<PAGE>

--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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

                For the quarterly period ended December 31, 2001

                                       OR

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

                 For the transition period from ______ to ______

                         Commission file number 0-23946

                       PEDIATRIC SERVICES OF AMERICA, INC.
             (Exact name of Registrant as specified in its charter)

                   Delaware                                     58-1873345

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

                 310 Technology Parkway, Norcross GA 30092-2929
          (Address of principal executive offices, including zip code)

                                 (770) 441-1580
              (Registrant's telephone number, including area code)

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

                               Yes [X]        No [_]

As of  January 29, 2002, the Registrant had 6,713,456 shares of Common
Stock, $0.01 Par Value, outstanding.

--------------------------------------------------------------------------------
                                  Page 1 of 19
                          Index of Exhibits on page 19

<PAGE>

                                    FORM 10-Q
                       PEDIATRIC SERVICES OF AMERICA, INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                                 Page
                                                                                                               Number
                                                                                                               ------
<S>                                                                                                            <C>
PART I    FINANCIAL INFORMATION

ITEM 1:   Financial Statements

          Condensed Consolidated Balance Sheets as of
                   December 31, 2001 and September 30, 2001 ................................................       3

          Condensed Consolidated Statements of Operations for
                   the three months ended December 31, 2001 and 2000 .......................................       5

          Condensed Consolidated Statements of Cash Flows for
                   the three months ended December 31, 2001 and 2000 .......................................       6

          Notes to Condensed Consolidated Financial
                   Statements ..............................................................................       7

ITEM 2:   Management's Discussion and Analysis of Financial Condition and Results of Operations ............       10

ITEM 3:   Quantitative and Qualitative Disclosures about Market Risk .......................................       15


PART II   OTHER INFORMATION

ITEM 1:   Legal Proceedings ................................................................................       16

ITEM 6:   Exhibits and Reports on Form 8-K .................................................................       17

          Signatures .......................................................................................       18

          Index to Exhibits ................................................................................       19
</TABLE>

                                       2

<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                       PEDIATRIC SERVICES OF AMERICA, INC
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                  December 31,       September 30,
                                                                                      2001               2001
                                                                                  ------------       -------------
                                                                                  (Unaudited)
<S>                                                                               <C>                <C>
Assets
Current assets:
     Cash and cash equivalents .................................................      $  8,186             $ 15,259
     Accounts receivable, less allowances for doubtful
        accounts of $5,660 and $5,520, respectively. ...........................        32,012               31,456
     Prepaid expenses ..........................................................         1,090                  893
     Deferred income taxes .....................................................         1,775                1,778
     Inventory .................................................................         6,827                4,708
     Other current assets ......................................................           156                  236
                                                                                      --------             --------
Total current assets ...........................................................        50,046               54,330

Property and equipment:
     Home care equipment held for rental. ......................................        29,226               28,752
     Furniture and fixtures ....................................................        10,709               10,572
     Vehicles ..................................................................           725                  725
     Leasehold improvements ....................................................         1,309                1,222
                                                                                      --------             --------
                                                                                        41,969               41,271
     Accumulated depreciation and amortization .................................       (33,301)             (32,315)
                                                                                      --------             --------
                                                                                         8,668                8,956

Other assets:
     Goodwill, less accumulated amortization of
        $9,613 at September 30, 2001 ...........................................        31,706               31,706
     Certificates of need, less accumulated amortization of $535 and
        $505, respectively .....................................................           137                  167
     Deferred financing fees, less accumulated
        amortization of $671 and $701, respectively ............................           630                  787
     Non-compete agreements, less accumulated amortization of
        $1,116 and $1,110, respectively ........................................            44                   50
     Deferred income taxes .....................................................         1,051                1,049
     Workers' compensation bond collateral .....................................         1,825                    -
     Other .....................................................................           254                  253
                                                                                      --------             --------
                                                                                        35,647               34,012
                                                                                      --------             --------
Total assets ...................................................................      $ 94,361             $ 97,298
                                                                                      ========             ========
</TABLE>

See accompanying notes.

