<PAGE>   1
             FORM 10Q -- QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 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 FISCAL QUARTER ENDED JUNE 30, 2001

                                       OR

         [ ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                    THE SECURITIES EXCHANGE ACT OF 1934

                    FOR THE TRANSITION PERIOD FROM ____________ TO ____________

                         Commission File Number: 0-20135

                                 ---------------

                           AMERICA SERVICE GROUP INC.
             (Exact name of registrant as specified in its charter)

                  DELAWARE                             51-0332317
      (State or other jurisdiction of               (I.R.S. Employer
       incorporation or organization)             Identification No.)

                          105 WESTPARK DRIVE, SUITE 200
                           BRENTWOOD, TENNESSEE 37027
              (Address and zip code of principal executive office)

                                 (615) 373-3100
              (Registrant's telephone number, including area code)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed under 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 [ ]

         There were 5,428,055 shares of Common Stock outstanding as of August 2,
2001.

<PAGE>   2

                           AMERICA SERVICE GROUP INC.

                          QUARTERLY REPORT ON FORM 10-Q
                                      INDEX

<TABLE>
<CAPTION>
                                                                                                                      PAGE
                                                                                                                     NUMBER
                                                                                                                     ------
      <S>                                                                                                            <C>
      PART I. FINANCIAL INFORMATION

      Item 1. Financial Statements (Unaudited)
        Condensed Consolidated Balance Sheets as of June 30, 2001 and December 31, 2000.......................          3
        Condensed Consolidated Statements of Operations for the quarter and six months ended June 30, 2001
          and June 30, 2000...................................................................................          4
        Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2001
          and June 30, 2000...................................................................................          5
        Notes to Condensed Consolidated Financial Statements..................................................          6
      Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...........          8

      PART II. OTHER INFORMATION

      Item 4. Submission of Matter to a Vote of Security Holders..............................................         11
      Item 5: Other Information...............................................................................         11
      Item 6: Exhibits and Reports on Form 8-K................................................................         11
      Signature page..........................................................................................         12
      Index to exhibits.......................................................................................         13
</TABLE>

<PAGE>   3

                                     ITEM I:

                              FINANCIAL STATEMENTS

                           AMERICA SERVICE GROUP INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                       JUNE 30,         DECEMBER 31,
                                                                         2001              2000
                                                                       ---------        ------------
                                                                          (AMOUNTS SHOWN IN 000'S)
<S>                                                                    <C>               <C>
                             ASSETS
Current assets:
  Cash and cash equivalents ...................................        $      52         $     256
  Accounts receivable, healthcare and other less allowances ...           74,395            64,053
  Prepaid expenses and other current assets ...................           13,545             8,924
  Current deferred taxes ......................................            4,969             1,143
                                                                       ---------         ---------
          Total current assets ................................           92,961            74,376
Property and equipment, net ...................................            8,659             8,651
Deferred taxes ................................................            5,213                --
Goodwill, net .................................................           46,307            61,358
Contracts, net ................................................           13,622            14,002
Other intangible assets, net ..................................            1,783             1,925
Other assets ..................................................              902             1,090
                                                                       ---------         ---------
                                                                       $ 169,447         $ 161,402
                                                                       =========         =========

               LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable ............................................        $  26,355         $  21,664
  Medical claims liability ....................................           17,471            11,285
  Accrued expenses ............................................           35,938            25,854
  Long-term debt classified as current pending executed
    amendment to the credit facility (SEE FOOTNOTE 5)..........           58,780                --
                                                                       ---------         ---------
          Total current liabilities ...........................          138,544            58,803
Noncurrent portion of accrued expenses ........................            4,712             3,680
Deferred taxes ................................................              757               757
Long-term debt ................................................               --            56,800
Commitments and contingencies
Mandatory redeemable preferred stock ..........................               --            12,397
Common stock ..................................................               54                41
Additional paid in capital ....................................           31,324            18,259
Stockholders' notes receivable ................................           (1,343)           (1,384)
Accumulated other comprehensive income ........................             (445)               --
Retained (deficit) earnings ...................................           (4,156)           12,049
                                                                       ---------         ---------
          Total liabilities and stockholders' equity ..........        $ 169,447         $ 161,402
                                                                       =========         =========
</TABLE>

            See notes to condensed consolidated financial statements.


