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

                       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, 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 December 31, 2001
       (unaudited) and June 30, 2001 (audited) ...........................     1

     Consolidated Statements of Operations for the
       Three Month and Six Month Periods Ended
       December 31, 2001 (unaudited) and 2000 (unaudited) ................     2

     Consolidated Statements of Stockholder's Equity for
       the Six Months Ended December 31, 2001 (unaudited) ................     3

     Consolidated Statements of Cash Flows for the
       Six Month Periods Ended December 31, 2001 (unaudited)
       and 2000 (unaudited) ..............................................     4

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

     ITEM 2. Management's Discussion and Analysis of
               Financial Condition and Results of Operations .............  9-12

     ITEM 3. Quantitative and Qualitative Disclosures
               About Market Risk .........................................    12

PART II. Other Information ...............................................    13

Signatures ...............................................................    14

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


<PAGE>

             Atlantic Express Transportation Corp. and Subsidiaries

                           Consolidated Balance Sheets

                                                    December 31,     June 30,
                                                        2001           2001
                                                   -------------   ------------
                                                    (unaudited)      (audited)
Assets
Current:
  Cash and cash equivalents ....................   $    671,583    $    861,719
  Restricted cash and cash equivalents .........        107,000       1,048,000
  Current portion of marketable securities .....      6,795,000       5,282,000
  Accounts receivable, net of allowance
    for doubtful accounts ......................     58,116,759      69,699,369
  Inventories ..................................     15,774,630      14,484,980
  Notes receivable .............................         41,611          33,459
  Prepaid expenses and other current assets ....     22,078,141      17,067,262
                                                   ------------    ------------
     Total current assets ......................    103,584,724     108,476,789
                                                   ------------    ------------

Property, plant and equipment, at
  cost, less accumulated depreciation ..........    179,088,552     175,655,190
                                                   ------------    ------------

Other assets:
  Goodwill, net ................................     11,328,744      11,491,698
  Investments ..................................        488,150         488,150
  Marketable securities, net of current portion       4,528,828       6,697,337
  Transportation contract rights, net ..........     18,477,315      19,577,871
  Deferred financing costs, net ................      7,116,105       8,791,385
  Due from parent company ......................        735,753         805,540
  Notes receivable .............................        145,089         166,541
  Deposits and other noncurrent assets .........      3,628,069       3,540,280
  Deferred tax assets ..........................     18,338,692      10,045,465
  Covenant not to compete, net .................        307,000         395,000
                                                   ------------    ------------
     Total other assets ........................     65,093,745      61,999,267
                                                   ------------    ------------
                                                   $347,767,021    $346,131,246
                                                   ============    ============
Liabilities and Stockholder's Equity
Current:
  Current portion of long-term debt ............   $  3,520,839    $  1,795,144
  Insurance premium financing ..................     12,401,422       9,724,226
  Accounts payable .............................      4,560,718       4,607,497
  Accrued compensation .........................      9,212,757      10,114,488
  Current portion of insurance reserve .........      6,933,000       6,330,000
  Accrued interest .............................      6,015,201       6,841,781
  Other accrued expenses and current liabilities     12,333,273      11,809,590
                                                   ------------    ------------
     Total current liabilities .................     54,977,210      51,222,726
                                                   ------------    ------------

Long-term debt, net of current portion .........    246,070,972     244,637,001
                                                   ------------    ------------
Premium on bond issuance .......................        379,125         470,115
                                                   ------------    ------------
Other long-term liabilities ....................      3,221,144       1,873,272
                                                   ------------    ------------

Commitments and contingencies

Stockholder's equity:
  Common stock, no par value, authorized
    shares 200; issued and outstanding 100 .....        250,000         250,000
  Additional paid-in capital ...................     62,198,517      56,698,517
  Accumulated deficit ..........................    (17,678,844)     (7,487,911)
  Accumulated other comprehensive loss .........     (1,651,103)     (1,532,474)
                                                   ------------    ------------
Total stockholder's equity .....................     43,118,570      47,928,132
                                                   ------------    ------------
                                                   $347,767,021    $346,131,246
                                                   ============    ============

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


                                       1
<PAGE>

             Atlantic Express Transportation Corp. and Subsidiaries

                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                         Three Months Ended              Six Months Ended
                                                            December 31,                   December 31,
                                                   ----------------------------    ----------------------------
                                                       2001            2000            2001            2000
                                                   ------------    ------------    ------------    ------------
                                                           (unaudited)                    (unaudited)
<S>                                                <C>             <C>             <C>             <C>
Revenues:
  Transportation Operations ....................   $ 97,285,366    $ 94,185,767    $157,110,856    $155,427,131
  Bus Sales Operations .........................     16,806,042      15,161,966      52,508,138      54,224,770
                                                   ------------    ------------    ------------    ------------
Total revenues .................................    114,091,408     109,347,733     209,618,994     209,651,901
                                                   ------------    ------------    ------------    ------------

