<PAGE>

                                   FORM 10-Q
                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC  20549

(Mark One)

{X}  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934


     For the quarterly period ended             March 31, 2002
                                    --------------------------------------

                                      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                      0-13716
                       ---------------------------------------------------

                        NORTH PITTSBURGH SYSTEMS, INC.
--------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

         Pennsylvania                               25-1485389
------------------------------       --------------------------------------
  (State or other jurisdiction of     (I.R.S. Employer Identification No.)
  incorporation or organization)

             4008 Gibsonia Road, Gibsonia, Pennsylvania 15044-9311
--------------------------------------------------------------------------------
                   (Address of principal executive offices)
                                  (Zip Code)

                               724-443-9600
--------------------------------------------------------------------------------
             (Registrant's telephone number, including area code)

                                   No Change
--------------------------------------------------------------------------------
  (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, and (2) has been subject to such filing requirements
for the past 90 days.

                              YES  X     NO_____
                                 -----

                      APPLICABLE ONLY TO CORPORATE USERS:

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

                           Common Stock Outstanding
                           ------------------------

At April 29, 2002, the Registrant had 15,005,000 shares of common stock
outstanding, par value $.15625 per share, the only class of such stock issued.
<PAGE>

                                    PART I

                                    Item 1
                             Financial Statements
                North Pittsburgh Systems, Inc. and Subsidiaries
                Consolidated Statements of Earnings (Unaudited)
                (Amounts in Thousands - Except Per Share Data)

                                                         For the Three Months
                                                            Ended March 31
                                                        ----------------------

                                                            2002        2001
                                                         ----------  ----------
Operating revenues:
  Local network services                                  $ 5,529     $ 4,849
  Long distance and access services                        13,696      13,063
  Directory advertising, billing & other services             352         591
  Telecommunication equipment sales                           607         487
  Other operating revenues                                  2,326       1,668
                                                          -------     -------

     Total Operating Revenues                              22,510      20,658


Operating expenses:
  Network and other operating expenses                     10,867      11,789
  Depreciation and amortization                             4,389       4,476
  State and local taxes                                       859         872
  Telecommunication equipment expenses                        400         317
                                                          -------     -------

     Total Operating Expenses                              16,515      17,454
                                                          -------     -------

   Net Operating Income                                     5,995       3,204


Other expense (income), net:
  Interest expense                                            914         890
  Interest income                                            (153)       (337)
  Sundry income, net                                         (298)         88
                                                          -------     -------

                                                              463         641
                                                          -------     -------

     Earnings before income taxes                           5,532       2,563

Income taxes                                                2,286       1,089
                                                          -------     -------

     Net earnings                                         $ 3,246     $ 1,474
                                                          =======     =======


Weighted average common shares outstanding                 15,005      15,005
                                                          =======     =======

Basic and diluted earnings per share                      $   .22     $   .10
                                                          =======     =======

Dividends per share                                       $   .17     $   .17
                                                          =======     =======

    See accompanying notes to condensed consolidated financial statements.

                                       1
<PAGE>

                NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES

                          Consolidated Balance Sheets

                            (Amounts in Thousands)

                                                           (Unaudited)
                                                             March 31   Dec. 31
              ASSETS                                           2002       2001
                                                             --------   --------

Current Assets:
  Cash and temporary investments                             $ 34,278   $ 35,299
  Marketable securities available for sale                        332        244
  Accounts receivable:
   Customers, net of allowance for doubtful accounts of
     $416 and $415, respectively                                5,261      5,404
   Access service settlements and other                         8,828      8,606
  Prepaid expenses                                                430        496
  Inventories of construction and operating materials and
   supplies                                                     2,433      2,548
  Prepaid taxes other than income taxes                           917          -
  Deferred income tax                                           1,249      1,249
                                                             --------   --------

     Total current assets                                      53,728     53,846
                                                             --------   --------

Property, plant and equipment:
  Land                                                            475        475
  Buildings                                                    13,545     13,531
  Equipment                                                   175,223    173,714
  Assets held under capital lease                              10,363     10,363
                                                             --------   --------
                                                              199,606    198,083

  Less accumulated depreciation and amortization              103,459     99,660
                                                             --------   --------
                                                               96,147     98,423

  Construction in progress                                      3,984      2,875
                                                             --------   --------
     Total property, plant and equipment, net                 100,131    101,298

Investments                                                    12,579     11,891
Deferred financing costs                                          570        590
Other assets                                                    1,268      1,338
                                                             --------   --------

                                                             $168,276   $168,963
                                                             ========   ========

                                                                     (Continued)

                                       2
<PAGE>

                NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES

                          Consolidated Balance Sheets

                            (Amounts in Thousands)

<TABLE>
<CAPTION>
                                                          (Unaudited)
                                                            March 31   Dec. 31
               LIABILITIES AND SHAREHOLDERS' EQUITY           2002       2001
                                                            --------   --------
<S>                                                         <C>        <C>
Current liabilities:
  Current portion of long-term debt                         $  4,141   $  4,125
  Obligation under capital lease                                 943        926
  Accounts payable                                             8,015      7,764
  Dividend payable                                             2,551      2,551
  Other accrued liabilities                                    2,748      3,938
  Federal and state income taxes                               2,508      1,605
                                                            --------   --------

     Total current liabilities                                20,906     20,909
                                                            --------   --------

Long-term debt                                                46,156     47,202
Obligation under capital lease                                 7,368      7,607
Deferred income taxes                                         10,706     10,483
Accrued pension and postretirement benefits                    6,140      6,476
Other liabilities                                              1,974      1,944
                                                            --------   --------

     Total liabilities                                        93,250     94,621
                                                            --------   --------