                                       3

<PAGE>   4

                           AMERICA SERVICE GROUP INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                QUARTER ENDED JUNE 30,               SIX MONTHS ENDED JUNE 30,
                                                                2001              2000                2001               2000
                                                            -----------        -----------        -----------        -----------
                                                                 (Amounts shown in 000's except share and per share amounts)
<S>                                                         <C>                <C>                <C>                <C>
Healthcare revenue ..................................       $   140,779        $    89,449        $   278,720        $   165,618
Healthcare expenses .................................           146,711             80,964            273,309            149,590
                                                            -----------        -----------        -----------        -----------
Gross margin ........................................            (5,932)             8,485              5,411             16,028
Selling, general and administrative expenses ........             7,251              3,169             11,393              6,410
Impairment of long-lived assets .....................            13,236                 --             13,236                 --
Depreciation and amortization .......................             1,960              1,403              3,943              2,348
                                                            -----------        -----------        -----------        -----------
Income (loss) from operations .......................           (28,379)             3,913            (23,161)             7,270
Interest, net .......................................            (1,237)              (891)            (2,525)            (1,421)
                                                            -----------        -----------        -----------        -----------
Income (loss) before taxes (benefit) ................           (29,616)             3,022            (25,686)             5,849
Provision for income taxes (benefit) ................           (11,237)             1,207             (9,645)             2,339
                                                            -----------        -----------        -----------        -----------
Net income (loss) ...................................           (18,379)             1,815            (16,041)             3,510
Preferred stock dividends ...........................                --               (161)              (163)              (324)
                                                            -----------        -----------        -----------        -----------
Net income (loss) attributable to common shares .....       $   (18,379)       $     1,654        $   (16,204)       $     3,186
                                                            ===========        ===========        ===========        ===========
Net income (loss) per common share:
  Basic .............................................       $     (3.39)       $      0.44        $     (3.14)       $      0.85
                                                            ===========        ===========        ===========        ===========
  Diluted ...........................................       $     (3.39)       $      0.33        $     (3.14)       $      0.65
                                                            ===========        ===========        ===========        ===========
Weighed average shares outstanding:
  Basic .............................................         5,420,000          3,737,000          5,153,000          3,732,000
                                                            ===========        ===========        ===========        ===========
  Diluted ...........................................         5,420,000          5,510,000          5,153,000          5,428,000
                                                            ===========        ===========        ===========        ===========
</TABLE>

            See notes to condensed consolidated financial statements.


                                       4

<PAGE>   5

                           AMERICA SERVICE GROUP INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                   SIX MONTHS ENDED JUNE 30,
                                                                     2001             2000
                                                                   --------         --------
                                                                    (AMOUNTS SHOWN IN 000'S)
<S>                                                                <C>              <C>
Operating activities:
Net income (loss) ..............................................   $(16,041)        $  3,510
Adjustments to reconcile net income (loss) to net cash
  provided by (used in) operating activities:
  Depreciation and amortization ................................      3,943            2,348
  Amortization of deferred financing costs .....................        190               65
  Impairment of long-lived assets ..............................     13,236               --
  Deferred income taxes.........................................     (8,736)              --
  Accretion of mandatory redeemable preferred stock discount ...         --               11
  Interest on stockholders' notes receivable ...................        (40)             (30)
  Changes in operating assets and liabilities, net of
     effects of acquisitions:
     Accounts receivable .......................................     (5,463)          (4,803)
     Prepaid expenses and other current assets .................     (9,501)             (60)
     Other assets ..............................................        (27)              42
     Accounts payable ..........................................      4,691            8,313
     Accrued expenses ..........................................     16,303           (2,300)
                                                                   --------         --------
Net cash provided by (used in) operating activities ............     (1,445)           7,096
Investing activities:
Cash paid for acquisitions, net of cash acquired ...............         --          (30,757)
Capital expenditures ...........................................     (1,337)          (1,112)
                                                                   --------         --------
Net cash used in investing activities ..........................     (1,337)         (31,869)
Financing activities:
Proceeds from current portion of long-term debt ................     17,780           31,095
Payments on current portion of long-term debt ..................    (15,800)          (5,394)
Payment of deferred financing costs ............................         --             (347)
Proceeds from stockholder note receivable ......................         81               --
Payment of mandatory redeemable preferred stock dividends ......        (61)            (324)
Common stock issued under Employee Stock Purchase Plan .........         --              275
Exercise of stock options ......................................        578              310
                                                                   --------         --------
Net cash provided by financing activities ......................      2,578           25,615
Net increase (decrease) in cash and cash equivalents ...........       (204)             842
Cash and cash equivalents, beginning of period .................        256              444
                                                                   --------         --------
Cash and cash equivalents, end of period .......................   $     52         $  1,286
                                                                   ========         ========
</TABLE>

