                                                         ------------------------------    ------------------------------
                                                             2000             2001             2000             2001
                                                         -------------    -------------    -------------    -------------
<S>                                                      <C>              <C>              <C>              <C>
Revenues:
  Transportation Operations ..........................   $  93,500,744    $  97,414,433    $ 227,465,595    $ 252,841,563
  Bus Sales Operations ...............................      13,203,195       13,471,204       68,670,745       67,695,975
                                                         -------------    -------------    -------------    -------------
Total revenues .......................................     106,703,939      110,885,637      296,136,340      320,537,538
                                                         -------------    -------------    -------------    -------------
Costs and expenses:
  Cost of operations - Transportation Operations .....      75,979,302       81,062,943      188,356,785      212,633,197
  Cost of operations - Bus Sales Operations ..........      12,118,397       12,799,480       62,174,171       62,623,266
  General and administrative .........................       3,750,206        7,088,555       17,982,177       21,493,695
  Depreciation and amortization ......................       5,248,271        5,642,854       13,815,133       17,185,371
                                                         -------------    -------------    -------------    -------------
                                                            97,096,176      106,593,832      282,328,266      313,935,529
                                                         -------------    -------------    -------------    -------------
    Income from operations ...........................       9,607,763        4,291,805       13,808,074        6,602,009
Interest expense (net) ...............................      (6,528,150)      (6,934,316)     (18,947,598)     (21,591,794)
Other income (expense) ...............................        (118,425)         139,939         (821,407)        (626,170)
                                                         -------------    -------------    -------------    -------------
    Income (loss) before provision (benefit) for
      income taxes and cumulative effect of a change
      in accounting principle ........................       2,961,188       (2,502,572)      (5,960,931)     (15,615,955)
Provision (benefit) for income taxes .................       1,332,537       (1,126,158)      (2,682,415)      (7,027,180)
                                                         -------------    -------------    -------------    -------------
    Net income (loss) before cumulative effect of a
      change in accounting principle .................   $   1,628,651    $  (1,376,414)   $  (3,278,516)   $  (8,588,775)
                                                         -------------    -------------    -------------    -------------
Cumulative effect of a change in accounting principle,
  net of benefit from income taxes of $245,875 .......              --               --          300,511               --
                                                         -------------    -------------    -------------    -------------
    Net income (loss) ................................   $   1,628,651    $  (1,376,414)   $  (3,579,027)   $  (8,588,775)
                                                         =============    =============    =============    =============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       2
<PAGE>

             Atlantic Express Transportation Corp. and Subsidiaries

                 Consolidated Statements of Stockholder's Equity

                        Nine months ended March 31, 2001

<TABLE>
<CAPTION>
                                           Common                        Retained       Accumulated
                                            Stock         Additional      Earnings         Other
                                           No par         Paid-in      (Accumulated    Comprehensive   Comprehensive
                                            Value         Capital         Deficit)        Income        Income (Loss)      Total
                                         ------------   ------------    ------------   -------------   --------------  -------------
<S>                                      <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
Net loss .............................             --             --     (1,376,414)             --      (1,376,414)    (1,376,414)
Unrealized loss on
  marketable securities ..............             --             --             --      (1,333,695)     (1,333,695)    (1,333,695)
                                                                                                       ------------
Comprehensive loss ...................             --             --             --              --    $(11,840,187)            --
                                         ------------   ------------   ------------    ------------    ============   ------------
Balance, March 31, 2001 ..............   $    250,000   $ 56,698,517   $ (8,052,403)   $ (2,403,113)             --   $ 46,493,001
                                         ============   ============   ============    ============                   ============
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>


             Atlantic Express Transportation Corp. and Subsidiaries

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                              Nine Months Ended
                                                                                  March 31,
                                                                       ------------------------------
                                                                            2000            2001
                                                                       -------------    -------------
<S>                                                                    <C>              <C>
Cash flows from operating activities:
     Net loss ......................................................   $  (3,579,027)   $  (8,588,775)
Adjustments  to reconcile  net loss to net cash  provided by
  (used in) operating activities:
          Gain on sale of marketable securities ....................        (666,735)         (93,131)
          Deferred income taxes ....................................      (2,928,292)      (7,027,180)
          Depreciation .............................................      12,056,024       15,183,204
          Amortization .............................................       3,153,859        4,343,155
          Write-off of accounts receivable .........................            --           (193,760)
          Reserve for doubtful accounts receivable .................          90,000           90,000
          Loss on sale of fixed assets .............................          29,552          270,106
          Decrease (increase) in:
               Accounts receivable .................................     (10,320,722)      (3,595,307)
               Inventories .........................................       4,951,870       (5,763,381)
               Prepaid expenses and other current assets ...........         337,996       (6,104,858)
               Deferred lease expense ..............................          12,651            --
               Deposits and other noncurrent assets ................        (363,919)       1,014,770
          Increase (decrease) in:
               Accounts payable ....................................        (436,140)       2,800,417
               Accrued expenses and other current liabilities ......       2,635,683        4,417,092
               Other long-term liabilities .........................        (794,088)      (1,493,197)
                                                                       -------------    -------------
               Net cash provided by (used in) operating activities .       4,178,712       (4,740,845)
                                                                       -------------    -------------

