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

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

(Mark One)

  [X]   Quarterly report pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934
        For the quarterly period ended December 31, 1999 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

<TABLE>
<CAPTION>

                                                                                                Page
                                                                                                ----
     <S>                                                                                        <C>
     ITEM 1. Financial Statements:

     Consolidated Balance Sheets at June 30, 1999 (audited) and December 31, 1999
          (unaudited)......................................................................       1

     Consolidated Statements of Operations for the Three Month and Six Month Periods
          Ended December 31, 1998 (unaudited) and 1999 (unaudited).........................       2

     Consolidated Statements of Stockholder's Equity for the Three Months and
          Six Months Ended December 31, 1999...............................................       3

     Consolidated Statements of Cash Flows for the Six Month Periods Ended December 31,
           1998 (unaudited) and 1999 (unaudited)...........................................       4

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

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

PART II. Other Information                                                                       12

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

Index to Exhibits..........................................................................     E-1
</TABLE>


<PAGE>



             Atlantic Express Transportation Corp. and Subsidiaries

                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                          June 30,           December 31,
                                                                            1999                 1999
                                                                       -------------        --------------
                                                                         (audited)            (unaudited)
<S>                                                                    <C>                  <C>
Assets
Current:
  Cash and cash equivalents .........................................  $     855,983        $   7,540,776
  Current portion of marketable securities ..........................      3,842,000            1,264,000
  Accounts receivable, net of allowance for doubtful accounts .......     48,468,255           39,208,782
  Inventories .......................................................     15,215,018           11,585,283
  Notes receivable ..................................................         31,964               17,200
  Prepaid expenses and other current assets .........................      6,190,766            5,721,463
                                                                       -------------        -------------
            Total current assets ....................................     74,603,986           65,337,504
                                                                       -------------        -------------

Property, plant and equipment, less accumulated depreciation ........    119,138,827          124,333,114
                                                                       -------------        -------------

Other assets:
  Goodwill, net .....................................................     12,143,514           11,980,560
  Investments .......................................................         35,000               35,000
  Marketable securities .............................................      5,869,380            7,145,336
  Deferred lease expense ............................................        148,155              140,093
  Transportation contract rights, net ...............................      3,408,096            3,612,933
  Deferred financing and organization costs, net ....................      8,018,053            7,057,954
  Due from parent company ...........................................        831,117              831,117
  Notes receivable ..................................................         11,494                5,653
  Deposit and other noncurrent assets ...............................      3,248,336            3,379,054
  Deferred tax assets ...............................................      3,935,981            7,543,669
  Covenant not to compete, net ......................................        120,000              100,000
                                                                       -------------        -------------
            Total other assets ......................................     37,769,126           41,831,369
                                                                       -------------        -------------
                                                                       $ 231,511,939        $ 231,501,987
                                                                       =============        =============
Liabilities and Stockholder's Equity
Current:
  Current portion of long-term debt .................................  $  21,411,180        $   1,773,169
  Accounts payable ..................................................      2,453,411            2,656,067
  Accrued compensation ..............................................      7,392,071            6,349,952
  Current portion of insurance reserve ..............................      4,500,000            2,200,000
  Accrued interest ..................................................      6,890,810            6,767,096
  Other accrued expenses and current liabilities ....................      3,992,443            6,752,647
                                                                       -------------        -------------
            Total current liabilities ...............................     46,639,915           26,498,931
                                                                       -------------        -------------

Long-term debt, net of current portion ..............................    159,921,440          178,578,570
                                                                       -------------        -------------
Premium on bond issuance ............................................        987,150              879,450
                                                                       -------------        -------------
Other long-term liabilities .........................................      3,023,529            2,489,737
                                                                       -------------        -------------

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 ........................................     15,898,517           22,048,517
  Accumulated other comprehensive income ............................        925,950            1,300,738
  Retained earnings (deficit) .......................................      3,865,438             (543,956)
                                                                       -------------        -------------
            Total stockholder's equity ..............................     20,939,905           23,055,299
                                                                       -------------        -------------
                                                                       $ 231,511,939        $ 231,501,987
                                                                       =============        =============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       1
<PAGE>