Shareholders' equity:
  Capital stock-common stock, par value $.15625;
   authorized 50,000 shares; issued 15,040 shares
   and outstanding 15,005 shares                               2,350      2,350
  Capital in excess of par value                               2,215      2,215
  Retained earnings                                           71,037     70,342
  Less cost of treasury stock (35 shares)                       (508)      (508)
  Accumulated other comprehensive income-unrealized loss
   on available for sale securities, net                         (68)       (57)
                                                            --------   --------

     Total shareholders' equity                               75,026     74,342
                                                            --------   --------

                                                            $168,276   $168,963
                                                            ========   ========
</TABLE>

    See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

                NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES

               Consolidated Statements of Cash Flows (Unaudited)
                            (Amounts in Thousands)

<TABLE>
<CAPTION>
                                                                         For the Three Months
                                                                            Ended March 31
                                                                         --------------------
                                                                          2002         2001
                                                                         -------      -------
<S>                                                                      <C>          <C>
Cash from operating activities:
 Net earnings                                                            $ 3,246      $ 1,474
 Adjustments to reconcile net earnings to net cash from
  operating activities:
   Depreciation and amortization                                           4,389        4,476
   Gain on sale of marketable securities                                       -           13
   Equity (income) loss of affiliated companies                             (688)          54
   Changes in assets and liabilities:
    Accounts receivable                                                      (79)         318
    Inventories of construction and operating materials
     and supplies                                                            115          552
    Deferred financing costs, prepaid expenses and
     other assets                                                            156          104
    Prepaid taxes                                                           (917)        (873)
    Accounts payable                                                         251         (368)
    Other accrued liabilities                                             (1,160)         (77)
    Accrued pension and postretirement benefits                             (336)         166
    Federal and state income taxes                                           903          501
    Deferred income taxes                                                    232          119
    Other, net                                                               (32)         (14)
                                                                         -------      -------
      Total adjustments                                                    2,834        4,971
                                                                         -------      -------

      Net cash from operating activities                                   6,080        6,445
                                                                         -------      -------

Cash used for investing activities:
 Expenditures for property and equipment                                  (3,166)      (3,131)
 Net salvage and cost of removal on retirements                              (61)           2
                                                                         -------      -------

      Net capital additions                                               (3,227)      (3,129)
                                                                         -------      -------

 Purchase of marketable securities available for sale                        (71)        (839)
 Proceeds from sale of marketable securities available for sale                -        2,744
 Distributions from affiliated entities                                        -           57
                                                                         -------      -------

      Net cash used for investing activities                              (3,298)      (1,167)
                                                                         -------      -------

Cash used for financing activities:
 Cash dividends                                                           (2,551)      (2,551)
 Payments of capital lease obligation                                       (222)        (180)
 Retirement of debt                                                       (1,030)        (878)
 Proceeds from issuance of debt                                                -        1,552
                                                                         -------      -------

      Net cash used for financing activities                              (3,803)      (2,057)
                                                                         -------      -------

Net (decrease) increase in cash and temporary investments                 (1,021)       3,221

Cash and temporary investments at beginning of period                     35,299       19,240
                                                                         -------      -------

Cash and temporary investments at end of period                          $34,278      $22,461
                                                                         =======      =======

Interest paid                                                            $   900      $   870
                                                                         =======      =======

Income taxes paid                                                        $ 1,030      $   475
                                                                         =======      =======
</TABLE>

Supplemental disclosure of noncash financing activities:

A capital lease obligation of $176 was incurred when a subsidiary of the
Registrant entered into a lease for new equipment during the three-month period
ended March 31, 2001. No obligation was incurred during the three-month period
ended March 31, 2002.

     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

                NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES
             Notes to Condensed Consolidated Financial Statements
                                  (Unaudited)


(1)  General
     -------

     The condensed consolidated financial statements included herein have been
prepared by the Registrant, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission.  Consolidated herein are the
financial results of the Registrant's wholly-owned subsidiaries, North
Pittsburgh Telephone Company (North Pittsburgh), Penn Telecom, Inc. (Penn
Telecom) and Pinnatech, Inc. (Pinnatech).  Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations.  Nevertheless, the Registrant believes
that its disclosures herein are adequate to make the information presented not
misleading and, in the opinion of management, all adjustments (which consisted
only of normal recurring accruals) necessary to present fairly the results of
operations for the interim periods have been reflected.  These condensed
consolidated financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Registrant's latest
Annual Report to the Securities and Exchange Commission on Form 10-K.

     In July, 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets"
(SFAS 142). The Registrant adopted this pronouncement on January 1, 2002. As of
March 31, 2002, the Registrant had a net book value of $561 in equity method
goodwill (recorded under "Investments") as the result of the purchase of
additional interest in the Pennsylvania RSA 6(II) Limited Partnership in
September, 2000. SFAS No. 142 discontinues the amortization of equity method
goodwill and prescribes that the Registrant continue to test for impairment in
accordance with Accounting Principles Board (APB) Opinion 18. The Registrant
noted no impairment during its review of the equity method goodwill and
associated investment during the first quarter of 2002. This pronouncement did
not have a significant impact on the consolidated financial statements.

     In August, 2001, the Financial Accounting Standards Board issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets". The
Registrant adopted this pronouncement on January 1, 2002. This pronouncement did
not have a significant impact on the consolidated financial statements.