Cash flows from investing activities:
     Acquisition of subsidiaries (net of cash acquired of $97,584) .     (14,956,593)            --
     Proceeds from sale of fixed assets ............................         561,885          467,472
     Additions to property, plant and equipment ....................     (28,122,513)     (28,026,563)
     Purchase of transportation contract rights ....................         (49,092)        (170,764)
     Additions to covenant not to compete ..........................        (175,000)         (50,000)
     Due from parent ...............................................           1,094          (79,919)
     Notes receivable ..............................................          22,442           15,901
     Marketable securities sold (purchased), net ...................       1,938,532       (6,759,553)
                                                                       -------------    -------------
               Net cash used in investing activities ...............     (40,779,245)     (34,603,426)
                                                                       -------------    -------------

Cash flows from financing activities:
     Additional paid-in capital ....................................      26,050,000        4,547,980
     Proceeds of additional borrowings .............................      24,780,924      103,440,254
     Principal payments on borrowings ..............................     (13,410,054)     (75,902,427)
     Insurance premium financing ...................................            --          8,145,517
     Deferred financing and organization costs .....................        (508,661)      (4,860,266)
                                                                       -------------    -------------
          Net cash provided by financing activities ................      35,371,058       36,912,209
                                                                       -------------    -------------
Net increase (decrease) in cash and cash equivalents ...............         311,676       (3,973,213)
Cash and cash equivalents, beginning of period .....................       2,581,372        5,585,901
                                                                       -------------    -------------
Cash and cash equivalents, end of period ...........................   $   2,893,048    $   1,612,688
                                                                       =============    =============

Supplemental  disclosures of cash flow information:
     Cash paid during the period  for:
          Interest .................................................   $  20,950,228    $  23,630,929
          Income taxes .............................................         110,596          256,380

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             --

     Contribution of buses as additional paid-in capital ...........            --          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,             March 31,
                                                   2000                 2001
                                               -----------           -----------
Parts and fuel .....................           $ 5,735,321           $ 5,548,305
Buses ..............................             4,940,285            10,890,682
                                               -----------           -----------
                                               $10,675,606           $16,438,987
                                               ===========           ===========

      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, 2000,
December  31,  2000 and March 31,  2001,  total  payments  made by Central  were
$28,041,324,  $18,202,677 and $7,350,207, respectively. In addition, as of March
31, 2001, Central was obligated to purchase $3,152,966 of vehicles from ABD.

      As of March 31 2001,  $596,760  of  deposits  are  classified  as  prepaid
expenses.

3. 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 (the "Notes") as of and for the nine months
ended March 31, 2001, and a consolidating  balance sheet as of June 30, 2000 and
consolidating  statements of operations for the nine months ended March 31, 2001
and 2000.

                      Condensed Consolidating Balance Sheet
                                 March 31, 2001
<TABLE>
<CAPTION>
                               Atlantic
                                Express                         Non-
                            Transportation    Guarantor      Guarantor     Elimination
                                 Corp.       Subsidiaries   Subsidiaries     Entries       Consolidated
                            --------------   ------------   ------------   -----------     ------------
<S>                        <C>              <C>             <C>           <C>              <C>
Current assets .........   $     269,877    $  92,088,153   $ 5,306,205   $        --      $  97,664,235
Investment in affiliates      90,482,640             --            --       (90,482,640)            --
Total assets ...........     280,654,445      309,379,302    12,776,212    (264,360,807)     338,449,152
Current liabilities ....       3,133,626       40,821,932    10,254,466      (5,074,464)      49,135,560
Total liabilities ......     237,748,922      254,684,770    10,781,691    (211,259,232)     291,956,151
Stockholder's equity ...      42,905,523       54,694,532     1,994,521     (53,101,575)      46,493,001
</TABLE>