Costs and expenses:
  Cost of operations - Transportation Operations     80,818,869      76,147,751     138,262,816     131,570,254
  Cost of operations - Bus Sales Operations ....     15,337,914      14,107,431      47,910,563      49,823,785
  General and administrative ...................      7,445,043       7,349,842      14,725,078      14,405,141
  Depreciation and amortization ................      6,543,456       5,639,414      12,925,874      11,542,517
                                                   ------------    ------------    ------------    ------------
Total operating costs and expenses .............    110,145,282     103,244,438     213,824,331     207,341,697
                                                   ------------    ------------    ------------    ------------
   Income (loss) from operations ...............      3,946,126       6,103,295      (4,205,337)      2,310,204
Interest expense ...............................      6,548,027       7,769,968      13,628,847      14,755,586
Other expense, net .............................        374,640         639,038         461,876         668,001
                                                   ------------    ------------    ------------    ------------
   Loss before benefit from income taxes .......     (2,976,541)     (2,305,711)    (18,296,060)    (13,113,383)
Benefit from income taxes ......................     (1,339,443)     (1,037,569)     (8,233,227)     (5,901,022)
                                                   ------------    ------------    ------------    ------------
Net loss .......................................   $ (1,637,098)   $ (1,268,142)   $(10,062,833)   $ (7,212,361)
                                                   ============    ============    ============    ============
</TABLE>

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


                                       2
<PAGE>

             Atlantic Express Transportation Corp. and Subsidiaries

                 Consolidated Statements of Stockholder's Equity

                       Six months ended December 31, 2001

<TABLE>
<CAPTION>
                                                                             Accumulated
                                   Common       Additional                      other
                                  stock no       paid-in      Accumulated   comprehensive   Comprehensive
                                  par value      capital        deficit          loss            loss          Total
                                 -----------   -----------   -------------  -------------   -------------   -----------
<S>                               <C>          <C>           <C>             <C>            <C>             <C>
Balance, June 30, 2001 ....       $250,000     $56,698,517   $ (7,487,911)   $(1,532,474)                   $47,928,132
Contribution from parent
  company .................             --       5,500,000             --             --    $         --      5,500,000
Net loss ..................             --              --     (8,425,735)            --      (8,425,735)    (8,425,735)
Unrealized loss on
  marketable securities ...             --              --             --     (1,368,272)     (1,368,272)    (1,368,272)
                                                                                            ------------
Comprehensive loss ........             --              --             --             --    $ (9,794,007)            --
                                  --------     -----------   ------------    -----------    ------------    -----------
Balance, September 30, 2001       $250,000     $62,198,517   $(15,913,646)   $(2,900,746)                   $43,634,125
                                  --------     -----------   ------------    -----------                    -----------
Dividend paid .............             --              --       (128,100)            --    $         --       (128,100)
Net loss ..................             --              --     (1,637,098)            --      (1,637,098)    (1,637,098)
Unrealized gain on
  marketable securities ...             --              --             --      1,249,643       1,249,643      1,249,643
                                                                                            ------------
Comprehensive loss ........             --              --             --             --    $(10,181,462)            --
                                                                                            ============
Balance, December 31, 2001        $250,000     $62,198,517   $(17,678,844)   $(1,651,103)                   $43,118,570
                                  ========     ===========   ============    ===========                    ===========
</TABLE>

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


                                       3
<PAGE>

             Atlantic Express Transportation Corp. and Subsidiaries

                      Consolidated Statements of Cash Flows

                                                        Six Months Ended
                                                           December 31,
                                                  -----------------------------
                                                      2001            2000
                                                  ------------    -------------
                                                           (unaudited)
Cash flows from operating activities:
  Net loss ....................................   $(10,062,833)   $ (7,212,361)
Adjustments to reconcile net loss to
  net cash provided by (used in) operating
  activities:
    Gain on sale of marketable securities
      and investments .........................       (205,959)       (367,393)
    Loss on sale of marketable securities
      and investments .........................        683,113         255,311
    Loss on sale of fixed assets ..............        281,910         516,106
    Deferred income taxes .....................     (8,293,227)     (5,901,022)
    Depreciation ..............................     11,525,975      10,208,619
    Amortization ..............................      3,003,737       2,874,329
    Reserve for doubtful accounts receivable ..         60,000          60,000
    Decrease (increase) in:
      Accounts receivable .....................     11,522,610         329,524
      Inventories .............................     (1,289,650)    (10,169,346)
      Prepaid expenses and other current assets     (5,010,879)       (290,862)
      Deposits and other noncurrent assets ....        (87,789)      1,674,748
    Increase (decrease) in:
      Accounts payable ........................        (46,779)        309,450
      Accrued expenses and other current
        liabilities ...........................       (601,628)      5,051,532
      Other long-term liabilities .............      1,347,872      (1,515,030)
                                                  ------------    ------------
    Net cash provided by (used in)
      operating activities ....................      2,826,473      (4,176,395)
                                                  ------------    ------------
Cash flows from investing activities:
  Proceeds from sale of fixed assets ..........         80,077         191,332
  Additions to property, plant and equipment ..    (15,321,323)    (19,122,991)
  Purchase of transportation contract rights ..        (34,336)       (146,914)
  Due from parent company .....................         69,787         (79,919)
  Proceeds from collection of notes receivable          13,300          15,901
  Purchases of marketable securities ..........     (3,755,842)     (3,972,325)
  Proceeds from sales or redemptions of
    marketable securities .....................      3,815,568       2,513,701
                                                  ------------    ------------
    Net cash used in investing activities .....    (15,132,769)    (20,601,215)
                                                  ------------    ------------