            See notes to condensed consolidated financial statements.


                                       5

<PAGE>   6

                           AMERICA SERVICE GROUP INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2001

1. BASIS OF PRESENTATION

         The interim condensed consolidated financial statements as of June 30,
2001 and for the quarter and six months then ended are unaudited, but in the
opinion of management, have been prepared in conformity with accounting
principles generally accepted in the United States applied on a basis consistent
with those of the annual audited consolidated financial statements. Such interim
condensed consolidated financial statements reflect all adjustments (consisting
of normal recurring accruals) necessary for a fair presentation of the financial
position and the results of operations for the quarter and six months presented.
The results of operations for the quarter and six months presented are not
necessarily indicative of the results to be expected for the year ending
December 31, 2001. The interim condensed consolidated financial statements
should be read in connection with the audited consolidated financial statements
for the year ended December 31, 2000.

2. ACQUISITIONS

         On September 20, 2000, the Company, through its wholly-owned subsidiary
Secure Pharmacy Plus, Inc. ("SPP"), completed the purchase of the assets of the
correctional pharmacy division of Bergen Brunswig Corporation. The cash purchase
price of $7.9 million was financed under the Company's syndicated credit
facility. SPP is the largest correctional pharmacy company in the United States
servicing over 300,000 inmates in forty-one states. SPP's sales to the Company
are eliminated in consolidation. The Company accounted for the acquisition using
the purchase method of accounting.

         On June 1, 2000, the Company acquired the stock of Correctional Health
Services, Inc. ("CHS") for $16.7 million in cash, net of cash acquired. The
purchase price was financed by advances pursuant to the Company's then existing
Senior Credit Facility, which was increased in connection with the acquisition.
CHS, with headquarters in Verona, New Jersey, services nineteen contracts
providing health care services to approximately 12,000 inmates.

         On March 29, 2000, the Company acquired the Pennsylvania and New York
operations of Correctional Physician Services, Inc. ("CPS") for $14 million in
cash financed under the Company's then existing Senior Credit Facility. CPS
assigned its contracts for the Eastern Region of the Pennsylvania Department of
Corrections and the Yonkers Region of the New York Department of Correctional
Services to the Company. Combined, the acquired Pennsylvania and New York
operations of CPS provide health care services to approximately 21,000 inmates.

3. IMPAIRMENT OF LONG-LIVED ASSETS

         During the second quarter, the Company was notified that another vendor
had been selected to negotiate a contract to provide healthcare services for the
Eastern Region of the Pennsylvania Department of Corrections upon the expiration
of the Company's contract on December 31, 2002. The Company also anticipates
that it will cease operations under the contract with the Yonkers Region of the
New York Department of Correctional Services upon the expiration of the
Company's contract on May 31, 2002 as the healthcare services are to be assumed
by the client. Given these factors, in accordance with FAS 121 Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
the Company recorded a non-cash impairment charge of $13.2 million ($8.3 million
net of tax) during the second quarter of 2001 representing the excess net
goodwill recorded in connection with the aforementioned acquisition of CPS over
the fair value of the two contracts. The Company estimated the fair value of the
contracts by calculating the net present value of estimated cash flows during
the remaining term of the contracts adjusted for certain other factors.