                                       5
<PAGE>


                 Condensed Consolidating Statement of Operations
                        Three months ended March 31, 2001
<TABLE>
<CAPTION>

                                      Atlantic
                                       Express                            Non-
                                   Transportation      Guarantor       Guarantor         Elimination
                                        Corp.         Subsidiaries    Subsidiaries         Entries       Consolidated
                                   --------------     ------------    ------------       -----------     ------------
<S>                                 <C>              <C>              <C>              <C>              <C>
Net revenues ....................   $        --      $ 110,823,689    $   2,700,056    $  (2,638,108)   $ 110,885,637
Income from operations ..........            --          4,282,299            9,506             --          4,291,805
Income (loss) before income taxes            --         (2,512,078)           9,506             --         (2,502,572)
Net loss of subsidiaries ........      (1,376,414)            --               --          1,376,414              --
Net income (loss) ...............      (1,376,414)      (1,381,642)           5,228       (1,376,414)       1,376,414
</TABLE>

                 Condensed Consolidating Statement of Operations
                        Nine months ended March 31, 2001
<TABLE>
<CAPTION>

                                      Atlantic
                                      Express                             Non-
                                   Transportation      Guarantor       Guarantors       Elimination
                                       Corp.         Subsidiaries     Subsidiaries        Entries        Consolidated
                                   ---------------   --------------   -------------   ---------------   -------------
<S>                                 <C>              <C>              <C>             <C>              <C>
Net revenues ....................   $        --      $ 320,249,930    $   4,925,432   $  (4,637,824)   $ 320,537,538
Income from operations ..........            --          6,467,209          134,800            --          6,602,009
Income (loss) before income taxes            --        (15,750,755)         134,800            --        (15,615,955)
Net loss of subsidiaries ........      (8,588,775)            --               --         8,588,775             --
Net income (loss) ...............      (8,588,775)      (8,662,915)          74,140       8,588,775       (8,588,775)
</TABLE>

                 Condensed Consolidating Statement of Cash Flows
                        Nine months ended March 31, 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 .......   $  1,123,121    $(11,316,519)   $  5,452,553    $       --      $ (4,740,845)
Net cash provided by (used in)
  investing activities .......    (72,676,152)     44,832,279      (6,759,553)           --       (34,603,426)

Net cash provided by (used in)
  financing activities .......     71,458,962     (36,087,904)           --              --        35,371,058
Decrease in cash and cash
  equivalents ................        (94,069)     (2,572,144)     (1,307,000)           --        (3,973,213)
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 ..............   $     55,931    $  1,124,757    $    432,000    $       --      $  1,612,688
</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>


                                       6
<PAGE>

                 Condensed Consolidating Statement of Operations
                        Three months ended March 31, 2000
<TABLE>
<CAPTION>

                                       Atlantic
                                       Express                           Non-
                                    Transportation     Guarantor      Guarantor      Elimination
                                        Corp.        Subsidiaries   Subsidiaries       Entries     Consolidated
                                    --------------  --------------  ------------   -------------   ------------
<S>                                 <C>             <C>             <C>            <C>             <C>
Net revenues ....................   $       --      $ 88,895,376    $  1,475,175   $   (999,858)   $ 89,370,693
Income from operations ..........      4,400,000       3,522,377         419,535           --         8,341,912
Income (loss) before income taxes      4,400,000      (2,220,388)        419,535           --         2,599,147
Net loss of subsidiaries ........       (990,471)           --              --          990,471            --
Net income (loss) ...............      1,429,529      (1,221,215)        230,744        990,471       1,429,529
</TABLE>

                 Condensed Consolidating Statement of Operations
                        Nine months ended March 31, 2000
<TABLE>
<CAPTION>
                                        Atlantic
                                        Express                             Non-
                                     Transportation    Guarantor        Guarantors      Elimination
                                         Corp.        Subsidiaries     Subsidiaries       Entries      Consolidated
                                     --------------  -------------    -------------   --------------   -------------
<S>                                 <C>              <C>              <C>             <C>              <C>
Net revenues ....................   $        --      $ 261,581,573    $   1,846,200   $    (999,858)   $ 262,427,915
Income from operations ..........       4,400,000        7,667,093          694,691            --         12,761,784
Income (loss) before income taxes       4,400,000       (9,966,238)         694,691            --         (4,871,547)
Cumulative effect of a change
  in accounting principal .......            --           (546,388)            --              --           (546,388)
Net loss of subsidiaries ........      (5,399,865)            --               --         5,399,865             --
Net Income (loss) ...............      (2,979,865)      (5,781,945)         382,080       5,399,865       (2,979,865)
</TABLE>