(2)  Comprehensive Income
     --------------------

     SFAS No. 130, "Reporting Comprehensive Income", establishes requirements
for disclosure of comprehensive income. The objective of SFAS 130 is to report
all changes in equity that result from transactions and economic events other
than transactions with owners. Comprehensive income is the total of net income
and all other non-owner changes in equity. The reconciliation of net income to
comprehensive income is as follows (in thousands):


                                            For the Three Months
                                               Ended March 31
                                          ------------------------
                                             2002          2001
                                            ------        ------
     Net income                           $  3,246       $  1,474
     Unrealized gain (loss) on
      marketable securities
      including reclassification
      adjustments, net of tax                  (11)            50
                                          --------       --------

        Comprehensive income              $  3,235       $  1,524
                                          ========       ========


                                       5
<PAGE>

                                    PART I

                                    Item 2

                    Management's Discussion and Analysis of
                 Financial Condition and Results of Operations
     (Amounts in Thousands Except Per Share Data and Operating Statistics)

     The statements contained in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" which are not historical are
"forward-looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended.  These forward-looking statements represent
the Registrant's present expectations or beliefs concerning future events.  The
Registrant cautions that such statements are qualified by important factors that
could cause actual results to differ materially from those in the forward-
looking statements.  Thus, results actually achieved may differ materially from
expected results included in these statements.

     Certain prior period amounts have been reclassified to conform to the
current period's presentation.

     (a)  Changes in Financial Condition
          ------------------------------

          There were no material changes in the Registrant's consolidated
general financial condition from the end of its preceding fiscal year on
December 31, 2001 to March 31, 2002, the end of the three-month period reported
herein.

     (b)  Results of Operations
          ---------------------

          Net earnings for the three-month period ended March 31, 2002 were
$3,246, or $.22 per share, compared to net earnings of $1,474, or $.10 per
share, for the comparable prior year period. These fluctuations were
attributable to the following factors:

          (1) Operating Revenues
              ------------------

              Total operating revenues increased $1,852, or 9.0%, in the three-
month period ended March 31, 2002 over the comparable period in 2001. This
increase was primarily the result of increases in local network services of $680
(14.0%), long distance and access services of $633 (4.8%), telecommunications
equipment sales of $120 (24.6%) and other operating revenues of $658 (39.4%),
offset partially by a decrease in directory advertising, billing and other
services of $239 (40.4%).

              Increases in local network service revenues of $680, or 14.0%,
were attributable to several factors, one of which was North Pittsburgh's
Chapter 30 filing with the Pennsylvania Public Utility Commission (PA PUC) in
December of 2001. As a result of this revenue neutral filing, North Pittsburgh
increased local rates, with the corresponding offset occurring through a
decrease in intrastate access rates. The revenue shift from long distance and
access services revenues to local network services revenues was approximately
$450 for the three-month period ended March 31, 2002. Penn Telecom's basic area
revenues also increased $253 due to continued successful penetration south of
North Pittsburgh's territory in the city of Pittsburgh and surrounding areas as
well as north of North Pittsburgh's territory in the city of Butler, PA. Penn
Telecom's basic access lines installed increased from 5,132 as of March 31, 2001
to 11,091 as of March 31, 2002, and primary rate interface (PRI) circuits grew
from 74 circuits as of March 31, 2001 to 211 circuits as of March 31, 2002.

              The increase in long distance and access service revenues of $633,
or 4.8%, was attributable to an increase in high capacity circuits sold (special
access revenues) and an increase in cellular termination revenues, offset
partially by lower access and toll revenues. Special access revenues increased
$353 at North Pittsburgh and $387 at Penn Telecom, mostly as a result of large
increases in the number of DS-1 and DS-3 circuits sold. At Penn Telecom, the
number of DS-1s, DS-3s and OC-3s installed have increased from 83, 10 and 0,
respectively, as of March 31, 2001 to 251, 22 and 2, respectively, as of March
31, 2002. Cellular termination access revenues increased $119 due to the growth
in minutes of use (MOUs) of cellular traffic. Interstate and intrastate access
revenues decreased approximately $133, mostly as a result of the North
Pittsburgh Chapter 30 filing which, as described above, shifted approximately
$450 from intrastate access revenues to local network services revenue. The
shifting of revenue at North Pittsburgh was partially offset by the growth in
customers producing originating and terminating access revenues at Penn Telecom.
Toll revenues decreased approximately $167 due to a decrease in intraLATA toll
revenues at North Pittsburgh, partially offset by a growth in both intraLATA and
interLATA toll revenues at Penn Telecom. The decrease in intraLATA toll revenues
at North

                                       6
<PAGE>

Pittsburgh was mostly a result of a decrease in market share and loss of minutes
of use to such competition as cellular and to a decrease in the average billed
rate due to the development of additional calling plans to meet the competitive
environment. This decrease was partially offset by an increase in both intraLATA
and interLATA toll revenues at Penn Telecom due to the successful bundling of
toll with local calling packages. As of March 31, 2002, 78% of Penn Telecom's
competitive local exchange carrier (CLEC) customers subscribed to one of its
toll packages.

              Telecommunications equipment sales increased $120, or 24.6%, due
to an increase in private branch exchange and additional equipment sales, offset
partially by lower key system sales.

              The increase in other operating revenues of $658, or 39.4%, was
primarily due to the growth in digital subscriber line (DSL) revenues of
approximately $425 as combined DSL lines (both wholesale and retail) increased
from 3,023 as of March 31, 2001, to 5,447 as of March 31, 2002. In addition, net
uncollectible revenue charges decreased due to improved cash collection from
both retail customers as well as carriers.