             Atlantic Express Transportation Corp. and Subsidiaries

                      Consolidated Statements of Operations

<TABLE>
<CAPTION>

                                                                 Three Months Ended                   Six Months Ended
                                                                     December 31,                        December 31,
                                                          -------------------------------     -------------------------------
                                                               1998              1999              1998              1999
                                                          -------------     -------------     -------------     -------------
                                                                    (unaudited)                         (unaudited)
<S>                                                       <C>               <C>               <C>               <C>
Revenues:
     Transportation Operations .......................    $  68,505,309     $  73,804,660     $ 104,097,900     $ 117,589,672
     Bus Sales Operations ............................       16,463,006        16,868,351        51,903,202        55,467,550
                                                          -------------     -------------     -------------     -------------
Total revenues .......................................       84,968,315        90,673,011     $ 156,001,102       173,057,222
                                                          -------------     -------------     -------------     -------------

Costs and expenses:
     Cost of operations - Transportation Operations ..       53,495,495        58,885,612        86,772,065        99,354,159
     Cost of operations - Bus Sales Operations .......       14,908,478        15,427,313        46,287,981        50,055,774
     General and administrative ......................        5,606,220         6,438,559        10,190,642        12,349,163
     Depreciation and amortization ...................        3,123,996         3,437,673         5,979,982         6,878,254
                                                          -------------     -------------     -------------     -------------
                                                             77,134,189        84,189,157       149,230,670       168,637,350
                                                          -------------     -------------     -------------     -------------
       Income (loss) from operations .................        7,834,126         6,483,854         6,770,432         4,419,872
Interest expenses (net) ..............................       (5,322,261)       (5,593,418)      (10,139,864)      (11,210,651)
Other income (expense) ...............................          (72,999)         (365,414)          (72,999)         (679,915)
                                                          -------------     -------------     -------------     -------------
       Income (loss) before other items
         and provision (benefit) for
         income taxes ................................        2,438,866           525,022        (3,442,431)       (7,470,694)
Cumulative effect of a change in accounting principles               --                --                --          (546,388)
                                                          -------------     -------------     -------------     -------------

       Income (loss) before nonrecurring items and
         provision (benefit) for income taxes ........        2,438,866           525,022        (3,442,431)       (8,017,082)
Nonrecurring item ....................................       (1,223,161)               --        (1,223,161)               --
                                                          -------------     -------------     -------------     -------------

       Income (loss) before provision (benefit) for
         income taxes ................................        1,215,705           525,022        (4,665,592)       (8,017,082)
Provision (benefit) for income taxes .................          547,068           236,259        (2,099,515)       (3,607,688)
                                                          -------------     -------------     -------------     -------------

       Net income (loss) .............................    $     668,637     $     288,763     $  (2,566,077)    $  (4,409,394)
                                                          =============     =============     =============     =============
Unrealized gain (loss) on marketable securities ......        1,561,228          (174,179)          951,378           374,788
                                                          -------------     -------------     -------------     -------------
       Comprehensive income (loss) ...................    $   2,229,865     $     114,584     $  (1,614,699)    $  (4,034,606)
                                                          =============     =============     =============     =============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       2
<PAGE>



             Atlantic Express Transportation Corp. and Subsidiaries

                 Consolidated Statements of Stockholder's Equity

                       Six months ended December 31, 1999


<TABLE>
<CAPTION>

                                                                                                     Accumulated
                                                                                   Retained             other
                                             Common stock       Additional         earnings         comprehensive
                                             No par value     paid-in capital      (deficit)            income             Total
                                            -------------     ---------------    ------------       -------------      -------------
<S>                                          <C>               <C>               <C>                <C>                <C>
Balance, June 30, 1999 ..................    $    250,000      $ 15,898,517      $  3,865,438       $    925,950       $ 20,939,905
Net loss ................................              --                --        (4,698,157)                --         (4,698,157)
Unrealized loss on
          marketable securities .........              --                --                --           (174,179)          (174,179)
------------------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1999 .............         250,000        15,898,517          (832,719)           751,771         16,067,569
------------------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital ..............              --         6,150,000                --                 --          6,150,000
Net income ..............................              --                --           288,763                 --            288,763
Unrealized gain on
          marketable securities .........              --                --                --            548,967            548,967
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 ..............    $    250,000      $ 22,048,517      $   (543,956)      $  1,300,738       $ 23,055,299
====================================================================================================================================
</TABLE>
          See accompanying notes to consolidated financial statements.


