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

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

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

      For the quarterly period ended September 30, 2000 or

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

      For the transition period from ______________ to ______________

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

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

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

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

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


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

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

Yes _X_  No___

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

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

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

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

100 Shares of Common Stock, no par value.

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<PAGE>

                               TABLE OF CONTENTS

                          PART I. Financial Information

                                                                            Page
                                                                            ----
     ITEM 1. Financial Statements:

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

     Consolidated Statements of Operations for the Three Month
          Periods Ended September 30,1999 (unaudited) and 2000
          (unaudited)......................................................    2

     Consolidated Statements of Stockholder's Equity for the Three
          Months Ended September 30, 2000 (unaudited)......................    3

     Consolidated Statements of Cash Flows for the Three Month Periods
          Ended September 30, 1999 (unaudited) and 2000 (unaudited)........    4

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

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

PART II. Other Information                                                    12

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

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

<PAGE>

             Atlantic Express Transportation Corp. and Subsidiaries

                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                         June 30,     September 30,
                                                                           2000           2000
                                                                      ------------    -------------
                                                                        (audited)      (unaudited)
<S>                                                                   <C>              <C>
Assets
Current:
     Cash and cash equivalents ....................................   $  2,502,575    $  1,805,052
     Current portion of marketable securities .....................      1,461,000       3,090,000
     Accounts receivable, net of allowance for doubtful accounts ..     50,962,057      48,449,167
     Inventories ..................................................     10,279,483       9,873,251
     Notes receivable .............................................         15,901            --
     Prepaid expenses and other current assets ....................      6,165,109       6,014,972
                                                                      ------------    ------------
               Total current assets ...............................     71,386,125      69,232,442
                                                                      ------------    ------------

Property, plant and equipment, less accumulated depreciation ......    124,934,071     133,091,360
                                                                      ------------    ------------
Other assets:
     Goodwill, net ................................................     11,817,606      11,736,129
     Investments ..................................................         35,000          35,000
     Marketable securities ........................................      6,691,661       5,518,686
     Transportation contract rights, net ..........................      3,329,311       3,238,284
     Deferred financing and organization costs, net ...............      6,248,073       5,896,305
     Due from parent company ......................................        816,117         785,838
     Deposits and other noncurrent assets .........................      3,205,594       3,127,850
     Deferred tax assets ..........................................      5,268,606       9,065,521
     Covenant not to compete, net .................................         80,000          70,000
                                                                      ------------    ------------
               Total other assets .................................     37,491,968      39,473,613
                                                                      ------------    ------------
                                                                      $233,812,164    $241,797,415
                                                                      ============    ============
Liabilities and Stockholder's Equity
Current:
     Current portion of long-term debt ............................   $  1,907,563    $  2,990,270
     Accounts payable .............................................      1,952,700       3,452,806
     Accrued compensation .........................................      6,516,830       7,241,948
     Current portion of insurance reserve .........................      3,200,000       3,950,000
     Accrued interest .............................................      7,017,741       3,213,381
     Other accrued expenses and current liabilities ...............      9,254,623      14,482,708
                                                                      ------------    ------------
               Total current liabilities ..........................     29,849,457      35,331,113
                                                                      ------------    ------------

Long-term debt, net of current portion ............................    178,270,878     186,718,345
                                                                      ------------    ------------
Premium on bond issuance ..........................................        771,750         717,900
                                                                      ------------    ------------
Other long-term liabilities .......................................      1,802,517       1,061,361
                                                                      ------------    ------------