              The decrease in directory advertising, billing and other services
of $239, or 40.4%, was mostly due to a decrease of $191 in directory advertising
revenue and a decrease of $32 in carrier billing and collection revenues.
Projected annual directory advertising revenues for 2002 are expected to
decrease approximately $750 from $1,800 in annual revenue in 2001 to $1,050 in
annual revenue for 2002. North Pittsburgh's five-year agreement with its former
directory partner expired with the 2001 directory. As the terms proposed by the
former directory partner for the next contract greatly decreased North
Pittsburgh's share of the income generated by the directory, North Pittsburgh
negotiated a five-year contract with a new partner, at terms much more
advantageous to North Pittsburgh. However, as the former partner continued to
publish its directory, the competitive environment increased, resulting in lower
revenues generated by North Pittsburgh's 2002 directory. With carrier billing
and collection revenues, North Pittsburgh has contracts with several
interexchange carriers (IXCs) and other telecommunications companies in which it
earns fees for performing billing and collection services on behalf of these
companies. North Pittsburgh has seen the volume of services and calls billed on
behalf of these companies steadily decrease over the past two years, mostly as a
result of more companies bringing these functions in-house.

     (2) Operating Expenses and Net Revenues
         -----------------------------------

              Total operating expenses decreased $939, or 5.4%, in the three-
month period ended March 31, 2002 over the comparable period in 2001. The change
was primarily the result of decreases in network and other operating expenses of
$922 (7.8%), depreciation and amortization expenses of $87 (1.9%) and state and
local taxes of $13 (1.5%), offset by an increase in telecommunications equipment
expenses of $83 (26.2%).

              The decrease in network and other operating expenses of $939, or
5.4%, was due to decreased expenses at North Pittsburgh, Penn Telecom and
Pinnatech. At North Pittsburgh, network and other operating expenses for the
three-month period ended March 31, 2002 decreased by approximately $390 from the
prior year comparable period due to several factors, one of which was a cost
reduction program instituted during the later part of the first quarter of 2001.
As discussed under the Regulatory Matters section of this report (paragraph
(d)(3) of this section), the intent of the Telecommunications Act of 1996 (the
1996 Act) as well as some current Federal Communications Commission (FCC) and PA
PUC regulatory proceedings is to open up the telecommunications market to
competition. Although North Pittsburgh has yet to see any material impact on its
revenues or loss of access lines, it has adopted a pro-active approach to cost
reduction. The cost reduction program involved not only the elimination of
direct external expenses such as a large reduction in the use of outside
contractors, but also involved improving operating procedures. Internal
processes and procedures have been re-engineered to maximize both labor and
material usage as well as inventory levels. In addition, with the recent
completion of the five-year modernization of North Pittsburgh's network during
2001, maintenance expense has decreased from prior year levels as legacy
equipment has been upgraded and/or replaced. Also, the prior year period
included a charge of $318 to reduce inventory to the lower of cost or market.

              At Penn Telecom, network and other expenses for the three-month
period ended March 31, 2002 decreased approximately $210 from the prior year
comparable period. The decrease was mostly a result of an approximate $500
charge incurred in the prior year period due to the expensing of operational
support system evaluation charges in accordance with Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use". In addition, the prior year period included $85 in renovation
expense for a Penn Telecom facility and the current year period included $64 in
performance assurance payments received from Verizon, which are recorded as a
reduction in operating expenses. These expense decreases were offset by the
underlying growth in Penn Telecom's CLEC variable costs in association with the
overall growth in access line equivalents and revenue. Unbundled network element
(UNE) costs for non-facilities based access lines, broadband circuit costs and
DSL costs have increased approximately $290 from the comparable prior year
period to support the overall growth in the network, access lines, high

                                       7
<PAGE>

capacity circuits and DSL lines in service. In addition, personnel and other
operating costs grew in order to support the revenue growth and overall growth
of the network.

              At Pinnatech, network and other operating expenses for the three-
month period ended March 31, 2002 decreased approximately $110 from the prior
year comparable period. The decrease was a result of a lower employee base,
which resulted in a reduction of $77 in salary and related benefits expense. In
addition, approximately $50 in Nauticom Sports Network (NSN) charges were
incurred by Pinnatech in the prior year comparable period. Although the NSN was
closed in December of 2000, several contracts were settled for higher amounts
than originally accrued for in the restructuring reserve and other miscellaneous
charges were incurred in the first quarter of 2001.

              The decrease in depreciation and amortization expenses of $87, or
1.9%, was the result of the decrease in the depreciable asset base at North
Pittsburgh due to the retirement of approximately $16 million of property and
equipment during 2001. The retirements were mostly a result of the completion of
the North Pittsburgh five-year network modernization plan during 2001, with the
property and equipment which had been rendered obsolete through the improved
network architecture and digital capability removed from service. The Registrant
made gross property additions of $99.6 million over the past five years to
implement state-of-the-art switching transmission and transport facilities, an
extensive fiber network, broadband capability via DSL technology to 97% of North
Pittsburgh's lines and to support the build-out of the Penn Telecom CLEC
operations.

              The increase in telecommunications and equipment expense of $83,
or 26.2%, was a direct result of the increase in telecommunications equipment
sales of 24.6%.

              The decrease in state and local taxes of $13, or 1.5%, was mostly
attributable to a reduction in the Pennsylvania capital stock tax due to a
reduction in millage rates from the prior year.

              Overall, the increase in total operating revenues of $1,852,
coupled with the decrease in total operating expenses of $939, resulted in a
87.1% increase in net operating income for the three-month period ended March
31, 2002 over the comparable period in 2001.

          (3) Other Items
              -----------

              Interest expense increased for the three-month period ended March
31, 2002 by $24 over the comparable period in 2001 due to increased average debt
balances. Interest income decreased $184 primarily due to the liquidation of
available for sale debt securities in April of 2001 and the general decrease in
short-term money market rates for temporary investments. The net increase in
sundry income of $386 was primarily due to an increase in equity income from the
Registrant's investments in three cellular partnerships.