Cash flows from financing activities:
  Capital contributed from parent company .....      5,500,000       4,547,980
  Revolving lines of credit ...................      3,913,317      96,382,866
  Principal payments on long-term debt, net ...       (753,651)    (75,337,504)
  Proceeds from insurance premium financing ...     12,971,943              --
  Payments on insurance premium financing .....    (10,294,747)             --
  Deferred financing and organization costs ...        (33,602)     (4,415,644)
  Other .......................................       (128,100)             --
                                                  ------------    ------------
     Net cash provided by financing activities.     11,175,160      21,177,698
                                                  ------------    ------------
Net decrease in cash and cash equivalents .....     (1,131,136)     (3,599,912)
Cash and cash equivalents, beginning of period       1,909,719       5,585,901
                                                  ------------    ------------
Cash and cash equivalents, end of period ......   $    778,583    $  1,985,989
                                                  ============    ============

Supplemental disclosures of cash flow
  information:
  Cash paid during the period for:
    Interest ..................................   $ 12,824,108    $ 13,257,794
    Income taxes ..............................        179,216         177,354
                                                  ============    ============
Supplemental schedule of noncash
  investing and financing activities:
    Loans incurred for purchase of
      property, plant and equipment ...........   $         --    $    734,078
    Additional paid-in capital
      contributed for buses ...................             --       5,452,020


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


                                       4
<PAGE>

             Atlantic Express Transportation Corp. and Subsidiaries

                   Notes to Consolidated Financial Statements

      1. Basis of Accounting

      These consolidated financial statements should be read in conjunction with
the  consolidated  financial  statements  and  related  notes  contained  in the
Company's  financial  statements  as of and for the year ended June 30,  2001 as
filed on Form 10-K. In the opinion of management,  all  adjustments and accruals
(consisting only of normal recurring adjustments) which are necessary for a fair
presentation of operating  results are reflected in the  accompanying  financial
statements.  Operating  results for the periods  presented  are not  necessarily
indicative of the results for the full fiscal year.

      2. Inventories

         Inventories comprised the following:
                                              December 31,     June 30,
                                                  2001           2001
                                              ------------   -----------
         Parts and fuel ...................   $ 5,112,915    $ 5,235,312
         Buses held for sale ..............    10,661,715      9,249,668
                                              -----------    -----------
                                              $15,774,630    $14,484,980
                                              ===========    ===========

      3. Receivable Agreement

      In July  2001 the  Company  entered  into an  agreement  (the  "Receivable
Agreement")  with  Congress  Financial  Corp.  ("Congress"),  to sell  Congress,
without recourse, up to approximately $5.9 million of accounts receivable of the
Company.  Under the Receivable Agreement,  Congress purchases receivables at the
gross  amount of such  accounts  (less three and  one-quarter  percent  purchase
commission) and immediately credits 85% of this amount to the Company,  with the
balance paid to the Company upon Congress  receiving  cumulative  collections on
all receivables  purchased in excess of the purchase price previously  credited.
On  January  15,  2002 this  agreement  was  amended to  increase  the amount of
receivables  available for sale to  approximately  $11.3 million until April 30,
2002 and then to revert back to $5.9 million until expiration on May 31, 2002.