Commitments and contingencies

Stockholder's equity:
     Common stock, no par value - shares authorized 200; issued and
          outstanding 100 .........................................        250,000         250,000
     Additional paid-in capital ...................................     22,048,517      22,048,517
     Accumulated earnings (deficit) ...............................        (29,254)     (4,669,930)
     Accumulated other comprehensive income........................        848,299         340,109
                                                                      ------------    ------------
               Total stockholder's equity .........................     23,117,562      17,968,696
                                                                      ------------    ------------
                                                                      $233,812,164    $241,797,415
                                                                      ============    ============
</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
                                                                                                 September 30,
                                                                                        ----------------------------
                                                                                            1999            2000
                                                                                        -----------     -----------
                                                                                                (unaudited)
<S>                                                                                     <C>             <C>
Revenues:
     Transportation Operations......................................................    $43,785,012     $50,479,581
     Bus Sales Operations ..........................................................     38,599,199      39,062,804
                                                                                        -----------     -----------
Total revenues .....................................................................     82,384,211      89,542,385
                                                                                        -----------     -----------

Costs and expenses:
     Cost of Operations - Transportation Operations ................................     40,468,547      46,310,958
     Cost of Operations - Bus Sales Operations .....................................     34,628,461      35,716,353
     General and administrative ....................................................      5,910,604       5,704,989
     Depreciation and amortization .................................................      3,440,581       4,167,761
                                                                                        -----------     -----------
Total operating costs and expenses .................................................     84,448,193      91,900,061
                                                                                        -----------     -----------
          Loss from operations .....................................................     (2,063,982)     (2,357,676)
Interest expense (net) .............................................................     (5,617,233)     (5,968,414)
Other expense ......................................................................       (314,501)       (111,501)
                                                                                        -----------     -----------
          Loss before other items and benefit from income taxes ....................     (7,995,716)     (8,437,591)

Cumulative effect of a change in accounting principle, net of benefit from
          income taxes of $245,875 .................................................       (300,511)           --
                                                                                        -----------     -----------
          Loss before benefit from income taxes ....................................     (8,296,227)     (8,437,591)
Benefit from income
taxes ..............................................................................      3,598,070       3,796,915
                                                                                        -----------     -----------
Net loss ...........................................................................    $(4,698,157)    $(4,640,676)
                                                                                        ===========     ===========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       2
<PAGE>

             Atlantic Express Transportation Corp. and Subsidiaries

                 Consolidated Statements of Stockholder's Equity

                      Three months ended September 30, 2000

<TABLE>
<CAPTION>
                                                                        Accumulated
                                          Additional   Accumulated        other
                           Common stock    paid-in       earnings      comprehensive    Comprehensive
                           No par value    capital      (deficit)         Income        income (loss)         Total
                           ------------  -----------   -----------    -------------     -------------    --------------
<S>                          <C>        <C>           <C>             <C>              <C>               <C>
Balance, June 30, 2000 ....    250,000    22,048,517       (29,254)        848,299                          23,117,562
Net loss ..................       --            --      (4,640,676)           --           (4,640,676)      (4,640,676)
Unrealized loss on
  marketable securities....       --            --            --          (508,190)          (508,190)        (508,190)
                                                                                         ------------
Comprehensive loss ........       --            --            --              --         $ (5,148,866)            --
                             ---------  ------------  ------------    ------------       ============     ------------
Balance, September 30, 2000  $ 250,000  $ 22,048,517  $ (4,669,930)   $    340,109                        $ 17,968,696
                             =========  ============  ============    ============                        ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       3
<PAGE>


             Atlantic Express Transportation Corp. and Subsidiaries

                      Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                                        Three Months Ended
                                                                                           September 30,
                                                                                   -----------------------------
                                                                                        1999            2000
                                                                                   -------------   -------------
                                                                                            (unaudited)
<S>                                                                                <C>             <C>
Cash flows from operating activities:
     Net loss ..................................................................   $ (4,698,157)   $ (4,640,676)
Adjustments to reconcile net loss to net cash provided by operating activities:
          Loss (gain) on sale of marketable securities .........................         (4,493)        (86,560)
          Deferred income taxes ................................................     (3,843,947)     (3,796,915)
          Depreciation .........................................................      3,200,376       3,962,655
          Amortization .........................................................        641,390         597,314
          Reserve for doubtful accounts receivable .............................         30,000          30,000
          Decrease (increase) in:
               Accounts receivable .............................................       (262,585)      2,482,890
               Inventories .....................................................      5,381,113         406,232
               Prepaid expenses and other current assets .......................        690,585         150,137
               Deferred lease expense ..........................................          4,117            --
               Deposits and other noncurrent assets ............................          6,456          77,744
          Increase (decrease) in:
               Accounts payable ................................................      1,261,767       1,500,106
               Accrued expenses and other current liabilities ..................     (1,517,685)      2,898,843
               Other long-term liabilities .....................................       (527,676)       (741,156)
                                                                                   ------------    ------------
          Net cash provided by operating activities ............................        361,261       2,840,614
                                                                                   ------------    ------------