     (c)  Liquidity and Capital Resources
          -------------------------------

                                                       March 31,    December 31,
                                                          2002          2001
                                                       ---------    ------------

     Cash and temporary investments                    $  34,278      $  35,299
     Working capital                                   $  32,822      $  32,937
     Long-term debt (including current maturities)     $  50,297      $  51,327

          Cash and temporary investments were $34,278 at March 31, 2002 as
compared to $35,299 at December 31, 2001. The decrease was due to the annual
contribution made to the Registrant's defined benefit retirement plan in the
amount of $625, the annual estimated gross receipts tax payments made in the
amount of $1,393 and the $3,803 expended for financing activities, which
includes cash dividends and the scheduled repayments of debt and capital lease
obligations, during the first quarter of 2002. In addition, the Registrant has
internally funded 100% of the $3,166 of expenditures for property and equipment
during the first quarter of 2002. These cash outlays were partially offset by
the strong cash flows from operations of $6,080 for the first quarter of 2002.

          Temporary excess funds were invested in short-term cash equivalents
with maturity dates scheduled to coincide with tax payment due dates, debt
principal payments, etc. Management expects to continue the investment of such
excess funds throughout 2002, which should enable the Registrant to
satisfactorily meet all short-term obligations.

          Working capital levels at March 31, 2002 remained comparable to
December 31, 2001.

          The decrease in long-term debt was a result of the scheduled $1,030 of
principal repayments in the three-month period ended March 31, 2002. As
mentioned above, the Registrant funded 100% of its first quarter 2002

                                       8
<PAGE>

expenditures for property and equipment from its strong cash flows from
operations as well as healthy cash reserves. As such, no additional advances
were requested from the Registrant's available debt facilities. In 1996, North
Pittsburgh was granted approval for a loan from the Federal Financing Bank (FFB)
guaranteed by the Rural Utilities Service (RUS) in the maximum principal amount
of $75 million. The maximum principal amount has been and will be advanced
periodically over a total six-year period for qualified capital expenditure
projects, as defined in the loan agreement, to furnish and improve telephone
service in rural areas. All advances have a maturity date of December 31, 2012.
The total amount outstanding at March 31, 2002 to the FFB under this loan was
$33,166. As of March 31, 2002, North Pittsburgh had $5,045 of qualified capital
expenditures that were eligible to be drawn against this facility. In addition,
North Pittsburgh had principal outstanding of $17,131 at March 31, 2002 from
loan advances from the Rural Telephone Bank (RTB) made from 1977 through 1987.
The advances from the RTB have maturity dates ranging from 2009 through 2019.

              The notes payable to the RTB are secured by a supplemental
Mortgage Agreement executed by North Pittsburgh, which provides that
substantially all of the property, plant and equipment of North Pittsburgh,
which approximates a net book value of $76 million, are subject to a lien or a
security interest. Such agreement contains restrictions regarding dividends and
other distributions by North Pittsburgh. Under these restrictions, unless
certain working capital and net worth levels are maintained, North Pittsburgh is
not permitted to pay dividends on its capital stock (other than in shares of
capital stock), or to make any other distributions to its shareholders or
purchase, redeem or retire any of its capital stock or make any investment in
affiliated companies. As a result of these restrictions, $5,894 of North
Pittsburgh's retained earnings were available for dividends to the Registrant as
of March 31, 2002. Taking into consideration the North Pittsburgh restrictions,
consolidated retained earnings of the Registrant of approximately $23,761 were
available for dividends and other distributions to the Registrant's shareholders
as of March 31, 2002.

              The original six-year advancement period for the RUS loan ends in
November of 2002, at which time North Pittsburgh has the option of executing a
three-year extension of the advancement period through November of 2005. The
unadvanced amount of this facility as of March 31, 2002 was $34,764.

              North Pittsburgh also has available through June of 2004 a $10
million line of credit with the Rural Telephone Finance Cooperative at a rate of
prime plus 1 1/2%. No borrowings have taken place against the line of credit.

              A summary of the Registrant's significant contractual obligations
and commitments as of March 31, 2002 is as follows:

                                           Debt Principal   Capital Lease*
                                           --------------   -------------

              Remainder of 2002               $ 3,095          $1,370
              2003                              4,194           1,592
              2004                              4,268           1,592
              2005                              4,347           1,450
              2006                              4,431           1,272
              Thereafter                       29,962           4,362

*Represents total minimum lease commitments (interest and executory costs are
included).

              Consolidated capital expenditure commitments for the purchase and
installation of new equipment at March 31, 2002 amounted to approximately $1.1
million, with such amount being part of the 2002 construction program, which is
projected to be in the range of $13.0 million to $14.0 million.

              Management expects cash flows provided by operating activities and
cash reserves in 2002 to be sufficient to service long-term debt and capital
lease obligations, to pay dividends and to finance all non-RUS qualified
projects. The Registrant has the necessary cash flows from operations and cash
reserves to internally finance 100% of its projected capital expenditures.
However, due to the low cost financing available through the RUS for qualified
North Pittsburgh capital expenditures, the Registrant may request advancements
from the RUS facility in the future.

                                       9
<PAGE>


     (d)  Other Information
          -----------------

          (1)  Critical Accounting Policies
               ----------------------------

               Certain accounting policies are very important to the portrayal
of the Registrant's financial condition and results of operations and require
management's most subjective or complex judgments. These policies are as
follows:

               Revenue Recognition
               -------------------

               Revenues are recognized when local network, long distance and
access services are provided. Local service and intrastate long distance and
access service revenues are subject to the jurisdiction of the PA PUC. The
Registrant participates in interstate pooling arrangements with other telephone
companies. Such pools are funded by access service charges regulated by the FCC.
Revenue earned through pooling is initially recorded based on estimates. The
Registrant has settled substantially all access service arrangements through
2000. Revenues from equipment sales are recorded after equipment has been
installed and accepted by the customer.