      4. Subsequent Event

      On February 15, 2002, the Company  initiated a Consent  Solicitation  (the
"Consent")  from the holders of its 10 3/4% Senior  Secured  Notes due 2004 (the
"Notes") whereby the Company is asking the holders to consent to an amendment to
the indenture  under which the Notes were issued (as amended,  the  "Indenture")
which  would  permit  the  Company  to  increase  the amount of debt that may be
incurred under the Indenture,  without regard to the Interest Coverage Ratio (as
defined in the  Indenture),  to $143 million from $125 million (the  "Additional
Indebtedness"). The Additional Indebtedness would be incurred under an amendment
to the Company's  existing  revolving  credit  facility (the  "Revolving  Credit
Facility")  and would be  secured  in the same  manner as the  Revolving  Credit
Facility.  The lender(s) for the Additional  Indebtedness may include  Greenwich
Street Capital Partners II, L.P. or its affiliates  ("GSCP") or Atlantic Express
Transportation  Group  Inc.  ("AETG"),  the parent of the  Company.  GSCP is the
majority  shareholder  of AETG.  The consent of the holders of a majority of the
principal  amount  of the  Notes is  necessary  to effect  such  amendment.  The
placement of the Additional Indebtedness is subject to definitive  documentation
and the  negotiation  of  definitive  terms  with  the  Additional  Indebtedness
lender(s) and the existing lender under the Revolving Credit Facility.

      Due to the overall conditions in the workers'  compensation and automobile
liability  insurance  markets,  the  Company  has  experienced,  and  expects to
continue to  experience,  significant  increases  in those  insurance  costs and
related cash outlays. The Company believes that cash on hand, availability under
the Revolving Credit Facility, funds from its Receivable Agreement and cash from
operations will not be sufficient to fund its liquidity  needs through  December
2002. The proceeds from the Additional


                                       5
<PAGE>

Indebtedness would be used, as needed, to fund such insurance payments, with any
remaining availability to be used for working capital purposes.

      5. 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, 2001, and a consolidating balance sheet as
of June 30, 2001 and consolidating statements of operations for the three months
and six months ended December 31, 2001 and 2000 and the consolidating  statement
of cash flows for the six months ended December 31, 2000.

                      Condensed Consolidating Balance Sheet
                                December 31, 2001

<TABLE>
<CAPTION>
                              Atlantic
                               Express                       Non-
                           Transportation  Guarantor      Guarantor     Elimination
                                Corp.     Subsidiaries   Subsidiaries     Entries       Consolidated
                           -------------- ------------   ------------  -------------    ------------
<S>                        <C>            <C>            <C>           <C>              <C>
Current assets .........   $  9,682,941   $ 87,013,251   $ 6,888,532   $          --    $103,584,724
Investment in affiliates     82,469,218             --            --     (82,469,218)             --
Total assets ...........    300,159,302    300,349,514    12,271,903    (265,013,698)    347,767,021
Current liabilities ....      6,266,338     41,739,423     6,971,449              --      54,977,210
Total liabilities ......    247,317,619    254,578,526     9,978,169    (207,225,863)    304,648,451
Stockholder's equity ...     52,841,683     45,770,988     2,293,734     (57,787,835)     43,118,570
</TABLE>

                 Condensed Consolidating Statement of Operations
                      Three months ended December 31, 2001

<TABLE>
<CAPTION>
                              Atlantic
                               Express                       Non-
                           Transportation  Guarantor      Guarantor     Elimination
                                Corp.     Subsidiaries   Subsidiaries     Entries       Consolidated
                           -------------- ------------   ------------  -------------    ------------
<S>                        <C>            <C>             <C>           <C>              <C>
Net revenues ...........   $         --   $114,365,161    $1,364,497    $(1,638,250)     $114,091,408
Income (loss) from
  operations ...........             --      4,271,569      (325,443)            --         3,946,126
Loss before income taxes             --     (2,651,098)     (325,443)            --        (2,976,541)
Net loss of subsidiaries     (1,637,098)            --            --      1,637,098                --
Net loss ...............     (1,637,098)    (1,458,104)     (178,994)     1,637,098        (1,637,098)
</TABLE>

                 Condensed Consolidating Statement of Operations
                       Six months ended December 31, 2001

<TABLE>
<CAPTION>
                              Atlantic
                               Express
                           Transportation  Guarantor          Non-      Elimination
                                Corp.     Subsidiaries    Guarantors      Entries       Consolidated
                           -------------- ------------   ------------  -------------    ------------
<S>                        <C>            <C>             <C>           <C>              <C>
Net revenues ...........     $        --  $209,917,852    $2,977,642    $(3,276,500)     $209,618,994
Loss from operations ...              --    (3,803,705)     (401,632)            --        (4,205,337)
Loss before income taxes              --   (17,894,428)     (401,632)            --       (18,296,060)
Net loss of subsidiaries     (10,062,833)           --            --     10,062,833                --
Net loss ...............     (10,062,833)   (9,841,935)     (220,898)    10,062,833       (10,062,833)
</TABLE>