                                       3
<PAGE>



             Atlantic Express Transportation Corp. and Subsidiaries

                      Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                                                 Six Months Ended
                                                                                                    December 31,
                                                                                          ------------------------------
                                                                                               1998             1999
                                                                                          -------------    -------------
                                                                                                    (unaudited)
<S>                                                                                       <C>              <C>
Cash flows from operating activities:
     Net loss ........................................................................    $ (2,566,077)    $ (4,409,394)
Adjustments to reconcile net loss to net cash provided by (used in) operating
     activities:
          Gain on sale of marketable securities ......................................        (194,329)        (243,408)
          Deferred income taxes ......................................................      (2,099,515)      (3,607,688)
          Depreciation ...............................................................       5,401,850        6,385,695
          Amortization ...............................................................       1,263,915        1,294,926
          Reserve for doubtful accounts receivable ...................................          60,000           60,000
          Loss on sale of fixed assets ...............................................              --           29,552
          Nonrecurring item ..........................................................       1,223,161               --
          Decrease (increase) in:
               Accounts receivable ...................................................      (3,092,168)       9,199,473
               Inventories ...........................................................       1,014,617        3,629,735
               Prepaid expenses and other current assets .............................      (1,209,744)         469,303
               Deferred lease expense ................................................          57,304            8,062
               Deposits and other noncurrent assets ..................................         200,699         (130,717)
          Increase (decrease) in:
               Accounts payable ......................................................         595,259          202,656
               Accrued expenses and other current liabilities ........................      (1,975,650)        (705,629)
               Other long-term liabilities ...........................................         475,390         (533,793)
                                                                                          ------------     ------------
               Net cash provided by (used in) operating activities ...................        (845,288)      11,648,773
                                                                                          ------------     ------------

Cash flows from investing activities:
     Acquisition of subsidiaries (net of cash acquired of $1,100,009) ................      (6,014,361)              --
     Proceeds from sale of fixed assets ..............................................          33,887          548,949
     Additions to property, plant and equipment ......................................     (18,745,242)     (10,933,329)
     Purchase of transportation contract rights ......................................         (70,215)         (49,092)
     Due from parent .................................................................        (158,528)              --
     Notes receivable ................................................................       1,570,247           20,605
     Marketable securities sold (purchased), net .....................................      (1,127,191)       1,920,240
                                                                                          ------------     ------------
               Net cash used in investing activities .................................     (24,511,403)      (8,492,627)
                                                                                          ------------     ------------

Cash flows from financing activities:
     Additional paid-in capital ......................................................              --        6,150,000
     Proceeds of additional borrowings ...............................................      19,355,307               --
     Principal payments on borrowings ................................................      (5,000,991)      (2,621,353)
     Deferred financing and organization costs .......................................         (49,995)              --
     Other ...........................................................................        (229,049)              --
                                                                                          ------------     ------------
          Net cash provided by financing activities ..................................      14,075,272        3,528,647
                                                                                          ------------     ------------
Net increase (decrease) in cash and cash equivalents .................................     (11,281,419)       6,684,793
Cash and cash equivalents, beginning of period .......................................      13,772,537          855,983
                                                                                          ------------     ------------
Cash and cash equivalents, end of period .............................................    $  2,491,118        7,540,776
                                                                                          ============     ============

Supplemental  disclosures of cash flow information:  Cash paid during the period
     for:
          Interest ...................................................................    $  9,521,069     $ 10,019,393
          Income taxes ...............................................................         182,068           47,025

Supplemental schedule of noncash investing and financing activities:
     Loans incurred for purchase of property, plant and equipment ....................    $  5,686,617     $  1,225,152
     Liability incurred for acquisition of contract rights ...........................              --          415,320
     Additional paid-in capital contributed for bondholder consent fees and expenses .       2,709,591               --
</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,  1999 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.

      Certain  amounts  in  the  fiscal  1999  financial  statements  have  been
reclassified to conform with current period presentation.

      Operating results for the periods presented are not necessarily indicative
of the results for the full fiscal year.

2.  New Accounting Pronouncement

      On July 1, 1999, the Company  adopted the American  Institute of Certified
Public  Accountants  Statement of Position  98-5 ("SOP 98-5")  "Reporting on the
Costs of Start-Up Activities".  In connection therewith,  the Company recorded a
charge  of $0.5  million  described  as the  cumulative  effect  of a change  in
accounting  principle,  which represented  unamortized start-up costs as of June
30, 1999.