4. CHANGES IN ACCOUNTING ESTIMATES

         During the second quarter of 2001, the Company recorded change in
accounting estimate charges of approximately $6 million ($3.7 million net of
tax) to strengthen medical claims reserves due to adverse development of prior
years' medical claims and $1.7 million ($1.1 million net of tax) for legal and
malpractice insurance liabilities. The charge for medical claims reserve
strengthening was primarily the result of updated information that showed actual
utilization and cost data for inpatient and outpatient services were higher than
historical levels upon which the original estimate was based. The charge for
legal and malpractice insurance exposures primarily relates to liquidity issues
of certain insurance carriers who provided coverage to the Company from
1992-1997.


                                       6

<PAGE>   7

5. BANKING ARRANGEMENTS

         As a result of the charges referred to in the preceding footnotes, the
Company obtained a waiver relating to compliance with certain financial
covenants contained in its $65 million senior secured credit facility (the
"credit facility") dated August 2, 2000. However, the waiver will expire unless
the Company and the syndicate banks have entered into an amendment to the credit
facility by September 20, 2001.

         In the accompanying financial statements, the Company classified the
principal amount outstanding under the credit facility as a current liability.
Such classification is required because, absent the amendment referred to in the
previous paragraph, the current waiver will expire and indebtedness outstanding
pursuant to the credit facility may be called by the syndicate banks.

         The Company has negotiated the form of an amendment to the credit
facility pursuant to which amounts available to the Company would be based upon
varying percentages of accounts receivable and inventory. Total availability,
however, would remain at $65 million until the first of three $5 million
reductions in availability that occur on December 31, 2001, June 30, 2002, and
December 31, 2002, respectively. Certain financial covenants would be modified
and other financial covenants added through the quarter ending September 30,
2002. Interest rates under the amendment would remain based upon the Company's
ratio of total debt to earnings before interest, taxes, and depreciation and
amortization. However, the range of interest rates would change from LIBOR plus
1.5% to 2.75% under the previous credit facility to LIBOR plus 1.75% to 3.5%
under the amended credit facility.

         The Administrative Agent under the credit facility has approved the
amendment and has recommended that the other three syndicate banks participating
in the credit facility do so. One of such syndicate banks has approved the
amendment as of the date of this Quarterly Report on 10-Q. The amendment will
become effective upon its approval by one of the two remaining syndicate banks,
which the Company expects to receive within the next week.

         Upon receipt of the executed amendment, the Company intends to issue a
press release announcing the effectiveness of the amendment and to re-release
its financial statements for the quarter ended June 30, 2001, to reflect the
reclassification of the indebtedness outstanding pursuant to the credit facility
as long-term indebtedness.

6. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

         In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging Activities
("SFAS 133"), as amended in June 2000 by SFAS No. 138, Accounting for Certain
Derivative Instruments and Certain Hedging Activities, which requires the
Company to recognize all derivatives as assets or liabilities measured at fair
value. Changes in fair value are recognized through either earnings or other
comprehensive income dependent on the effectiveness of the hedge instrument. The
Company currently maintains three interest collar agreements with three of its
syndicate banks for a notional amount of $24 million. The collar agreements,
which expire between October 2002 and May 2003, qualify as cash flow hedges
under SFAS 133.

         On January 1, 2001, the Company adopted SFAS 133 and SFAS 138 resulting
in a charge to other comprehensive income of approximately $212,000, net of tax,
as the cumulative effect of a change in accounting principle representing the
fair value of the collar agreements on the date of adoption. During the six
months ended June 30, 2001, the decrease in fair value of the collar agreements
of approximately $233,000, net of tax, was recognized through other
comprehensive income as the intrinsic change in fair market value during the
period. At June 30, 2001, the fair value of the interest rate collar agreements
was a liability of $748,000. The Company's collar agreements are maintained for
interest rate protection purposes only, pursuant to a provision of its credit
facility.

         In June 2001, the Financial Accounting Standards Board issued SFAS No.
141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets,
effective for fiscal years beginning after December 15, 2001. Under the new
rules, goodwill will no longer be amortized but will be subject to annual
impairment tests in accordance with the Statements. Other intangible assets will
continue to be amortized over their useful lives.

         The Company will apply the new rules on accounting for goodwill and
other intangible assets beginning in the first quarter of 2002. Application of
the nonamortization provisions of the Statement is expected to result in an
increase in net income of $1.5 million per year ($.25 per share). During 2002,
the Company will perform the first of the required impairment tests of goodwill
as of January 1, 2002 and has not yet determined what the effect of these tests
will be on the earnings and financial position of the Company.