                                       6
<PAGE>

                Condensed Consolidating Statement of Cash Flows
                       Six months ended December 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 ..... $ (9,854,233)      $ 13,681,432      $ (1,000,726)      $        --      $  2,826,473
Net cash provided by (used
  in) investing activities .....     (453,781)       (14,738,714)           59,726                --       (15,132,769)
Net cash provided by (used
  in) financing activities .....   10,269,756            905,404                --                --        11,175,160
Decrease in cash and cash
  equivalents ................        (38,258)          (151,878)         (941,000)               --        (1,131,136)
Cash and cash equivalents,
  beginning of period ........         86,000            775,719         1,048,000                --         1,909,719
                                 ------------       ------------      ------------       -----------      ------------
Cash and cash equivalents,
  end of period ..............         47,742            623,841           107,000                --           778,583
</TABLE>

                      Condensed Consolidating Balance Sheet
                                  June 30, 2001
<TABLE>
<CAPTION>

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

                 Condensed Consolidating Statement of Operations
                      Three months ended December 31, 2000
<TABLE>
<CAPTION>
                                      Atlantic
                                       Express                         Non-
                                   Transportation   Guarantor       Guarantor   Elimination
                                        Corp.      Subsidiaries    Subsidiaries   Entries     Consolidated
                                   --------------  ------------    ------------ -----------   ------------
<S>                                 <C>            <C>             <C>          <C>           <C>
Net revenues ....................   $        --    $109,272,294    $1,075,297   $ (999,858)   $109,347,733
Income from operations ..........            --       6,077,226        26,069           --       6,103,295
Income (loss) before income taxes            --      (2,331,780)       26,069           --      (2,305,711)
Net loss of subsidiaries ........    (1,268,142)             --            --    1,268,142              --
Net income ......................    (1,268,142)     (1,282,480)       14,338    1,268,142      (1,268,142)
</TABLE>

                 Condensed Consolidating Statement of Operations
                       Six months ended December 31, 2000
<TABLE>
<CAPTION>
                                      Atlantic
                                       Express
                                   Transportation   Guarantor         Non-      Elimination
                                        Corp.      Subsidiaries    Guarantor      Entries     Consolidated
                                   --------------  ------------    ------------ -----------   ------------
<S>                                 <C>            <C>             <C>          <C>           <C>

Net revenues ....................   $         --   $209,426,241    $2,225,376   $ (1,999,716) $209,651,901
Income from operations ..........             --      2,184,910       125,294             --     2,310,204
Income (loss) before income
taxes ...........................             --    (13,238,677)      125,294             --   (13,113,383)
Net income (loss) of subsidiaries     (7,212,361)            --            --      7,212,361            --
Net income (loss) ...............     (7,212,361)    (7,281,273)       68,912      7,212,361    (7,212,361)
</TABLE>

                                       7
<PAGE>

                 Condensed Consolidating Statement of Cash Flows
                       Six months ended December 31, 2000
<TABLE>
<CAPTION>
                                   Atlantic
                                    Express                          Non-
                                Transportation      Guarantor      Guarantor     Elimination
                                     Corp.        Subsidiaries    Subsidiaries     Entries       Consolidated
                                --------------    ------------    ------------   -----------     ------------
<S>                              <C>              <C>             <C>             <C>             <C>
Net cash provided by (used in)
  operating activities .......   $  5,430,765     $ (9,446,784)   $  (160,376)    $    --         $ (4,176,395)
Net cash provided by (used in)
  investing activities .......    (93,748,285)      74,605,694     (1,458,624)         --          (20,601,215)
Net cash provided by
  financing activities .......     88,215,202      (67,037,504)          --            --           21,177,698
Decrease in cash and cash
  equivalents ................       (102,318)      (1,878,594)    (1,619,000)         --           (3,599,912)
Cash and cash equivalents,
  beginning of period ........        150,000        3,696,901      1,739,000          --            5,585,901
                                 ------------     ------------    -----------     -------         ------------
Cash and cash equivalents,
  end of period ..............         47,682        1,818,307        120,000          --            1,985,989
</TABLE>

6. Reclassifications

      Certain  amounts  in  the  prior  year  financial   statements  have  been
reclassified to conform with current year presentation.

7. New Accounting Pronouncements

      In June 2001 the Financial  Accounting  Standards Board approved Statement
of Financial Accounting Standard ("SFAS") No. 141, "Business Combinations",  and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 prospectively
prohibits the pooling of interest method of accounting for business combinations
initiated  after  June  30,  2001.  SFAS No.  142  requires  companies  to cease
amortizing  goodwill that existed at June 30, 2001. Any goodwill  resulting from
acquisitions  completed after June 30, 2001 will not be amortized.  SFAS No. 142
also  establishes a new method of testing  goodwill for  impairment on an annual
basis or on an interim  basis if an event  occurs or  circumstances  change that
would reduce the fair value of a reporting  unit below its carrying  value.  The
Company is required to adopt SFAS No. 142 on July 1, 2002.  The adoption of SFAS
No. 142 will result in the  Company's  discontinuation  of  amortization  of its
goodwill;  however,  the  Company  will be  required  to test its  goodwill  for
impairment  under the new  standard  beginning  in the first  fiscal  quarter of
adoption,  which could have an adverse effect on the Company's future results of
operations if an impairment  occurs. The Company is in the process of evaluating
the financial statement impact of adoption of SFAS No. 142.