                 Condensed Consolidating Statement of Cash Flows
                        Nine months ended March 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 .................................   $ (7,274,210)   $ 13,629,454    $ (2,176,532)   $     --     $  4,178,712
Net cash provided by (used in) investing .....
  activities .................................       (606,817)    (42,110,960)      1,938,532          --      (40,779,245)
Net cash provided by  financing
  activities .................................      8,805,924      28,106,285            --            --       36,912,209
Increase (decrease) in cash and  cash ........
equivalents ..................................        924,897        (375,221)       (238,000)         --          311,676
Cash and cash equivalents, beginning of period       (324,134)      2,247,506         658,000          --        2,581,372
                                                 -------------------------------------------------------------------------
Cash and cash equivalents, end of period .....   $    600,763    $  1,872,285    $    420,000    $     --     $  2,893,048
</TABLE>


                                       7
<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

Three months ended March 31, 2001 compared to three months ended March 31, 2000.

      Revenues.  Revenues from Transportation  Operations were $97.4 million for
the three  months ended March 31, 2001  compared to $93.5  million for the three
months ended March 31, 2000, an increase of $3.9 million or 4.2%.  This increase
was due primarily to (i) $4.3 million of new contracts  awarded and $3.2 million
net increase in contract rates and service requirements partially offset by $3.1
million decrease due to exits from  under-performing  contracts and $0.5 million
of contracts lost. Revenues from Bus Sales Operations were $13.5 million for the
three months ended March 31, 2001 compared to $13.2 million for the three months
ended March 31, 2000, an increase of $0.3 million or 2.0%.

      Gross  Profit.  Gross  profit  from  Transportation  Operations  was $16.4
million for the three months ended March 31, 2001  compared to $17.5 million for
the three months ended March 31, 2000, a decrease of $1.2 million or 6.7%.  As a
percentage  of revenues,  gross profit  decreased to 16.8 % for the three months
ended March 31, 2001 from 18.7% for the three months ended March 31, 2000.  This
decrease was due primarily to increased labor costs. Gross profit from Bus Sales
Operations  was $0.7 million for the three months ended March 31, 2001  compared
to $1.1  million for the three  months  ended March 31, 2000, a decrease of $0.4
million or 38.1%.  As a percentage of revenues,  gross profit  decreased to 5.0%
for the three  months  ended March 31, 2001 from 8.2% for the three months ended
March 31, 2000. The reduction in gross profit percentage was due primarily to an
increase in 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 $6.0 million for the three months ended
March 31, 2001  compared to $2.8  million for the three  months  ended March 31,
2000, an increase of $3.2 million or 116.0 %. This increase was primarily due to
a $3.9  million  net  credit in the prior  period in  relation  to a  litigation
settlement  in 2000  partially  offset by $0.4 million  decrease in  recruitment
expense  in  2001.  General  and  administrative  expenses  for  the  Bus  Sales
Operations for the three months ended March 31, 2001 were $1.1 million  compared
to $1.0  million for the three  months  ended March 31, 2000 an increase of $0.1
million or 12.0%. This increase was due primarily to increases in administrative
payrolls.

      Depreciation  and  amortization  expenses.  Depreciation  and amortization
expenses  for the  Transportation  Operations  were $5.4  million  for the three
months ended March 31, 2001  compared to $5.0 million for the three months ended
March 31, 2000,  an increase of $0.4 million or 7.5%.  This  increase was due to
(i)  $0.2  million  additional  depreciation  relating  to the  purchase  of new
vehicles and (ii) an increase of $0.2 million due primarily to the  amortization
of contract rights of newly acquired subsidiaries. Depreciation and amortization
expenses  for the Bus Sales  Operations  were $0.2  million for the three months
ended March 31, 2001 and March 31, 2000, respectively.

      Income from  operations.  Income from  operations was $4.3 million for the
three  months  ended  March 31,  2001  compared to $9.6  million  ($5.7  million
exclusive of a $3.9 million net credit in relation to the litigation settlement)
for the three months  ended March 31,  2000,  a decrease of $5.3  million  ($1.5
million  exclusive of the litigation  settlement).  This decrease was due to the
net effect of the items discussed above.