Cash flows from investing activities:
     Proceeds from sale of fixed assets ........................................           --           845,762
     Additions to property, plant and equipment ................................     (7,428,749)    (12,877,205)
     Purchase of transportation contract rights ................................           --           (11,782)
     Due from parent company ...................................................           --            30,279
     Notes receivable ..........................................................          1,672          15,901
     Marketable securities sold (purchased), net ...............................        243,909        (877,655)
                                                                                   ------------    ------------
          Net cash used in investing activities ................................     (7,183,168)    (12,874,700)
                                                                                   ------------    ------------

Cash flows from financing activities:
     Proceeds of additional borrowings .........................................      6,469,809       9,753,000
     Principal payments on borrowings ..........................................       (165,574)       (311,326)
     Deferred financing and organization costs .................................           --          (105,111)
                                                                                   ------------    ------------
          Net cash provided by financing activities ............................      6,304,235       9,336,563
                                                                                   ------------    ------------
Net increase (decrease) in cash and cash equivalents ...........................       (517,672)       (697,523)
Cash and cash equivalents, beginning of period .................................        855,983       2,502,575
                                                                                   ------------    ------------
Cash and cash equivalents, end of period .......................................   $    338,311    $  1,805,052
                                                                                   ============    ============

Supplemental disclosures of cash flow information:
     Cash paid during the period
     for:
          Interest .............................................................   $  8,651,538    $  9,231,690
          Income taxes .........................................................         45,625         126,256

Supplemental schedule of noncash investing and financing activities:
     Loans incurred for purchase of property, plant and equipment ..............   $    340,000    $     88,500
     Liability incurred for acquisition of contract rights .....................        415,320            --
</TABLE>

                 See accompanying notes to financial statements.


                                       4
<PAGE>

             Atlantic Express Transportation Corp. and Subsidiaries

                   Notes to Consolidated Financial Statements

1. Basis of Accounting

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

2. Inventories

      Inventories comprised the following:
                                                  June 30,     September 30,
                                                    2000            2000
                                                -----------    ------------

      Parts and fuel .....................      $ 5,339,198     $5,033,687
      Buses ..............................        4,839,564      4,940,285
                                                -----------     ----------
                                                $10,279,483     $9,873,251
                                                ===========     ==========

      On August  11,  1999,  after  receiving  a fairness  opinion  issued by an
investment bank of national standing,  Central New York Coach Sales and Service,
Inc. and Jersey Bus Sales,  Inc., both wholly-owned  subsidiaries of the Company
(collectively   "Central")   entered  into  an  agreement   with   Atlantic  Bus
Distributors,  Inc.  ("ABD"),  a wholly  owned  subsidiary  of Atlantic  Express
Transportation Group, Inc. ("AETG") (the parent company), to order certain buses
through ABD.  Central is required to deposit  from fifteen to thirty  percent of
the cost of these vehicles  simultaneously  with ABD's receipt of these vehicles
from the  manufacturers  and pay the balance to ABD upon  Central's  delivery of
these vehicles to its customers or within one hundred and twenty days, whichever
comes  first.  The  purchase  price of each bus  equals  the  price at which ABD
purchased such bus,  together with any costs incurred by ABD in connection  with
the purchase of any such vehicles.  During the quarter ended September 30, 2000,
total payments made by Central were  $28,041,324.  In addition,  as of September
30, 2000, Central was obligated to purchase $10,188,835 of vehicles from ABD.