               Nonrefundable up-front activation fees associated with the
provisioning of telephone service, when material, are deferred and recognized
over the expected term of the customer relationship.

               Impairment of Long-Lived Assets
               -------------------------------

               Based upon the provisions of SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", the Registrant reviews assets for
impairment whenever events or changes in circumstances indicate that the
carrying value of the assets may not be recoverable. A determination of
impairment (if any) is made based on estimates of future cash flows. The
Registrant determined that there was no impairment to the carrying value of such
assets during the first quarter of 2002.

               Valuation of Accounts Receivable
               --------------------------------

               Management reviews accounts receivable to determine which are
doubtful of collection. In making the determination of the appropriate allowance
for doubtful accounts, management considers the Registrant's accounts receivable
aging schedules, history of write-offs, relationships with its customers and the
overall credit worthiness of its customers.

               Income Taxes
               ------------

               In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income and tax planning strategies in making this assessment.

               The judgments used in applying the above policies are based on
management's evaluation of the relevant facts and circumstances as of the date
of the financial statements. Actual results may differ from those estimates.

          (2)  NSN Restructuring
               -----------------

               In the fourth quarter of 2000, the Registrant shutdown the NSN.
The sports network division of Pinnatech had been providing broadcasts of high
school and small college sporting events as well as other sports programming. A
pretax charge of $972 was recorded during 2000 in network and other operating
expenses to cover the restructuring costs associated with the shutdown of the
NSN, with a restructuring accrual of $239 remaining as of December 31, 2000.

               During 2001, the Registrant satisfied all remaining obligations
with the exception of the remaining future operating lease payments. Net NSN
restructuring cash expenditures during 2001 totaled $331. An additional net $277
was recorded as expense in 2001, due primarily to the settlement of a contract
for satellite equipment and airtime above the Registrant's original estimate and
the inability to generate the estimated sub-lease contracts for the facility
under lease, offset partially by the sale of NSN fixed assets with a net book
value of $31 for a gain. As of December 31, 2001, the remaining restructuring
accrual liability was $154.

                                       10
<PAGE>

               In the first quarter of 2002, net cash expenditures for the
leased facility were $8, making the remaining restructuring accrual $146 as of
March 31, 2002. No additions or reversals to the accrual were made during the
first quarter of 2002.

          (3)  Regulatory Matters
               ------------------

               Both North Pittsburgh and Penn Telecom are subject to regulatory
oversight by the PA PUC for intrastate services and the FCC for interstate
services. The PA PUC and the FCC have broad powers of supervision and regulation
over public utilities with respect to service and facilities, rates and charges,
securities, the encumbering or disposition of public utility properties,
accounting and various other matters.

               In 1996, Congress passed the 1996 Act, which has the goal of
opening the telecommunications industry to further competition for all services.
The 1996 Act prohibits state legislative or regulatory restrictions or barriers
to entry regarding the provision of local telephone service. It also requires
most incumbent local exchange carriers to interconnect with the networks of
other telecommunications carriers, unbundle their services into network
elements, offer their telecommunications services at wholesale rates to allow
the resale of such services and allow other telecommunications carriers to
locate equipment on their premises. Local exchange telephone carriers are also
required to compensate each other for the transport and termination of calls.

               The FCC has issued a number of Rulemakings that continue to
implement the requirements of the 1996 Act. The clear intent of the 1996 Act was
to open up the local exchange market to competition. The 1996 Act appears to
mandate, among other items, that North Pittsburgh, at some point in time, permit
the resale of its services at wholesale rates, provide number portability,
provide dialing parity, provide interconnection to any requesting carrier for
the transmission and routing of telephone exchange service and exchange access
and provide access to network elements.

               North Pittsburgh's wireline operations are considered Rural under
the 1996 Act and are exempt from certain of the foregoing obligations unless, in
response to a bona fide request for interconnection, the PA PUC removes that
exemption. North Pittsburgh along with 17 other rural companies in Pennsylvania
was granted a temporary suspension to July 10, 2002 of certain interconnection
requirements in the 1996 Act applicable to incumbent local exchange carriers
(LECs) as they relate to non-facilities based competition.

               The provision of interstate toll and access services by North
Pittsburgh and Penn Telecom is subject to the regulatory scrutiny of the FCC.
Terms, conditions and rates for interstate toll and access services are filed in
interstate tariffs for review and approval by the FCC. However, effective August
1, 2001, the FCC no longer requires non-dominant interstate toll providers,
including Penn Telecom, to file tariffs for their interstate toll services. Penn
Telecom now informs its toll customers of the rates, terms and conditions
through written notice to its customers.

               In October of 2001, the FCC adopted an Order referred to as the
Multi Association Group, or MAG Order, that modified the interstate access
charge rules and universal service support system for rate-of-return (ROR)
incumbent LECs. North Pittsburgh is subject to this Order. According to the FCC,
the new rules, which went into effect January 1, 2002, are intended to
accomplish the following three (3) goals: 1) align the interstate access rate
structure more closely with the manner in which costs for access are incurred;
2) replace implicit support for universal service with explicit support that is
portable to all eligible telecommunications carriers on a competitively neutral
basis; and 3) provide certainty and stability for small and mid-sized local
telephone companies serving rural and high-cost areas by permitting these
carriers to continue to set rates based on a ROR of 11.25%, thereby encouraging
investment in rural America.