                                       8
<PAGE>

      Net interest expense.  Net interest expense was $6.9 million for the three
months ended March 31, 2001  compared to $6.5 million for the three months ended
March 31,  2000,  an increase of $0.4  million or 6.2%.  This  increase  was due
primarily to (i) an increase in indebtedness of $12.2 million in relation to the
acquisition of newly  acquired  subsidiaries;  (ii) higher average  indebtedness
outstanding  partially  offset by $0.3 million  decrease  due to lower  interest
rates; and (iii) an increase of $0.3 million in amortization of deferred finance
charges.

      Net loss.  The Company  generated a net loss of $1.4 million for the three
months ended March 31, 2001 compared to net income of $1.6 million for the three
months ended March 31, 2000, a decrease of $3.0  million.  This decrease was due
to the net effect of the items discussed above.

Nine months ended March 31, 2001 compared to nine months ended March 31, 2000.

      Revenues.  Revenues from Transportation Operations were $252.8 million for
the nine months  ended March 31,  2001  compared to $227.5  million for the nine
months  ended  March 31,  2000,  an  increase  of $25.4  million or 11.2%.  This
increase was due primarily to (i) $11.8 million of new contracts  awarded;  (ii)
$2.9 million in  additional  summer work;  and (iii) $9.5 million in relation to
acquisition of new subsidiaries partially offset by $8.1 million decrease due to
exit  from  under-performing  contracts  and $1.2  million  of  contracts  lost.
Revenues from Bus Sales  Operations were $67.7 million for the nine months ended
March 31,  2001  compared to $68.7  million for the nine months  ended March 31,
2000, a decrease of $1.0 million or 1.4%.  This  decrease was due primarily to a
decrease  of $1.3  million in new bus sales  partially  offset by an increase of
$0.3 million in other sales.

      Gross  Profit.  Gross  profit  from  Transportation  Operations  was $40.2
million for the nine months ended March 31, 2001  compared to $39.1  million for
the nine months ended March 31, 2000,  an increase of $1.1 million or 2.8%. As a
percentage  of  revenues,  gross  profit  decreased to 15.9% for the nine months
ended March 31, 2001 from 17.2% for the nine months  ended March 31,  2000.  The
decrease in gross profit  percentage was due primarily to increased labor costs.
Gross profit from the Bus Sales  Operations was $5.1 million for the nine months
ended March 31, 2001  compared to $6.5  million for the nine months  ended March
31,  2000, a decrease of $1.4  million or 21.9%.  The  reduction in gross profit
percentage  was due primarily to an increase in the  proportion of sales made in
the New Jersey market which has had historically lower gross profit margins then
the New York market and increased  competition  which has reduced margins.  As a
percentage of revenues, gross profit decreased to 7.5% for the nine months ended
March 31, 2001 from 9.5% for the nine months ended March 31, 2000.

      General and administrative  expenses.  General and administrative expenses
for the  Transportation  Operations were $18.4 million for the nine months ended
March 31,  2001  compared to $15.1  million for the nine months  ended March 31,
2000, an increase of $3.3 million or 21.5%. This increase was primarily due to a
$3.2  million net credit in the prior year  period in  relation to a  litigation
settlement  in 2000.  General  and  administrative  expenses  for the Bus  Sales
Operations  were $3.1 million for the nine months ended March 31, 2001  compared
to $2.9  million  for the nine  months  ended March 31, 2000 an increase of $0.3
million or 9.0%. This increase was primarily due to increases in  administrative
payrolls.

      Depreciation  and  amortization  expenses.  Depreciation  and amortization
expenses  for the  Transportation  Operations  were $16.5  million  for the nine
months ended March 31, 2001  compared to $13.2 million for the nine months ended
March 31, 2000,  an increase of $3.3 million or 25.1%.  This increase was due to
(i)  $1.5  million  additional  depreciation  relating  to the  purchase  of new
vehicles;  (ii) $1.3 million  increase in  depreciation of fixed assets of newly
acquired  subsidiaries;  and (iii) $0.5 million in relation to  amortization  of
contract  rights  primarily of newly  acquired  subsidiaries.  Depreciation  and
amortization  of the Bus Sales  Operations were $0.6 million for the nine months
ended March 31, 2001 and March 31, 2000, respectively.

      Income from  operations.  Income from  operations was $6.6 million for the
nine months  ended  March 31, 2001  compared  to $13.8  million  ($10.6  million
exclusive of a $3.2 million net credit in relation to the litigation settlement)
for the nine months  ended March 31,  2000,  a decrease  of $7.2  million  ($4.0
million exclusive of the litigation settlement. This decrease was due to the net
effect of the items discussed above.