                                       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, 2001 compared to three months ended December 31,
2000.

      Revenues.  Revenues from Transportation  Operations were $97.3 million for
the three months ended December 31, 2001 compared to $94.2 million for the three
months  ended  December  31,  2000,  an increase of $3.1  million or 3.3%.  This
increase was due primarily to $5.6 million  increase in contract rate  increases
and service  requirements  of existing  contracts plus $1.6 million revenue from
new contracts  partially  offset by $4.0 million  decrease in revenues from lost
contracts   including  $3.1  million  due  to   cancellation  of  the  Company's
paratransit  contracts in Pennsylvania.  Revenues from Bus Sales Operations were
$16.8  million for the three  months ended  December 31, 2001  compared to $15.2
million  for the three  months  ended  December  31,  2000,  an increase of $1.6
million or 10.8%.  This  increase was  primarily  due to $1.8 million in new bus
sales partially offset by $0.2 million decrease in used bus sales.

      Gross  Profit.  Gross  profit  from  Transportation  Operations  was $16.5
million for the three months ended  December 31, 2001  compared to $18.0 million
for the three  months  ended  December  31,  2000, a decrease of $1.6 million or
8.7%. As a percentage of revenues, gross profit decreased to 16.9% for the three
months ended  December  31, 2001 from 19.2% for the three months ended  December
31, 2000. The decrease in gross profit percentage was due primarily to increased
vehicle and worker's  compensation  insurance costs (2.2%) and increased  health
and welfare  and pension  costs  (0.8%)  partially  offset by a decrease in fuel
costs (0.9%).  Gross profit from Bus Sales  Operations  was $1.5 million for the
three  months  ended  December  31, 2001  compared to $1.1 million for the three
months  ended  December 31,  2000,  an increase of $0.4  million or 39.2%.  As a
percentage  of  revenues,  gross  profit  increased to 8.7% for the three months
ended  December 31, 2001 from 7.0% for the three months ended December 31, 2000.
The  increase in gross  profit  percentage  was due  primarily to an increase in
proportion of sales of school buses,  which have higher margins than  commercial
vehicles and increased margins on bus sales primarily in the New York market.

      General and administrative  expenses.  General and administrative expenses
for the  Transportation  Operations  were $6.3 million for both the three months
ended  December  31, 2001 and December 31,  2000.  Professional  fees  increased
approximately  $0.2 million but were offset by a similar decrease in advertising
and   recruitment   expenses.   As  a  percentage   of  revenues,   general  and
administrative  expenses  decreased to 6.5% for the three months ended  December
31, 2001 from 6.7% for the three  months ended  December  31, 2000.  General and
administrative  expenses for the Bus Sales Operations were $1.1 million for both
the three months ended  December 31, 2001 and December 31, 2000. As a percentage
of revenues, general and administrative expenses decreased to 6.7% for the three
months ended December 31, 2001 from 7.0% for the three months ended December 31,
2000.

      Depreciation  and  amortization  expenses.  Depreciation  and amortization
expenses  for the  Transportation  Operations  were $6.3  million  for the three
months  ended  December  31, 2001  compared to $5.4 million for the three months
ended  December 31, 2000, an increase of $0.9 million.  This increase was due to
increased depreciation in relation to the purchase of new vehicles. Depreciation
and  amortization  of Bus Sales  Operations were $0.2 million for both the three
months ended December 31, 2001 and December 31, 2000.


                                       9
<PAGE>

      Income (loss) from operations. Income from operations was $3.9 million for
the three months ended  December 31, 2001 compared to $6.1 million for the three
months ended  December 31, 2000, a decrease of $2.2  million.  This decrease was
due to the net effect of the items discussed above.

      Interest  expense.  Interest expense was $6.5 million for the three months
ended  December  31, 2001  compared to $7.8  million for the three  months ended
December  31,  2000,  a decrease of $1.2  million or 16.0%.  This  decrease  was
primarily  due to (i) $0.4  million  reduction  in interest  due to repayment of
$30.0 million of the Notes in December  2000 and  replacing  this debt with debt
under the Revolving Credit Facility; (ii) $0.4 million reduction in amortization
of deferred  finance costs;  and (iii) lower average  interest  rates  partially
offset by higher average indebtedness.

      Net loss.  The Company  generated a net loss of $1.6 million for the three
months ended  December  31, 2001  compared to a net loss of $1.3 million for the
three months ended December 31, 2000, an increase of $0.4 million due to the net
effect of the items discussed above.