      As of September 30, 2000,  $1,029,887 of deposits is classified as prepaid
expenses.

3. Related Party Transactions

      In August 2000,  AETG  purchased $5.5 million of buses which it is leasing
to the Company.  These operating  leases,  with terms ranging from 3 to 5 years,
provide for annual lease payments of approximately $0.7 million.

4. Subsequent Event

      Effective  October 31, 2000,  after receiving a fairness opinion issued by
an investment bank of national  standing,  the Company sold four subsidiaries to
an  affiliate,  Atlantic  Transit,  Corp.  (ATC)  for a  purchase  price of $4.3
million.  The  proceeds  were used to  reduce  borrowings  under  the  Company's
revolving  line of  credit.  Subject to  compliance  with the  revolving  credit
agreement,  the Company may  re-borrow  such amounts to provide the Company with
additional  working capital.  In accordance with the Indenture for the Company's
10 3/4% Senior Secured Notes due 2004 (the "Notes"),  the four subsidiaries were
terminated  as  guarantors  of the Notes,  and all of the capital  stock and the
assets of the four  subsidiaries  were released as collateral for the Notes. For
the quarter ended  December 31, 2000,  the Company will reflect a loss from sale
of subsidiaries of approximately $3.6 million.  The following tables reflect the
effect such sales would have had on the  statements of  operations  for the year
ended June 30, 2000 and the three


                                       5
<PAGE>

months ended September 30, 2000 had such sales been made as of July 1, 1999, and
the effect on the  balance  sheet as of  September  30, 2000 had such sales been
made as of that date:

                 Condensed Consolidated Statement of Operations
                            Year ended June 30, 2000

<TABLE>
<CAPTION>
                                               Historical       Adjustments       Pro Forma
                                             -------------    --------------   --------------
<S>                                          <C>              <C>              <C>
Revenues .................................   $ 353,481,004    $  (9,586,748)   $ 343,894,256
                                             -------------    -------------    -------------
Gross profit .............................      52,467,506       (2,294,189)      50,173,317
                                             -------------    -------------    -------------
Income (loss) before  nonrecurring  items,
   benefit from  (provision for) income
   taxes and cumulative effect of a
   change in accounting principle ........      (4,565,170)       1,295,493       (5,860,663)
                                             -------------    -------------    -------------
Net income (loss) ........................   $  (3,778,929)   $     712,521    $  (4,491,450)
                                             =============    =============    =============
</TABLE>

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

<TABLE>
<CAPTION>
                                              Historical      Adjustments     Pro Forma
                                             ------------    -------------   ------------
<S>                                          <C>             <C>             <C>
Revenues .................................   $ 89,542,385    $ (1,314,251)   $ 88,228,134
                                             ------------    ------------    ------------
Gross profit .............................      7,515,074         (54,426)      7,460,648
                                             ------------    ------------    ------------
Income (loss) before  nonrecurring  items,
   benefit from  (provision for) income
   taxes and cumulative effect of a
   change in accounting principle ........     (8,437,591)       (259,309)     (8,178,282)
                                             ------------    ------------    ------------
Net income (loss) ........................   $ (4,640,676)       (142,620)   $ (4,498,056)
                                             ============    ============    ============
</TABLE>




                      Condensed Consolidated Balance Sheet
                               September 30, 2000

<TABLE>
<CAPTION>
                                                              Adjustments
                                                                  and
                                                Historical    Eliminations      Pro Forma
                                               ------------   -------------   -------------
<S>                                            <C>            <C>             <C>
Current assets .............................   $ 69,232,442   $  2,857,485    $ 72,089,927
Contract rights and other non current assets    172,564,973     (5,766,965)    166,798,008
                                               ------------   ------------    ------------
     Total assets ..........................   $241,797,415   $ (2,909,480)   $238,887,935
                                               ============   ============    ============

Current liabilities ........................   $ 35,331,113   $   (356,566)   $ 34,974,547
Inter-company ..............................        954,747        954,747
Non current liabilities ....................    188,497,606           --       188,497,606
                                               ------------   ------------    ------------
     Total liabilities .....................   $223,828,719   $    598,181    $224,426,900
                                               ============   ============    ============