3.  Inventories

      Inventories comprised the following:
<TABLE>
<CAPTION>

                                                                     June 30,        December 31,
                                                                       1999              1999
                                                                  -------------     -------------

      <S>                                                         <C>               <C>
      Parts and fuel...................................           $  3,919,018      $  4,173,844
      Buses held for sale..............................             11,296,000         7,411,439
                                                                  ------------      ------------
                                                                  $ 15,215,018      $ 11,585,283
                                                                  ============      ============
</TABLE>


4. Litigation

      In June 1998,  Atlantic Express  Transportation  Group, Inc. ("AETG") (the
"parent  company")  commenced  litigation  against  National  Express Group, PLC
("National") asserting claims of "tortuous interference with business relations,
unfair competition and breach of contract".

      Approximately $1.5 million of litigation expenses have been incurred since
the inception of the lawsuit,  including $0.9 million  incurred in the first six
months of the current fiscal year.

5. Additional Paid-In Capital

      In December 1999, the Company received an additional capital  contribution
of $6.2 million from AETG.


                                       5
<PAGE>

6. Inter-Company Transactions

      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.  (collectively  "Central")  entered  into an
agreement  with  Atlantic  Bus  Distributors,   Inc.  ("ABD"),  a  wholly  owned
subsidiary of AETG,  to order certain buses through ABD.  Central is required to
deposit fifteen 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 purchases of any such vehicles.

7. Revolving Line of Credit Extension

      In November 1999, Congress Financial Corporation  ("Congress") renewed the
Company's  $30.0 million  revolving  credit  facility (the  "Facility")  and the
Company's Accounts Purchase and Sale Agreement (the "Receivable  Agreement") for
an additional two years commencing February 4, 2000.

8. Supplemental Financial Information

      The following are unaudited condensed  consolidating  financial statements
regarding the Company (on a stand-alone  basis and on a consolidated  basis) and
its subsidiaries  which are Guarantors and Non-Guarantors of the Notes as of and
for the six months ended December 31, 1999, and a consolidating balance sheet as
of June 30, 1999 and consolidating statements of operations for the three months
ended December 31, 1999 and 1998 and for the six months ended December 31, 1999,
and consolidating  statement of cash flows for the six months ended December 31,
1998.


                      Condensed Consolidating Balance Sheet
                                December 31, 1999

<TABLE>
<CAPTION>
                                   Atlantic
                                    Express                                    Non-
                                 Transportation         Guarantor           Guarantor            Elimination
                                      Corp.           Subsidiaries        Subsidiaries             Entries            Consolidated
                                --------------       -------------       ---------------      ----------------       --------------
<S>                             <C>                  <C>                 <C>                  <C>                    <C>
Current assets .........        $   6,713,936        $  56,565,082        $   2,058,486        $          --         $  65,337,504
Investment in affiliates           56,295,788                   --                   --          (56,295,788)                   --
Total assets ...........          212,893,698          203,108,712           10,423,115         (194,923,538)          231,501,987
Current liabilities ....            7,343,025           16,054,982            3,100,924                   --            26,498,931
Total liabilities ......          176,218,491          164,435,883            5,870,508         (138,078,194)          208,446,688
Stockholder's equity ...           36,675,207           38,672,829            4,552,607          (56,845,344)           23,055,299
</TABLE>


<TABLE>
<CAPTION>

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

                                     Atlantic
                                      Express                                Non-
                                  Transportation      Guarantor           Guarantor        Elimination
                                       Corp.         Subsidiaries       Subsidiaries          Entries           Consolidated
                                  --------------     ------------       ------------       -------------       ---------------
<S>                               <C>                <C>                <C>                <C>                   <C>
Net revenues .............        $        --        $90,366,485        $   306,526        $        --           $90,673,011
Income from operations ...                 --          6,224,436            259,418                 --             6,483,854
Income before income taxes                 --            265,604            259,418                 --               525,022
Net income of subsidiaries            288,763                 --                 --           (288,763)                   --
Net income ...............            288,763            146,083            142,680           (288,763)              288,763
</TABLE>