Six months ended December 31, 2001 compared to six months ended December 31,
2000.

      Revenues.  Revenues from Transportation Operations were $157.1 million for
the six months ended  December 31, 2001  compared to $155.4  million for the six
months  ended  December  31,  2000,  an increase of $1.7  million or 1.1%.  This
increase  was due  primarily  to $6.4  million in contract  rate  increases  and
service requirements of existing contracts plus $2.9 million additional revenues
from new contracts  partially offset by a $7.6 million decrease in revenues from
lost  contracts  including $5.4 million in relation to the  cancellation  of the
Company's  paratransit contracts in Pennsylvania and a $1.2 million decrease due
to the  exit  from  an  under  performing  contract.  Revenues  from  Bus  Sales
Operations  were  $52.5  million  for the six months  ended  December  31,  2001
compared to $54.2 million for the six months ended December 31, 2000, a decrease
of $1.7 million or 3.2%. This decrease was due primarily to decreases in new bus
sales.

      Gross  Profit.  Gross  profit  from  Transportation  Operations  was $18.8
million for the six months ended December 31, 2001 compared to $23.9 million for
the six months ended December 31, 2000, a decrease of $5.0 million or 21.0%.  As
a  percentage  of revenues,  gross profit  decreased to 12.0% for the six months
ended  December 31, 2001 from 15.4% for the six months ended  December 31, 2000.
The decrease in gross profit  percentage was due primarily to increased  vehicle
and worker's compensation  insurance costs (2.7%),  increased health and welfare
and pension costs (0.8%) and increased labor costs (0.9%), partially offset by a
decrease in fuel costs (0.8%).  Gross profit from Bus Sales  Operations was $4.6
million for the six months ended  December 31, 2001 compared to $4.4 million for
the six months ended  December 31, 2000, an increase of $0.2 million or 4.5%. As
a percentage of revenues,  gross profit  increased 8.8% for the six months ended
December  31, 2001 from 8.1% for the six months ended  December  31, 2000.  This
increase was due primarily to an increase in the  proportion of school bus sales
in  proportion  to sales of  commercial  vehicles  which have lower margins than
school buses and to an increase in the margins on school bus sales  primarily in
the New York market.

      General and administrative  expenses.  General and administrative expenses
for the  Transportation  Operations  were $12.5 million for the six months ended
December 31, 2001  compared to $12.4  million for the six months ended  December
31, 2000,  an increase of $0.2  million.  This  increase was primarily due to an
increase in professional  fees ($0.4 million) and office expenses ($0.1 million)
partially  offset by a decrease in advertising  and  recruitment  expenses ($0.5
million). As a percentage of revenues,  general and administrative expenses were
8.0% for both the six months  ended  December  31, 2001 and  December  31, 2000.
General  and  administrative  expenses  for the Bus  Sales  Operations  was $2.2
million for the six months  ended  December 31, 2001 as compared to $2.0 million
for the six months ended December 31, 2000, an increase of $0.1 million or 6.8%.
As a percentage of revenues,  general and  administrative  expenses increased to
4.2% for the six months  ended  December  31,  2001 from 3.8% for the six months
ended December 31, 2000.

      Depreciation  and  amortization  expenses.  Depreciation  and amortization
expenses for the Transportation Operations were $12.5 million for the six months
ended  December  31,  2001  compared to $11.1  million for the six months  ended
December  31,  2000,  an  increase of $1.4  million.  This  increase  was due to
increased depreciation in relation to the purchase of new vehicles. Depreciation
and amortization


                                       10
<PAGE>

expenses of Bus Sales Operations were $0.4 million for both the six months ended
December 31, 2001 and 2000.

      Income (loss) from  operations.  Loss from operations was $4.2 million for
the six months  ended  December 31, 2001  compared to $2.3  million  income from
operations  for the six months  ended  December  31,  2000,  an increase of $6.5
million. This increase was due to the net effect of the items discussed above.

      Interest  expense.  Interest  expense was $13.6 million for the six months
ended  December  31,  2001  compared to $14.8  million for the six months  ended
December 31, 2000, a decrease of $1.1 million. This decrease was due to (i) $0.7
million  reduction in interest  expense due to repayment of $30.0 million of the
Notes in December  2000 and  replacing  this debt with debt under the  Revolving
Credit Facility; (ii) $0.1 million reduction in amortization of deferred finance
costs; and (iii) lower average interest rates partially offset by higher average
indebtedness.

      Net loss.  The Company  generated a net loss of $10.1  million for the six
months ended  December  31, 2001  compared to a net loss of $7.2 million for the
six months ended  December 31, 2000,  an increase of $2.9 million due to the net
effect of the items discussed above.