Shareholder's equity .......................     17,968,696     (3,507,661)     14,461,035
                                               ------------   ------------    ------------
 Total liabilities and shareholder's equity    $241,797,415   $ (2,909,480)   $238,887,935
                                               ============   ============    ============
</TABLE>


                                       6
<PAGE>

Supplemental Financial Information

      The following are unaudited condensed  consolidating  financial statements
regarding the Company (on a stand-alone  basis and on a consolidated  basis) and
its  subsidiaries  which are guarantors and  non-guarantors  of the Company's 10
3/4%  Senior  Secured  Notes  due  2004  as of and for the  three  months  ended
September 30, 2000,  and a  consolidating  balance sheet as of June 30, 2000 and
consolidating statements of operations and cash flows for the three months ended
September  30,  1999.  The  following  information  does not give  effect to the
subsequent event described in Note 4.

                      Condensed Consolidating Balance Sheet
                               September 30, 2000

<TABLE>
<CAPTION>
                              Atlantic
                               Express                          Non-
                           Transportation     Guarantor      Guarantor      Elimination
                                Corp.       Subsidiaries    Subsidiaries      Entries        Consolidated
                           --------------  -------------   -------------   --------------   -------------
<S>                        <C>             <C>             <C>             <C>              <C>
Current assets .........   $     614,577   $  64,578,398   $   4,039,467   $        --      $  69,232,442
Investment in affiliates      50,963,486            --              --       (50,963,486)            --
Total assets ...........     221,603,587     218,034,267      10,083,264    (207,923,703)     241,797,415
Current liabilities ....       3,020,536      28,068,324       4,242,253            --         35,331,113
Total liabilities ......     179,049,832     184,587,696       6,147,413    (145,956,222)     223,828,719
Stockholder's equity ...      42,553,755      33,446,571       3,935,851     (61,967,481)      17,968,696
</TABLE>

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

<TABLE>
<CAPTION>
                                Atlantic
                                 Express                        Non-
                             Transportation    Guarantor     Guarantor      Elimination
                                  Corp.       Subsidiaries   Subsidiaries      Entries     Consolidated
                             --------------  -------------  -------------  ------------   -------------
<S>                           <C>            <C>             <C>           <C>            <C>
Net revenues ..............   $      --      $ 89,392,164    $ 1,150,079   $  (999,858)   $ 89,542,385
Income (loss) from
operations ................          --        (2,456,901)        99,225          --        (2,357,676)
Income (loss) before income
     taxes ................          --        (8,536,816)        99,225          --        (8,437,591)
Net loss of subsidiaries ..    (4,640,676)           --             --       4,640,676            --

Net income (loss) .........    (4,640,676)     (4,695,250)        54,574     4,640,676      (4,640,676)
</TABLE>

                 Condensed Consolidating Statement of Cash Flows
                      Three months ended September 30, 2000

<TABLE>
<CAPTION>
                                    Atlantic
                                     Express                               Non-
                                 Transportation        Guarantor        Guarantor        Elimination
                                      Corp.          Subsidiaries      Subsidiaries        Entries        Consolidated
                                 --------------     --------------    -------------     ------------     -------------
<S>                               <C>               <C>               <C>                 <C>            <C>
Net cash provided by (used in)
  operating activities ........   $ (9,514,939)     $ 12,356,898      $     (1,345)       $   --         $  2,840,614
Net cash provided by (used in)
  investing activities ........       (342,061)      (11,654,984)         (877,655)           --          (12,874,700)
Net cash provided by (used in)
  financing activities ........      9,753,000          (416,437)             --              --            9,336,563
                                  ------------      ------------      ------------        --------       ------------
Increase (decrease) in cash and
  cash equivalents ............   $   (104,000)     $    285,477      $   (879,000)       $   --         $   (697,523)
Cash and cash equivalents,
  beginning of period .........        150,000           613,575         1,739,000            --            2,502,575
                                  ------------      ------------      ------------        --------       ------------
Cash and cash equivalents,
  end of period ...............   $     46,000      $    899,052      $    860,000        $   --         $  1,805,052
                                  ============      ============      ============        ========       ============