                                       6
<PAGE>


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

<TABLE>
<CAPTION>
                                          Atlantic
                                          Express
                                       Transportation         Guarantor              Non-          Elimination
                                            Corp.           Subsidiaries         Guarantors          Entries          Consolidated
                                      ----------------     --------------      -------------     ---------------     --------------
<S>                                    <C>                 <C>                 <C>                <C>                <C>
Net revenues ....................      $          --       $ 172,686,197       $     371,025      $          --      $ 173,057,222
Income from operations ..........                 --           4,144,716             275,156                 --          4,419,872
Income (loss) before income taxes                 --          (7,745,850)            275,156                 --         (7,470,694)
Cumulative effect of a change in
     accounting principle .......                 --            (546,388)                 --                 --           (546,388)
Net loss of subsidiaries ........         (4,409,394)                 --                  --          4,409,394                 --
Net income (loss) ...............         (4,409,394)         (4,560,730)            151,336          4,409,394         (4,409,394)
</TABLE>


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

<TABLE>
<CAPTION>

                                          Atlantic
                                           Express                                   Non-
                                       Transportation       Guarantor             Guarantor        Elimination
                                            Corp.          Subsidiaries          Subsidiaries         Entries         Consolidated
                                      ----------------    --------------        --------------    --------------     --------------
<S>                                   <C>                  <C>                  <C>                  <C>             <C>
Net cash provided by (used in)
     operating activities ....        $  1,609,507         $ 11,881,506         $ (1,842,240)        $   --          $ 11,648,773
Net cash used in investing
     activities ..............            (300,258)         (10,112,609)           1,920,240             --            (8,492,627)
Net cash provided by (used in)
     financing activities ....           4,116,654             (588,007)                  --             --             3,528,647
Increase in cash and cash
     equivalents .............           5,425,903            1,180,890               78,000             --             6,684,793
Cash and cash equivalents,
     beginning of period .....            (324,134)             522,117              658,000             --               855,983
Cash and cash equivalents,            -------------------------------------------------------------------------------------------
     end of period ...........           5,101,769            1,703,007              736,000             --             7,540,776
</TABLE>


                      Condensed Consolidating Balance Sheet
                                  June 30, 1999
<TABLE>
<CAPTION>
                                    Atlantic
                                     Express                                   Non-
                                 Transportation        Guarantor            Guarantor           Elimination
                                      Corp.           Subsidiaries         Subsidiaries            Entries            Consolidated
                                ----------------     --------------       --------------       --------------        ---------------
<S>                             <C>                  <C>                  <C>                  <C>                   <C>
Current assets .........        $   1,220,437        $  68,829,160        $   4,554,389        $          --         $  74,603,986
Investment in affiliates           60,330,394                   --                   --          (60,330,394)                   --
Total assets ...........          208,820,247          204,637,409           12,596,989         (194,542,706)          231,511,939
Current liabilities ....           22,655,804           18,583,172            5,400,939                   --            46,639,915
Total liabilities ......          171,016,512          161,403,850            8,570,505         (130,418,833)          210,572,034
Stockholder's equity ...           37,803,735           43,233,559            4,026,484          (64,123,873)           20,939,905
</TABLE>


                                       7
<PAGE>



                 Condensed Consolidating Statement of Operations
                      Three months ended December 31, 1998

<TABLE>
<CAPTION>
                                             Atlantic
                                              Express                               Non-
                                          Transportation       Guarantor         Guarantor       Elimination
                                               Corp.         Subsidiaries       Subsidiaries        Entries         Consolidated
                                         ----------------   --------------     -------------    -------------      --------------
<S>                                      <C>                <C>                <C>              <C>                <C>
Net revenues .......................      $         --       $ 84,667,851      $  2,273,552      $ (1,973,088)      $ 84,968,315
Income (loss) from operations ......          (267,415)         7,853,713           247,828                --          7,834,126
Income (loss) before nonrecurring
  item, (provision for) benefit from
  income taxes .....................          (325,706)         2,516,744           247,828                --          2,438,866
Nonrecurring item ..................        (1,223,161)                --                --                --         (1,223,161)
Net income of subsidiaries .........         1,520,514                 --                --        (1,520,514)                --
Net income .........................           668,637          1,382,786           137,728        (1,520,514)           668,637
</TABLE>


                 Condensed Consolidating Statement of Operations
                       Six months ended December 31, 1998