                                       7

<PAGE>   8

ITEM 2. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

         This quarterly report on Form 10-Q contains and incorporates by
reference "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Those statements include, among other things,
discussions of the Company's business strategy and expectations concerning the
Company's position in the industry, future operations, margins, profitability,
liquidity and capital resources. All these forward-looking statements are based
on estimates and assumptions made by management of the Company that, although
believed to be reasonable, are inherently uncertain. Therefore, undue reliance
should not be placed on such statements and estimates. No assurance can be given
that any of such estimates or statements will be realized, and it is likely that
actual results may differ materially from those contemplated by such
forward-looking statements. Factors that may cause such differences include, but
are not limited to, those set forth in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2000 (the "2000 Form 10-K") under the
heading "Item 1. Business -- Cautionary Statements," which cautionary statements
are hereby incorporated herein by reference. All forward-looking statements
attributable to the Company or persons acting on behalf of the Company are
expressly qualified in their entirety by the cautionary statements set forth in
the 2000 Form 10-K. In light of these and other uncertainties, the inclusion of
forward-looking statements herein or in any statement made by the Company should
not be regarded as a representation by the Company that the Company's plans and
objectives will be achieved.

GENERAL

         The financial statements of the Company include the operations of SPP,
CHS and CPS since the dates of the consummation of such acquisitions: September
20, 2000, June 1, 2000, and March 30, 2000, respectively. The CHS and CPS
acquisitions increased the Company's number of contracts served by 21 and
increased the Company's presence in key geographic regions. The SPP acquisition
enables the Company to better manage its pharmacy costs and provides the Company
a vehicle through which to diversify its presence in the correctional health
care industry.

RESULTS OF OPERATIONS

SECOND QUARTER 2001 COMPARED TO SECOND QUARTER 2000

         Healthcare revenue for the quarter ended June 2001 increased to $140.8
million from $89.4 million in the second quarter 2000. The $51.4 million
increase is attributable to the acquisitions of CHS and SPP, an increase in
inmate population, pricing adjustments of existing contracts and net new
business. The increase in revenue relative to the CHS and SPP acquisitions was
$17.2 million, existing contract revenues increased $7.8 million and net new
business represented a $26.4 million increase in revenue during the second
quarter of 2001 as compared to the second quarter of 2000.

         Healthcare expenses during the second quarter 2001 were $146.7 million
or 104.2% of revenue versus $81.0 million or 90.5% of revenue for the same
period in 2000. The $65.7 million increase is mainly attributable to the CHS and
SPP acquisitions and net new business. Also, changes in accounting estimates of
$6.0 million were recorded for strengthening of the medical claims reserves for
prior periods due primarily to adverse development of claims payments and $.4
million of other charges. Exclusive of the changes in accounting estimates and
other charges, healthcare expenses as a percent of revenue for the second
quarter 2001 were 99.7%. This 9.2% increase from prior year quarter relates
primarily to strengthening of current year medical claims reserves and increased
costs for pharmacy, salaries and off-site utilization. Additionally, the
Company's contract with the New York City Health and Hospitals Corporation
("Rikers Island") and its SPP operations generate lower margins than its other
corrections business as they are lower risk contracts.

         Selling, general and administrative expenses for the quarter ended June
2001 increased $4.1 million as compared to the quarter ended June 2000. As a
percent of revenue, selling, general and administrative expenses were 5.2% for
the quarter ended June 2001 versus 3.5% for the same period in 2000. Exclusive
of changes in accounting estimates for legal and malpractice insurance
liabilities of $1.3 million and the expensing of continuing transaction costs
related to certain strategic initiatives of $1.3 million, selling, general and
administrative expenses as a percent of revenue were 3.3% for the quarter ended
June 2001.

         Depreciation and amortization expense for the quarter ended June 2001
was $2.0 million versus $1.4 million for the same period in 2000. The increase
of $.6 million is mainly due to the amortization of the intangible assets
associated with the CHS and SPP acquisitions.