</TABLE>


                                       7
<PAGE>

                      Condensed Consolidating Balance Sheet
                                  June 30, 2000

<TABLE>
<CAPTION>
                              Atlantic
                               Express                          Non-
                           Transportation     Guarantor      Guarantor      Elimination
                                Corp.       Subsidiaries    Subsidiaries      Entries       Consolidated
                           --------------  --------------  -------------   --------------  -------------
<S>                        <C>             <C>             <C>             <C>              <C>
Current assets .........   $   5,460,699   $  62,668,334   $   3,257,092   $        --      $  71,386,125
Investment in affiliates      55,601,639            --              --       (55,601,639)            --
Total assets ...........     216,113,405     206,708,073      10,209,264    (199,218,578)     233,812,164
Current liabilities ....       6,949,572      19,691,884       3,208,001            --         29,849,457
Total liabilities ......     182,396,073     168,566,252       5,819,797    (146,087,520)     210,694,602
Stockholder's equity ...      33,717,332      38,141,821       4,389,467     (53,131,058)      23,117,562
</TABLE>

                 Condensed Consolidating Statement of Operations
                      Three months ended September 30, 1999

<TABLE>
<CAPTION>
                                         Atlantic
                                          Express                        Non-
                                      Transportation    Guarantor      Guarantor      Elimination
                                            Corp.      Subsidiaries   Subsidiaries      Entries      Consolidated
                                      --------------  -------------   ------------    -----------   -------------
<S>                                   <C>             <C>              <C>            <C>           <C>
Net revenues ......................   $       --      $ 82,319,712     $  64,499      $      --     $ 82,384,211
Income (loss) from operations .....           --        (2,079,720)       15,738             --       (2,063,982)
Income (loss) before benefit from
   income taxes and cumulative
   effect of a change in accounting
   principle ......................           --        (8,011,454)       15,738             --       (7,995,716)
Cumulative effect of a change
    in accounting principle, net of
   benefit from income taxes ......           --          (300,511)         --               --         (300,511)
Net loss of
subsidiaries ......................     (4,698,157)           --            --               --        4,698,157
Net income (loss) .................     (4,698,157)     (4,706,813)        8,656        4,698,157     (4,698,157)
</TABLE>




                 Condensed Consolidating Statement of Cash Flows
                      Three months ended September 30, 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 .......   $(5,548,384)   $ 6,388,054    $  (478,409)      $   --        $   361,261
Net cash provided by (used in)
   investing activities .......       (63,269)    (7,363,808)       243,909           --         (7,183,168)
Net cash provided by
   financing activities .......     6,129,809        174,426           --             --          6,304,235
                                  -----------    -----------    -----------       --------      -----------
Increase (decrease) in cash and
   cash equivalents ...........   $   518,156    $  (801,328)   $  (234,500)      $   --        $  (517,672)
Cash and cash equivalents,
     beginning of period ......      (324,134)       522,117        658,000           --            855,983
                                  -----------    -----------    -----------       --------      -----------
Cash and cash equivalents,
     end of period ............   $   194,022    $  (279,211)   $   423,500       $   --        $   338,311
                                  ===========    ===========    ===========       ========      ===========
</TABLE>


                                       8
<PAGE>


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

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

Three months ended  September 30, 2000 compared to three months ended  September
30, 1999.

      Revenues.  Revenues from Transportation  Operations were $50.5 million for
the three  months ended  September  30, 2000  compared to $43.8  million for the
three months  ended  September  30, 1999,  an increase of $6.7 million or 15.3%.
This increase was due primarily to (i) $2.3 million  additional summer revenues;
(ii) $1.0 million as a result of new contracts  awarded;  and (iii) $3.4 million
due to contract rate increases and service  requirements  of existing  contracts
(including  one  additional  revenue day in New York City in  September  2000 as
compared  to  September  1999 which  increased  revenues by  approximately  $0.5
million).  Revenues  from Bus Sales  Operations  was $39.1 million for the three
months ended  September  30, 2000 compared to $38.6 million for the three months
ended September 30, 1999, an increase of $0.5 million or 1.2%. This increase was
primarily due to increases in parts and repair sales.