Liquidity and Capital Resources

      Management  anticipates  total  capital  expenditures  of $18.5 million in
fiscal  2002,  of which  approximately  $15.3  million were made by December 31,
2001. This included approximately $11.1 million for the purchase of new vehicles
and $4.2 million for other property and equipment.

      Net Cash Provided By Operating Activities.  Net cash provided by operating
activities was $2.8 million for the six months ended December 31, 2001 primarily
due to the  following:  (i) $4.6  million  of  increases  in source of funds for
working  capital plus non-cash items of depreciation  and  amortization of $14.5
million;  (ii) an increase in long-term insurance reserves of $1.4 million;  and
(iii)  $0.7  million  other  sources  of funds  offset  by the net loss of $10.1
million and a $8.3 million increase in deferred income tax asset.

      Net Cash Used in Investing  Activities.  For the six months ended December
31, 2001,  the Company  made $15.3  million of capital  expenditures  to acquire
additional vehicles and equipment.

      Net Cash Provided by Financing Activities.  Net cash provided by financing
activities totaled $11.2 million for the six months ended December 31, 2001, due
to (i) a  capital  contribution  of $5.5  million  received  from the  Company's
parent,  AETG; (ii) $13.0 million  insurance premium  financing;  and (iii) $3.9
million net increase in borrowings under the Company's  revolving line of credit
partially offset by $10.3 million  repayments of insurance premium financing and
$0.7 million of principal payments on borrowings.

      Due to overall  conditions  in the workers'  compensation  and  automobile
liability  insurance  markets,  the  Company  has  experienced,  and  expects to
continue to  experience,  significant  increases  in those  insurance  costs and
related cash outlays. In particular, the Company's automobile liability policies
are  scheduled  to expire on February  28,  2002,  subject to  extension  by the
Company until June 30, 2002. The Company expects to extend these policies and as
a result  expects to be required to make  significant  related  cash  outlays on
February 28, 2002 and June 30,  2002.  The Company  believes  that cash on hand,
availability  under the  Revolving  Credit  Facility  (of which $4.4 million was
undrawn at December  31,  2001),  funds from its  existing  accounts  receivable
agreement and cash from  operations will not be sufficient to fund its liquidity
needs through December 2002. The proceeds from the Additional Indebtedness would
be  used  as  needed  to  fund  such  insurance  payments,  with  any  remaining
availability to be used for working capital purposes.  Over the longer term, the
Company  expects  to be  eligible  to  receive  refunds of a portion of its cash
outlays in the event of favorable automobile liability claims experience.

      The Company currently believes that the Additional  Indebtedness (see Note
4 to  consolidated  financial  statements),  together  with its other  financial
resources  described  above,  would be sufficient  to fund its  liquidity  needs
through  December  2002.  However,  in accordance  with industry  practice,  the


                                       11
<PAGE>

Company  does not expect to receive  notice of the  insurance  costs and related
cash outlays for its automobile  liability  policies for the  subsequent  policy
period  until  shortly  before  June 30,  2002.  In  addition,  the  Company has
experienced  volatility  in the  price of  labor,  the  cost of fuel  and  other
operational costs. If the Company's insurance amounts or its variable costs were
to  increase  more than  currently  expected,  the  Company  would  examine  its
alternatives to meet those increased requirements, including possible additional
financings,  asset sales,  postponement of  discretionary  expenditures or other
alternatives.  Depending on the significance of any such increases, the required
insurance  costs and related  cash  outlays or the  unexpected  increases in its
operational  costs  may have a  material  adverse  effect  on the  Company,  its
operations and its ability to service its indebtedness, including the Notes.

      At December 31, 2001, the Company's  total debt and  stockholder's  equity
were $249.6 million and $43.1 million, respectively.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

      The Company is exposed to market risk from fluctuations in interest rates,
which could impact its consolidated  financial  position,  results of operations
and cash flows.  The Company  manages  the  exposure to market risk  through its
regular operating and financing activities.  The Company does not use derivative
financial  instruments for speculative or trading purposes and does not maintain
such instruments that may expose it to significant market risk.

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

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


                                       12
<PAGE>

PART II  OTHER INFORMATION

Item 1.  Legal Proceedings

         None.

Item 2.  Changes in Securities and Use of Proceeds

         None.

Item 3.  Defaults Upon Senior Securities

         None.

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

         None.

Item 5.  Other Information

         None.

Item 6.  Exhibits and Reports on Form 8-K

         a) Exhibits

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

         b) Reports on Form 8-K.

         None.


                                       13
<PAGE>

                                   SIGNATURES

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


                                         ATLANTIC EXPRESS TRANSPORTATION CORP.


                                         By:  /s/ ALAN J. RUBINFELD
                                              --------------------------------
                                              Alan J. Rubinfeld
                                              Chief Financial Officer

February 15, 2002

                                       14
<PAGE>


                                Index to Exhibits

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

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

         None

                                      E-1