               The MAG Order had the following effects: 1) increased flat rate
charges referred to as Subscriber Line Charges (SLCs) that are billed to
residential and business customers; and 2) decreased per minute of use switched
access charges billed to interexchange toll providers that originate and
terminate traffic on the LECs network.

               The MAG Order also created a new universal service support
mechanism, Interstate Common Line Support (ICLS). The ICLS will replace the
Carrier Common Line (CCL) charge, which was previously billed to interexchange
toll providers. The ICLS will be phased in beginning July of 2002 and the CCL
will be eliminated as of July of 2003. The initial effect of the implementation
of the MAG Order on North Pittsburgh is expected to be revenue neutral. A number
of parties have filed Petitions for Reconsideration regarding certain issues
contained in the MAG Order. The outcome of these Petitions is unknown at this
time. Because the outcome of these proceedings is uncertain at this time, North
Pittsburgh is unable to predict the specific long-term effect that the MAG Order
will have on its revenues and operations.

               Penn Telecom, as a CLEC, was not directly affected by the MAG
Order, as it does not currently offer services in the areas served by incumbent
LECs that were subject to the Order.

                                       11
<PAGE>

               At the same time the MAG Order was adopted, the FCC also issued a
Further Notice of Proposed Rulemaking seeking comment on an incentive regulation
plan for incumbent LECs which are now under ROR regulation in the interstate
jurisdiction. Because the outcome of this proceeding is not yet known, North
Pittsburgh is not able to predict the specific effect that it will have on its
operations and revenues.

               In February of 2002, the FCC issued a Notice of Proposed
Rulemaking (NPRM) regarding the possible classification of wireline broadband
Internet access as an information service rather than a telecommunications
service. Should the FCC adopt this finding, it may remove network based
broadband offerings such as DSL services from regulation under the FCC Act.
However, in the NPRM, the FCC also asked whether it should extend universal
service fund (USF) requirements to not only facilities based wireline Broadband
Internet Service Providers (BISPs), but also wireless, cable TV and satellite
BISPs.

               Should the FCC extend a USF contribution requirement to all
BISPs, both North Pittsburgh and Penn Telecom would be affected. Because the
outcome of this proceeding is unknown at this time, neither North Pittsburgh nor
Penn Telecom is able to determine the specific effect such action would have on
their operations and revenues.

               In February of 2002, the FCC issued a Further Notice of Proposed
Rulemaking regarding the possible reformation of the system for assessing and
recovering USF funds. In addition to asking whether BISPs should contribute as
described above, the FCC has also asked for comment on whether it should assess
carrier contributions based on the number and capacity of connections that
contributing carriers provide to customers, rather than on the current method
which is based on the interstate revenues they earn.

               Should the FCC move to reform the current system for assessing
and recovering USF funds, both North Pittsburgh and Penn Telecom would be
affected by the change. Because the outcome of this proceeding is unknown at
this time, neither North Pittsburgh nor Penn Telecom is able to determine the
specific effect such action would have on their operations and revenues.

               Effective January 22, 2001, North Pittsburgh moved from ROR
regulation in the intrastate jurisdiction to an alternative form of regulation,
which is a price cap plan. Under North Pittsburgh's price cap plan, rates for
non-competitive intrastate services are allowed to increase based on an index
that measures economy-wide price increases less a productivity offset. There is
no limitation on earnings under this plan. The terms of the plan also allow
North Pittsburgh to rebalance rates once each year in order to allow North
Pittsburgh to gradually realign its intrastate rate structure on a more rational
basis in order to meet future competition. In addition, as competition develops
in the future, North Pittsburgh may file with the PA PUC to declare certain
services competitive and thereby be freed from all rate regulation for those
services. In return for approval of the alternative form of regulation, North
Pittsburgh has committed to continue to upgrade its network in the future to
ensure that all its customers will have access to broadband services. While
there is no immediate impact to North Pittsburgh's operations and revenues under
the price cap plan, it is North Pittsburgh's view that the plan as approved will
aid North Pittsburgh in meeting competition in the future.

               Historically, North Pittsburgh's wireline operations have not
experienced significant competition in its franchised service area. However, as
a result of the passage of the 1996 Act, North Pittsburgh's local wireline
operations are experiencing increased competition from various sources,
including, but not limited to, large end users installing their own networks,
IXCs, satellite transmission services, cellular communications providers, cable
television companies, radio-based personal communications companies, competitive
access providers (CAPs) and other systems capable of completely or partially
bypassing local telephone facilities.

               Specifically, the PA PUC, in an order entered April 10, 2001,
granted AT&T Communications and its affiliate, TCG Pittsburgh, (AT&T/TCG)
authority to provide local dial tone services as a facilities-based CLEC in the
service areas of eight (8) telephone companies in Western Pennsylvania,
including North Pittsburgh, utilizing cable TV facilities. However, due to
changes in business plans and a corporate reorganization, AT&T/TCG in January of
2002 withdrew their request for authority as a CLEC in those rural service
areas.

               North Pittsburgh is currently addressing potential competition by
focusing on improved customer satisfaction, reducing costs, increasing
efficiency, restructuring rates and examining new product offerings and new
telecom related markets for entry. Although North Pittsburgh cannot predict the
specific effects of competition on its local telephone business, it is intent on
taking advantage of the various opportunities that competition should provide.

                                       12
<PAGE>

               At the same time, Penn Telecom is actively expanding its CLEC
operations outside of North Pittsburgh's service territory in Verizon's
(formerly Bell Atlantic) and Sprint's traditional service territories.

               The provision of intrastate toll and access services is subject
to regulatory scrutiny of the PA PUC. Terms, conditions and rates for intrastate
toll and access services are filed in intrastate tariffs for review and approval
by the PA PUC.