      Gross Profit. Gross profit from Transportation Operations was $4.2 million
for the three months ended  September  30, 2000 compared to $3.3 million for the
three months ended  September 30, 1999, an increase of $0.9 million or 25.7%. As
a percentage  of revenues,  gross profit  increased to 8.3% for the three months
ended  September  30, 2000 from 7.6% for the three  months ended  September  30,
1999.  This increase was primarily due to a decrease in costs  associated with a
terminated contract partially offset by higher fuel costs. Gross profit from Bus
Sales  Operations was $3.3 million for the three months ended September 30, 2000
compared to $4.0  million for the three  months  ended  September  30,  1999,  a
decrease of $0.6  million or 15.7%.  As a percentage  of revenues,  gross profit
decreased to 8.6% for the three months ended  September  30, 2000 from 10.3% for
the three months ended September 30, 1999. This decrease was primarily due to an
increase in the  proportion of sales of commercial  vehicles made in the current
quarter,  which  have  lower  gross  profit  margins  than  sales of school  bus
vehicles.

      General and administrative  expenses.  General and administrative expenses
for the  Transportation  Operations were $4.7 million for the three months ended
September 30, 2000 compared to $5.0 million for the three months ended September
30,  1999,  a decrease of $0.3 million or 5.1%.  This  decrease was  principally
related to decreases in professional  fees of $0.6 million  partially  offset by
increases in advertising and recruitment  expenses. As a percentage of revenues,
general and administrative expenses decreased to 9.3% for the three months ended
September  30, 2000 from 12.3% for the three  months ended  September  30, 1999.
General and  administrative  expenses for the Bus Sales Operations for the three
months ended  September 30, 2000 were $1.0 million  compared to $0.9 million for
the three months ended  September 30, 1999. As a percentage of revenues  general
and  administrative  expenses  increased  to 2.5%  for the  three  months  ended
September 30, 2000 from 2.4% for the three months ended September 30, 1999.

      Depreciation  and  amortization  expenses.  Depreciation  and amortization
expenses for the Transportation Operations was $4.0 million for the three months
ended  September  30, 2000  compared to $3.2  million for the three months ended
September 30, 1999, an increase of $0.7 million or 22.4%.  This increase was due
to additional depreciation due to the purchase of new vehicles. Depreciation and
amortization  expenses  for the Bus Sales  Operations  was $0.2  million for the
three months ended September 30, 2000 and 1999 respectively.

      Loss from operations.  Loss from operations was $2.4 million for the three
months ended  September  30, 2000  compared to $2.1 million for the three months
ended September 30, 1999, an increase of $0.3 million.  This increase was due to
the net effect of the items discussed above.




                                       9
<PAGE>

      Net interest expense.  Net interest expense was $6.0 million for the three
months ended  September  30, 2000  compared to $5.6 million for the three months
ended September 30, 1999, an increase of $0.4 million or 6.3%. This increase was
due primarily to higher average indebtedness outstanding during the three months
ended September 30, 2000.

      Net loss.  The Company  generated a net loss of $4.6 million for the three
months ended  September  30, 2000 compared to a net loss of $4.7 million for the
three months ended September 30, 1999, a decrease of $0.1 million. This decrease
was due to the net effect of the items discussed above and the cumulative effect
of a change in accounting principle.

Liquidity and Capital Resources

      Management  anticipates  total  capital  expenditures  of $22.6 million in
fiscal 2001 of which  approximately  $13.0  million were made by  September  30,
2000. This included approximately $10.9 million for purchase of new vehicles and
$2.1 million for other property and equipment.