                                       8

<PAGE>   9

         Net interest expense of $1.2 million for the quarter ended June 2001
increased $.3 million from the same period in 2000. The increase is related to
the $25 million of incremental debt incurred to finance the CHS and SPP
acquisitions, a portion of which was repaid subsequent to the acquisitions.

         The income tax benefit for the quarter ended June 2001 was $11.2
million, which equates to a 38% effective tax rate. Preferred stock dividends of
$.2 million for the quarter ended June 2000 relate to the 5% dividend rate on
the $12.5 million of Series A Convertible Preferred Stock, which were converted
to common stock on February 5, 2001.

SIX MONTHS ENDED JUNE 2001 COMPARED TO SIX MONTHS ENDED JUNE 2000

         Healthcare revenues for the six months ended June 2001 increased to
$278.7 million from $165.6 million for the six months ended June 2000. The
$113.1 million increase is attributable to the acquisitions of CPS, CHS and SPP
(collectively the "2000 acquisitions"), an increase in inmate population,
pricing adjustments of existing contracts and net new business. The increase in
revenue relative to the 2000 acquisitions was $45.3 million, existing contract
revenues increased $15.7 million and net new business represented a net $52.1
million increase in revenue during the six months ended June 2001 as compared to
the six months ended June 2000.

         Healthcare expenses during the six months ended June 2001 were $273.3
million or 98.1% of revenue versus $149.6 million or 90.3% of revenue for the
same period in 2000. The $123.7 million increase is mainly attributable to the
2000 acquisitions and net new business. Exclusive of the changes in accounting
estimates and other charges recorded during the second quarter 2001 of $6.4
million, healthcare expenses as a percent of revenue for the six months ended
June 2001 was 95.8%. This 5.5% increase from the prior year relates primarily to
strengthening of current year medical claims reserves and increased costs for
pharmacy, salaries and off-site utilization. Additionally, the Company's
contract with the New York City Health and Hospitals Corporation ("Rikers
Island") and its SPP operations generate lower margins than its other
corrections business but also reduce the Company's risk.

         Selling, general and administrative expenses for the six months ended
June 2001 increased $5.0 million as compared to the six months ended June 2000.
As a percent of revenue, selling, general and administrative expenses were 4.1%
for the six months ended June 2001 versus 3.9% for the same period in 2000.
Exclusive of changes in accounting estimates for legal and malpractice insurance
liabilities of $1.3 million and the expensing of continuing transaction costs
related to certain strategic initiatives of $1.3 million, selling, general and
administrative expenses as a percent of revenue were 3.2% for the six months
ended June 2001. The decrease from 4.1% to 3.2% reflects the Company's ability
to effectively leverage its selling, general and administrative expenses through
its acquisition and revenue growth model.

         Depreciation and amortization expense for the six months ended June
2001 was $3.9 million versus $2.3 million for the same period in 2000. The
increase of $1.6 million is mainly due to the amortization of the intangible
assets associated with the 2000 acquisitions.


                                       9

<PAGE>   10

         Net interest expense of $2.5 million for the six months ended June 2001
increased $1.1 million from the same period in 2000. The increase is related to
the $37 million of incremental debt incurred to finance the 2000 acquisitions, a
portion of which was subsequently repaid.

    The income tax benefit for the six months ended June 2001 was $9.6 million,
which equates to a 37.5% effective tax rate. Preferred stock dividends of $.3
million for the six months ended June 2001 relate to the 5% dividend rate on the
$12.5 million of Series A Convertible Preferred Stock, which was converted to
common stock on February 5, 2001, and the accretion of the remaining unamortized
discount on the preferred stock.

LIQUIDITY AND CAPITAL RESOURCES

         Cash flows from operating activities during the quarter ended June 2001
was a net use of $5.7 million compared to cash provided by operations of $4.2
million for the comparable 2000 period. This decrease is due primarily to the
Company's operating loss during the second quarter 2001. The Company's working
capital is $(45.6) million as of June 30, 2001, reflecting the reclassification
of the indebtedness outstanding pursuant to the credit facility as a current
liability under the circumstances described in Footnote 5 to the accompanying
financial statements.