<TABLE>
<CAPTION>
                                             Atlantic
                                              Express                                                 Non-
                                          Transportation      Guarantor          Guarantor        Elimination
                                               Corp.         Subsidiaries      Subsidiaries         Entries          Consolidated
                                          ---------------   --------------    --------------     ---------------    --------------
<S>                                      <C>                <C>                <C>               <C>                <C>
Net revenues .......................     $          --      $ 155,644,406      $   3,442,232     $  (3,085,536)     $ 156,001,102
Income (loss) from operations ......          (320,906)         6,829,282            262,056                --          6,770,432
Income (loss) before nonrecurring
  item, (provision for) benefit from
  income taxes .....................          (379,197)        (3,325,290)           262,056                --         (3,442,431)
Nonrecurring item ..................        (1,223,161)                --                 --                --         (1,223,161)
Net loss of subsidiaries ...........        (1,684,780)                --                 --         1,684,780                 --
Net income (loss) ..................        (2,566,077)        (1,828,911)           144,131         1,684,780         (2,566,077)
</TABLE>


                 Condensed Consolidating Statement of Cash Flows
                       Six months ended December 31, 1998

<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 .....        $(18,865,166)        $ 15,950,730         $  2,069,148         $  --          $   (845,288)
Net cash used in investing
     activities ...............          (5,842,005)         (17,542,207)          (1,127,191)           --           (24,511,403)
Net cash provided by (used in)
     financing activities .....          19,076,263           (5,000,991)                  --            --            14,075,272
Increase (decrease) in cash and
     cash equivalents .........          (5,630,908)          (6,592,468)             941,957            --           (11,281,419)
Cash and cash equivalents,
     beginning of period ......           6,932,910            4,014,584            2,825,043            --            13,772,537
Cash and cash equivalents,             ------------------------------------------------------------------------------------------
     end of period ............        $  1,302,002         $ (2,577,884)        $  3,767,000         $  --          $  2,491,118
</TABLE>


                                       8
<PAGE>

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

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

Three months ended December 31, 1999 compared to three months ended December 31,
1998.

      Revenues.  Revenues from Transportation  Operations were $73.8 million for
the three months ended December 31, 1999 compared to $68.5 million for the three
months  ended  December  31,  1998,  an increase of $5.3  million or 7.7%.  This
increase was due primarily to $3.3 million as a result of new contracts  awarded
and $5.2 million due to contract  rate  increases  and service  requirements  of
existing contracts  partially offset by $3.1 million decrease in revenues due to
the sale of subsidiaries to an affiliate effective April 1, 1999.

      Gross  Profit.  Gross  profit  from  Transportation  Operations  was $14.9
million for the three months ended  December 31, 1999  compared to $15.0 million
for the three months ended  December 31, 1998, a decrease of $0.1 million or 1%.
As a  percentage  of  revenues,  gross  profit  decreased to 20.2% in the second
quarter of 1999 from 21.9% in the second  quarter of 1998. The decrease in gross
profit was due  primarily  to an  increase  in  salaries  due to the tight labor
market  partially  offset by  increased  revenues.  Gross  profit from Bus Sales
Operations  was $1.4  million  for the three  months  ended  December  31,  1999
compared  to $1.6  million for the three  months  ended  December  31,  1998,  a
decrease of $0.1  million or 7.3%.  As a percentage  of  revenues,  gross profit
decreased to 8.5% for the three months ended December 31, 1999 from 9.4% for the
three months ended December 31, 1998.  The reduction in gross profit  percentage
was due primarily to reduced gross profit on a sale to a municipal customer.

      General and administrative  expenses.  General and administrative expenses
for the  Transportation  Operations were $5.5 million for the three months ended
December 31, 1999  compared to $4.6 million for the three months ended  December
31, 1998, an increase of $0.9 million or 19.3%.  This increase was primarily due
to  increases  in  advertising  and  promotion  of $0.4  million in  relation to
employee  recruitment  and $0.5  million  increase  in  administrative  payroll,
benefits and other general and  administrative  expenses due to the expansion in
new areas.  As a percentage  of revenues,  general and  administrative  expenses
increased to 7.4% for the three months ended December 31, 1999 from 6.7% for the
three months ended December 31, 1998.  General and  administrative  expenses for
the Bus Sales  Operations  were $1.0 million for the three months ended December
31,  1999 and 1998,  respectively.  As a  percentage  of  revenues,  general and
administrative  expenses  decreased to 5.7% for the three months ended  December
31, 1999 from 6.2% for the three months ended December 31, 1998

      Depreciation  and  amortization  expenses.  Depreciation  and amortization
expenses  for the  Transportation  Operations  were $3.2  million  for the three
months  ended  December  31, 1999  compared to $2.9 million for the three months
ended  December 31, 1998, an increase of $0.3 million.  This increase was due to
additional depreciation relating to the purchase of new vehicles.