      Net Cash Provided By Operating Activities.  Net cash provided by operating
activities  of $2.8  million  for the three  months  ended  September  30,  2000
resulted  primarily  from $7.4 million  increases in source of funds for working
capital plus non-cash items of  depreciation  and  amortization  of $4.6 million
offset by (i) net loss of $4.6 million;  (ii) $3.8 million  increase in deferred
income tax asset; and (iii) $0.7 million decrease in other sources of funds.

      Net  Cash  Used in  Investing  Activities.  For  the  three  months  ended
September 30, 2000,  the Company made $13.0 million of capital  expenditures  to
acquire  additional  vehicles,  other property and  equipment.  Of these capital
expenditures $0.1 million were directly  financed.  In addition the Company made
$0.9 million net purchases of marketable securities.

      Net Cash Provided by Financing Activities.  Net cash provided by financing
activities  totaled $9.3 million for the three months ended  September 30, 2000,
due primarily to $9.8 million net borrowings under the Company's  revolving line
of credit,  partially  offset by  principal  payments  of $0.3  million on other
borrowings.

      The Company  continues to experience higher fuel costs which are impacting
profit margins and increased  advertising and  recruitment  costs due to a tight
labor market.

      Effective October 31, 2000 after receiving a fairness opinion issued by an
investment bank of national  standing,  the Company sold four subsidiaries to an
affiliate  for a  purchase  price  $4.3  million  (see  Note  4 to  Consolidated
Financial  Statements).  The proceeds of the sale were used to reduce borrowings
under the Company's  revolving  line of credit.  Subject to compliance  with the
revolving  credit  agreement,  the Company may re-borrow such amounts to provide
the Company with additional  working capital.

      The first quarter is historically the period of the Company's greatest use
of its revolving line of credit due to the purchase of vehicles for the upcoming
school year and seasonal  lower revenues in this quarter.  The Company  believes
that its current  operating  cash flow and its borrowing  capacity under its $30
million  revolving  credit  facility  (of which  $1.5  million  was  undrawn  at
September 30, 2000),  will provide it with  sufficient  liquidity to conduct its
operations for the balance of the year.

      Management  has  considered a variety of options to enhance the  Company's
liquidity  and has  formulated  a proposal  intended to provide the Company with
greater  financial  flexibility  and the  ability to  capitalize  on  additional
business  opportunities.  The  principal  elements of the  proposal  include (i)
establishing  a $125 million  revolving  credit  facility and modifying  various
provisions  of the  Indenture;  (ii)  receiving  a capital  contribution  of $10
million  from  AETG;  (iii)  AETG  contributing  all of the stock of ATC and its
subsidiaries to the Company;  and (iv) offering to repurchase at par $30 million
of its outstanding 10 3/4% Senior Secured Notes due February 1, 2004.


                                       10
<PAGE>

      The  Company  is in the  process of  preparing  an Offer to  Purchase  and
Consent  Solicitation  Statement to present to its bondholders.  There can be no
assurance that the Company will be able to establish a larger credit facility or
that its  bondholders  will  provide the  necessary  consent to  consummate  the
proposal.  The foregoing  statements  do not  constitute an offer to buy, or the
solicitation of an offer to sell any securities. Such offer, if made, would only
be made pursuant to a definitive offer to purchase and related documentation.

      At September 30, 2000, the Company's total debt and  stockholder's  equity
were $189.7 million and $18.0 million respectively.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

      Not Applicable.


                                       11
<PAGE>


PART II OTHER INFORMATION

Item 1. Legal Proceedings

      None.

Item 2. Changes in Securities and Use of Proceeds

      None.

Item 3. Defaults Upon Senior Securities

      None.

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

      None.

Item 5. Other Information

      None.

Item 6. Exhibits and Reports on Form 8-K

      a) Exhibits

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

      b) Reports on Form 8-K - None.


                                       12
<PAGE>


                                   SIGNATURES

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





                                     ATLANTIC EXPRESS TRANSPORTATION CORP.


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

November 20, 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.


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


      27.1               Financial Data Schedule


                                       E-1