         As noted in Footnote 5 to the accompanying financial statements, the
Company has negotiated the form of an amendment to the credit facility. The
Administrative Agent under the credit facility has approved the amendment and
has recommended that the other three syndicate banks participating in the credit
facility do so. One of such syndicate banks has approved the amendment as of the
date of this Quarterly Report on Form 10-Q. The amendment will become effective
upon its approval by one of the two remaining banks. The Company expects to
receive final approval within the next week.  Management believes that amounts
available under the amended credit facility will be sufficient to meet the
Company's foreseeable cash needs and anticipated contract renewal activity.

         On February 5, 2001, the Company completed the conversion of 125,000
shares of Series A Convertible Preferred Stock, having an aggregate liquidation
preference of $12.5 million into 1,322,751 shares of common stock. The Company
registered the shares of common stock issued upon the conversion of the
preferred stock.


                                       10

<PAGE>   11

                                    PART II:

                                OTHER INFORMATION

ITEM 4. -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         At the annual meeting of stockholders, held June 6, 2001, the
stockholders of the Company voted to elect the Company's Board of Directors:
Michael Catalano, Chairman, President and Chief Executive Officer (4,788,179
affirmative votes and 3,000 votes withheld); William D. Eberle (4,788,179
affirmative votes and 3,000 votes withheld); Burton C. Einspruch (4,773,075
affirmative votes and 18,104 votes withheld); Carol R. Goldberg (4,791,179
affirmative votes); David A. Freeman (4,788,179 affirmative votes and 3,000
votes withheld); Jeffrey L. McWaters (4,497,504 affirmative votes and 293,675
votes withheld); Richard M. Mastaler (4,788,179 affirmative votes and 3,000
votes withheld); Richard D. Wright (4,788,179 affirmative votes and 3,000 votes
withheld).

ITEM 5. -- OTHER INFORMATION

         On July 26, 2001, the Company issued a press release discussing its
second quarter 2001 operating performance. A copy of such press release is
attached hereto as Exhibit 99.1 and is hereby incorporated herein by reference.

ITEM 6. -- EXHIBITS AND REPORTS ON FORM 8-K

         (A) Exhibits

<TABLE>
<S>     <C>    <C>
3.1     --     Amended and Restated Certificate of Incorporation of America Service Group Inc.
               (incorporated by reference to Exhibit 3.1 of the Registrant's Registration Statement on
               Form S-1, Registration No. 33-43306, as amended).

3.2     --     Amended and Restated By-Laws of America Service Group Inc. (incorporated by
               reference to Exhibit 3.2 of the Registrant's Annual Report on Form 10-K for the year
               ended December 31, 1996).

4.1     --     Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the
               Registrant's Registration Statement on Form S-1, Registration No. 33-43306).

10.1    --     Waiver No. 1, dated July 25, 2001, to Amended and Restated Credit Agreement,
               dated as of August 1, 2000.

11.1    --     Statement regarding computation of per share earnings.

99.1    --     June 2001 Earnings Release.

99.2    --     Press Release dated February 7, 2001, announcing the Conversion
               of Preferred Stock to Common Stock (incorporated herein by
               reference to the Company's Current Report on Form 8-K, filed
               February 7, 2001, Commission File No. 0-23340).
</TABLE>

         (B) Reports on Form 8-K

             1.  On February 7, 2001, the Company filed a Form 8-K under Item 5
                 announcing the conversion of all outstanding shares of its
                 Series A Convertible Preferred Stock to Common Stock.


                                       11

<PAGE>   12

                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly authorized this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                                 AMERICA SERVICE GROUP INC.



                                  /s/ MICHAEL  CATALANO
                                 -----------------------------------------------
                                                Michael Catalano
                                 Chairman, President & Chief Executive Officer



                                  /s/ S. WALKER CHOPPIN
                                 -----------------------------------------------
                                               S. Walker Choppin
                                 Senior Vice President & Chief Financial Officer


Dated: August 14, 2001


                                       12

<PAGE>   13

                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                             DESCRIPTION
-------                            -----------
<S>        <C>   <C>
 10.1      --    Waiver No. 1, dated July 25, 2001, to Amended and Restated
                 Credit Agreement, dated as of August 1, 2000.

 11.1      --    Statement re-computation of per share earnings

 99.1      --    June 2001 Earnings Release
</TABLE>


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