      Income (loss) from operations. Income from operations was $6.5 million for
the three months ended  December 31, 1999 compared to $7.8 million for the three
months ended December 31, 1998, a decrease of $1.4 million.

      Net interest expense.  Net interest expense was $5.6 million for the three
months  ended  December  31, 1999  compared to $5.3 million for the three months
ended December 31, 1998, an increase of $0.3 million or 5.1%.  This increase was
due primarily to higher average indebtedness outstanding during the period.


                                       9
<PAGE>

      Income  (loss)  before   nonrecurring   item  and  taxes.   Income  before
nonrecurring  item and taxes was $0.5 for the three  months  ended  December 31,
1999 compared to $2.4 million for the three months ended December 31, 1998.

      Net income. The Company generated net income of $0.3 million for the three
months ended  December 31, 1999 compared to a net income of $0.7 million for the
three months ended  December 31, 1998, a decrease of $0.4 million due to the net
effect of the items discussed above.

Six months  ended  December 31, 1999  compared to six months ended  December 31,
1998

      Revenues.  Revenues from Transportation Operations were $117.6 million for
the six months ended  December 31, 1999  compared to $104.1  million for the six
months  ended  December 31, 1998,  an increase of $13.5  million or 13.0%.  This
increase was due  primarily to (i) $1.4 million in  additional  summer  revenue;
(ii) $4.9 million as a result of new contracts awarded;  and (iii) $10.3 million
due to increase in contract rates and service requirements of existing contracts
partially  offset by a $3.1 million  decrease due to the sale of subsidiaries to
an affiliate  effective April 1, 1999.  Revenues from Bus Sales  Operations were
$55.5  million for the six months  ended  December  31,  1999  compared to $51.9
million for the six months ended  December 31, 1998, an increase of $3.6 million
or 6.9%.  This  increase was due  primarily  to a $4.4  million  increase in new
vehicle sales partially offset by a $0.8 decrease in other sales.

      Gross  Profit.  Gross  profit  from  Transportation  Operations  was $18.2
million for the six months ended December 31, 1999 compared to $17.3 million for
the six months ended  December 31, 1998, an increase of $0.9 million or 5.3%. As
a  percentage  of revenues,  gross profit  decreased to 15.5% for the six months
ended  December 31, 1999 from 16.6% for the six months ended  December 31, 1998.
The decrease in gross profit percentage was due primarily to increased  salaries
due to the tight labor market.  Gross profit from Bus Sales  Operations was $5.4
million for the six months ended  December 31, 1999 compared to $5.6 million for
the six months ended December 31, 1998, a decrease of $0.2 million or 3.6%. This
reduction was due  primarily to an increase in the six months of the  proportion
of sales made in the New Jersey  market which has had  historically  lower gross
profit  margins than the New York market and reduced gross profit on a sale to a
municipal customer.

      General and administrative  expenses.  General and administrative expenses
for the  Transportation  Operations  were $10.4 million for the six months ended
December 31, 1999 compared to $8.2 million for the six months ended December 31,
1998,  an increase of $2.2 million or 26.9%.  This increase was primarily due to
(i) $1.0 million increase in administrative payroll,  benefits and other general
and  administrative  expenses  due to  expansion  in new areas (ii) $0.7 million
increase  in  professional  fees  primarily  in  connection  with the  Company's
litigation with National  Express Group,  PLC and (iii) $0.5 million increase in
advertising and promotion in relation to employee  recruitment.  As a percentage
of revenues,  general and administrative  expenses increased to 8.9% for the six
months ended  December 31, 1999 from 7.9% for the six months ended  December 31,
1998. General and administrative  expenses for the Bus Sales Operations was $1.9
million for the six months  ended  December 31, 1999 as compared to $2.0 million
for the six months ended  December 31, 1998, a decrease of $0.1 million or 2.9%.
As a percentage of revenues,  general and administrative  expenses were 3.4% and
3.8% for the six months ended December 31, 1999 and 1998, respectively.