                                       9
<PAGE>

      Net interest expense.  Net interest expense was $21.6 million for the nine
months ended March 31, 2001  compared to $18.9 million for the nine months ended
March 31,  2000,  an increase of $2.6  million or 14.0%.  This  increase was due
primarily to (i) an increase in indebtedness of $15.4 million in relation to the
acquisition of newly  acquired  subsidiaries;  (ii) higher average  indebtedness
outstanding  partially  offset by $0.3 million  decrease  due to lower  interest
rates;  and (iii) an increase of $0.9  million in the  amortization  of deferred
financing costs.

      Loss before  cumulative  change in accounting  principle  and taxes.  Loss
before cumulative change in accounting  principle and taxes was $8.6 million for
the nine  months  ended March 31,  2001  compared  to $3.3  million for the nine
months ended March 31, 2000 an increase of $5.3 million.

      Net loss.  The Company  generated a net loss of $8.6  million for the nine
months ended March 31, 2001  compared to a net loss of $3.6 million for the nine
months ended March 31,  2000,  an increase of $5.0 million due to the net effect
of the items discussed above.

Liquidity and Capital Resources

      Management  anticipates  total  capital  expenditures  of $31.8 million in
fiscal 2001 including approximately $5.9 million for the purchase of vehicles in
relation to new contracts and maintenance  capital  expenditures  for the fiscal
year ended June 30, 2002. These vehicles have been or will be purchased prior to
the  Company's  fiscal year end due to  availability  of inventory and favorable
pricing.  Approximately $28.8 million were made by March 31, 2001. This included
approximately  $22.4  million for  purchase of new vehicles and $6.4 million for
other property and equipment.

      Net  Cash  Used in  Operating  Activities.  Net  cash  used  in  operating
activities  was $4.7 million for the nine months ended March 31, 2001 due to the
following:  (i) a net loss of $8.6 million  plus non cash items of  depreciation
and  amortization of $19.5 million less a $7.0 million  increase in deferred tax
benefit;  (ii) $8.2  million  use of cash for  working  capital;  and (iii) $0.4
million other uses of funds.

      Net Cash Used in Investing Activities. For the nine months ended March 31,
2001,  the  Company  made  $28.8  million  of  capital  expenditures  to acquire
additional vehicles, other property and equipment. Of these capital expenditures
$0.7 million were directly financed. In addition,  the Company made $6.8 million
in net purchases of marketable securities.

      Net Cash Provided by Financing Activities.  Net cash provided by financing
activities  totaled $35.4 million for the nine months ended March 31, 2001,  due
to (i) a $4.5  million  cash  contribution  as part of a $10.0  million  capital
contribution from the Company's parent,  Atlantic Express  Transportation Group,
Inc.  ("AETG");  (ii)  $103.4  million  of net  borrowings  under the  Company's
revolving  line of credit;  (iii)$8.1  million of insurance  premium  financing,
partially offset by $45.9 million of principal payments on borrowings, repayment
of $30.0  million of the  Company's 10 3/4% Senior  Secured  Notes due 2004 (the
"Notes");  and $4.9  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 nine
months ended March 31, 2001.

      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 is expected to have an impact
of  approximately  $1.0  million for the fiscal year ending June 30,  2001.  The
Company was able to extend its current  automobile policy through June 2001 with
no significant  increase in rates. The Company anticipates  significantly higher
costs for  automobile  liability  insurance  for the fiscal year ending June 30,
2002. Under the terms of its contract with its largest school bus customer,  the
Company is able to recover a portion of the increase in automobile liability and
workers compensation premium increases commencing with the school year beginning
September 2001 and has negotiated with its largest paratransit  customer to pass
through all automobile  liability  insurance  premium increases to that customer
for the remainder of its existing contract with that customer.  At this time the
Company  is not able to  quantify  the  effect on  margins  or  earnings  of the
expected net increase in automobile  liability  insurance premium for the fiscal
year ending June 30, 2002.


                                       10
<PAGE>

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

      The Company believes that its current  operating cash flow, along with its
borrowing  capacity under its $125.0 million revolving credit facility (of which
$11.1  million was undrawn at March 31,  2001) will  provide it with  sufficient
liquidity to conduct its existing operations through June 30, 2002.

      At March 31 2001, the Company's total debt and  stockholder's  equity were
$244.2 million and $46.5 million, respectively.


                                       11
<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.


                                       12
<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

May 15, 2001

                                       13