               On September 30, 1999, the PA PUC issued an Order dealing with a
variety of issues impacting LECs in Pennsylvania. Referred to as the Global
Order, it dealt with certain issues that affected North Pittsburgh.
Specifically, the Order allowed North Pittsburgh to rebalance and lower access
charges in order to prepare North Pittsburgh to meet competition in its serving
area. The reduction in access charges was offset in part by reimbursements from
an interim state USF that is funded by all telecommunications providers
(excluding wireless) in the state. Because the rebalancing and reduction of
access charges were offset by reimbursement from the fund, North Pittsburgh has
not experienced any significant impact on operations or revenues as a result of
the Global Order. The PA PUC, in the Global Order, indicated that it would
commence another proceeding on or after January 2, 2001 to examine further
changes to the USF and possible additional access charge reform. By Secretarial
Letter dated February 1, 2002, the PA PUC granted a coalition of telephone
companies, including North Pittsburgh, a ninety (90) day extension until April
15, 2002 in which to submit a proposal to the PA PUC outlining proposed changes
in access charges and the fund along with a timeline for these changes. The
coalition submitted its proposal on April 15, 2002. Upon completion of a review
of the proposal, it is expected that the PA PUC will initiate an "on the record
proceeding" to examine the need for further access charge and USF reform.

               The 1996 Act, FCC and PA PUC regulatory proceedings and the
thrust toward a fully competitive marketplace have created some uncertainty in
respect to the levels of North Pittsburgh's revenue growth in the future.
However, its unique location in a growing commercial/residential suburban
traffic corridor to the north of the City of Pittsburgh, its state-of-the-art
switching transmission and transport facilities and its extensive fiber network
place North Pittsburgh in a solid position to meet competition and minimize any
loss of revenues. In addition, North Pittsburgh continues to make its network
flexible and responsive to the needs of its customers to meet competitive
threats. At the same time, Penn Telecom continues its CLEC edge-out strategy in
the Pittsburgh metropolitan area and the city of Butler, PA, while taking
advantage of the opportunities afforded by the 1996 Act and the introduction of
competition into the toll, local wireline and broadband markets.

          (4)  Transactions with Related Parties
               ---------------------------------

               In 1998, the Registrant entered into an agreement to outsource
certain data processing functions to a third party processor (Processor). The
Registrant and the Processor are related by a common shareholder and director.
Payments to the Processor under this agreement were $1,307 and $675 for the
three-month periods ended March 31, 2002 and 2001, respectively. Also, the
Registrant paid $1 in each of those same periods to the law firm of a member of
the Board of Directors for various legal services. As of March 31, 2002, the
Registrant had amounts outstanding of $222 and $275 to the Processor and law
firm, respectively.

          (5)  New Accounting Pronouncements
               -----------------------------

               In June, 2001, the Financial Accounting Standards Board issued
SFAS No. 143, "Accounting for Asset Retirement Obligations". The pronouncement
is effective for the Registrant's year beginning January 1, 2003. The Registrant
does not expect this pronouncement will have a significant impact on the
consolidated financial statements.

                                       13
<PAGE>

                                    PART I

                                    ITEM 3



                   QUANTITATIVE AND QUALITATIVE DISCLOSURES

                               ABOUT MARKET RISK


     There have been no material changes in reported market risks faced by the
Registrant since the end of the preceding fiscal year on December 31, 2001.

                                       14
<PAGE>



                                  SIGNATURES


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


                                        NORTH PITTSBURGH SYSTEMS, INC.
                                        ------------------------------
                                                 (Registrant)


       May 15, 2002                     /s/ H. R. Brown
Date____________________                _______________________________________
                                        H. R. Brown, President


       May 15, 2002                     /s/ A. P. Kimble
Date____________________                _______________________________________
                                        A. P. Kimble, Vice President, Treasurer
                                        and Chief Accounting Officer


<PAGE>

                                    PART II

                               OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K
          --------------------------------
      (a) Exhibits - Exhibit Index for Quarterly Reports on Form 10-Q.
          --------

<TABLE>
<CAPTION>
Exhibit
Number             Subject                                    Applicability
------             -------                                    -------------
<S>         <C>                                        <C>

 (2)        Plan of acquisition, reorganization,       Not Applicable
            arrangement, liquidation or succession

 (3) (i)    Articles of Incorporation                  Provided in Quarterly Report on Form 10-Q for the quarter ended
                                                       June 30, 1996 and Incorporated Herein by Reference.

 (3) (ii)   By-Laws                                    Provided in Annual Report on Form 10-K for the year ended
                                                       December 31, 1998 and Incorporated Herein by Reference.

 (4)        Instruments defining the rights of         Provided in Registration of Securities of Certain Successor
            security holders including indentures      Issuers on Form 8-B filed on June 25, 1985 and Incorporated
                                                       Herein by Reference.

 (10)       Material Contracts                         Attached Hereto

 (11)       Statement of computation of earnings       Attached Hereto
            per share

 (15)       Letter re unaudited interim financial      Not Applicable
            information

 (18)       Letter re change in accounting             Not Applicable
            principles

 (19)       Report furnished to security holders       Not Applicable

 (22)       Published report regarding matters         Not Applicable
            submitted to a vote of security holders
</TABLE>
<PAGE>

Exhibit
Number             Subject                        Applicability
------             -------                        -------------


 (23)      Consents of experts and counsel    Not Applicable


 (24)      Power of attorney                  Not Applicable


 (99)      Additional exhibits                Not Applicable



      (b) Reports on Form 8-K - No reports on Form 8-K were filed during the
          -------------------
          quarter ended March 31, 2002.