      Depreciation  and  amortization  expenses.  Depreciation  and amortization
expenses for the Transportation  Operations were $6.5 million for the six months
ended  December  31,  1999  compared to $5.6  million  for the six months  ended
December  31,  1998,  an  increase of $0.9  million.  This  increase  was due to
additional  depreciation relating to the purchase of new vehicles.  Depreciation
and amortization  expenses of Bus Sales Operations were $0.4 million for the six
months ended December 31, 1999 and 1998, respectively.

      Income (loss) from operations. Income from operations was $4.4 million for
the six months  ended  December  31, 1999  compared to $6.8  million for the six
months ended  December 31, 1998, a decrease of $2.4  million.  This decrease was
due to the net effect of the items discussed above.


                                       10
<PAGE>

      Net interest  expense.  Net interest expense was $11.2 million for the six
months  ended  December  31, 1999  compared to $10.1  million for the six months
ended  December 31, 1998,  an increase of $1.1  million.  This  increase was due
primarily to higher average indebtedness outstanding during the period.

      Loss before nonrecurring item and taxes. Loss before nonrecurring item and
taxes was $7.3  million for the six months ended  December 31, 1999  compared to
$3.4 million for the six months ended December 31, 1998.

      Net loss.  The Company  generated  a net loss of $4.4  million for the six
months ended  December  31, 1999  compared to a net loss of $2.6 million for the
six months ended  December 31, 1998,  an increase of $1.8 million due to the net
effect of the items discussed above.

Liquidity and Capital Resources

      Management  anticipates  total  capital  expenditures  of $16.0 million in
fiscal 2000 of which approximately $12.2 million were made by December 31, 1999.
This included  approximately  $9.6 million for purchase of new vehicles and $2.6
million for other property and equipment.

      Net Cash Provided By Operating Activities.  Net cash provided by operating
activities of $11.6 million for the six months ended  December 31, 1999 resulted
primarily  from $12.8 million  increases in source of funds for working  capital
plus non-cash items of depreciation  and  amortization of $7.7 million offset by
(i) net loss of $4.4  million;  (ii) $3.6  million  increase in deferred  income
taxes; and (iii) $0.9 million decrease in other sources of funds.

      Net Cash Used in Investing  Activities.  For the six months ended December
31, 1999,  the Company  made $12.2  million of capital  expenditures  to acquire
additional  vehicles and equipment.  Of these capital  expenditures $1.2 million
were directly financed.

      Net Cash Provided by Financing Activities.  Net cash provided by financing
activities  totaled $3.5 million for the six months ended December 31, 1999, due
to $6.2 million capital  contribution by AETG,  partially offset by $2.6 million
principal payment on borrowings.  In addition, the Company incurred $1.2 million
of indebtedness  to directly  finance  capital  expenditures  for the six months
ended December 31, 1999.

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

      The Company's  revolving  credit facility (the  "Facility") and Receivable
Agreement were renewed through  February 3, 2002. The Company believes that this
Facility  of $30.0  million (of which  approximately  $12 million was undrawn at
December  31,  1999) will  provide it with  sufficient  liquidity to conduct its
operations for the balance of the year.

      At December 31, 1999, the Company's  total debt and  stockholder's  equity
were $180.4 million and $23.1 million respectively.


                                       11
<PAGE>



PART II  OTHER INFORMATION

Item 1.  Legal Proceedings

         See Note 4 to Consolidated Financial Statements.

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

February 11, 2000


                                       13
<PAGE>

                                Index to Exhibits


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

<TABLE>
<CAPTION>

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

<S>             <C>                                                              <C>
   10.1         Third  Amendment  dated  as of  January  25,  2000 to Loan and
                Security   Agreement   by   and   among   Congress   Financial
                Corporation,  certain subsidiaries of the Company as borrowers
                and the Company as Guarantor.................................

   10.2         First  Amendment  dated as of  January  25,  2000 to  Accounts
                Purchase  and  Sale   Agreement   among   Congress   Financial
                Corporation,  the  Company  and  certain  subsidiaries  of the
                Company as Sellers...........................................

   27.1         Financial Data Schedule
</TABLE>


                                      E-1