                                       3

<PAGE>

                       PEDIATRIC SERVICES OF AMERICA, INC.
               CONDENSED CONSOLIDATED BALANCE SHEETS--(Continued)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                                        December 31,   September 30,
                                                                                                            2001           2001
                                                                                                        ------------   -------------
                                                                                                         (Unaudited)
<S>                                                                                                     <C>            <C>
Liabilities and stockholders' equity
Current liabilities:
   Accounts payable ..................................................................................    $  6,480      $  5,611
   Accrued compensation ..............................................................................       4,658         5,757
   Income taxes ......................................................................................         570           498
   Accrued insurance .................................................................................       6,167         6,086
   Other accrued liabilities .........................................................................       4,493         5,162
   Deferred revenue ..................................................................................         597           621
   Current maturities of long-term obligations to related parties ....................................          25            25
   Current maturities of long-term obligations .......................................................          11            11
                                                                                                          --------      --------
Total current liabilities ............................................................................      23,001        23,771

Long-term obligations to related parties, net of current
    maturities .......................................................................................          --            25
Long-term obligations, net of current maturities .....................................................      27,350        32,352

Stockholders' equity:
   Preferred stock, $.01 par value, 2,000 shares
     authorized, no shares issued and outstanding ....................................................          --            --
   Common stock, $.01 par value, 80,000 shares
     authorized,  6,713 and 6,711 shares issued and outstanding at December 31, 2001
     and September 30, 2001, respectively ............................................................          67            67
   Additional paid-in capital ........................................................................      48,496        48,493
   Accumulated deficit ...............................................................................      (4,553)       (7,410)
                                                                                                          --------      --------
Total stockholders' equity ...........................................................................      44,010        41,150
                                                                                                          --------      --------
Total liabilities and stockholders' equity ...........................................................    $ 94,361      $ 97,298
                                                                                                          ========      ========
</TABLE>

See accompanying notes.

                                       4

<PAGE>

                       PEDIATRIC SERVICES OF AMERICA, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                        Three Months Ended
                                                                                           December 31,
                                                                                    2001                   2000
                                                                                -----------            -----------
                                                                                (Unaudited)            (Unaudited)
<S>                                                                             <C>                    <C>
Net revenue.................................................................    $   49,140             $   45,561
Costs and expenses:
   Operating salaries, wages and employee benefits..........................        22,637                 20,650
   Other operating costs....................................................        17,257                 16,414
   Corporate, general and administrative....................................         4,716                  4,453
   Provision for doubtful accounts..........................................           305                    958
   Depreciation and amortization............................................         1,094                  1,899
                                                                                ----------             ----------
         Total costs and expenses...........................................        46,009                 44,374
                                                                                ----------             ----------
Operating income............................................................         3,131                  1,187
Interest income.............................................................            58                    220
Interest expense............................................................          (719)                (1,221)
                                                                                ----------             ----------
Income before extraordinary item............................................         2,470                    186
Extraordinary item..........................................................           387                     --
                                                                                ----------             ----------
Net income..................................................................    $    2,857             $      186
                                                                                ==========             ==========

Basic net income per share data:
Income before extraordinary item............................................    $     0.37             $     0.03
Extraordinary item..........................................................          0.06                     --
                                                                                ----------             ----------
Net income..................................................................    $     0.43             $     0.03
                                                                                ==========             ==========


Diluted net income per share data:
Income before extraordinary item............................................    $     0.35             $     0.03
Extraordinary item..........................................................          0.05                     --
                                                                                ----------             ----------
Net income..................................................................    $     0.40             $     0.03
                                                                                ==========             ==========


Weighted average shares outstanding:
Basic.......................................................................         6,713                  6,659
                                                                                ==========             ==========
Diluted.....................................................................         7,101                  6,892
                                                                                ==========             ==========
</TABLE>


See accompanying notes.

                                        5

<PAGE>

                       PEDIATRIC SERVICES OF AMERICA, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                     Three Months Ended December 31,
                                                                                            2001            2000
                                                                                         -----------     -----------
Operating activities                                                                     (Unaudited)     (Unaudited)
<S>                                                                                  <C>                 <C>
Net income.........................................................................      $   2,857       $     186
Adjustments to reconcile net income to net cash used in
   operating activities:
     Depreciation and amortization.................................................          1,094           1,899
     Provision for doubtful accounts...............................................            305             958
     Amortization of deferred financing fees.......................................             38              79
     Deferred income taxes.........................................................              1            (130)
     Extraordinary gain on extinguishment of debt..................................           (387)             --
       Changes in operating assets and liabilities:
        Accounts receivable........................................................           (861)            169
        Prepaid expenses...........................................................           (197)           (178)
        Inventory..................................................................         (2,119)           (357)
        Other assets...............................................................             72             (12)
        Workers' compensation bond collateral......................................         (1,825)             --
        Accounts payable...........................................................            869            (731)
        Income taxes...............................................................             72            (176)
        Accrued liabilities........................................................         (1,711)         (2,623)
                                                                                         ---------       ---------
Net cash used in operating activities..............................................         (1,792)           (916)
Investing activities
Purchases of property and equipment................................................           (762)           (249)
                                                                                         ---------       ---------
Net cash used in investing activities..............................................           (762)           (249)
Financing activities
Principal payments on long-term debt...............................................         (4,522)            (54)
Proceeds from exercise of stock options............................................              3               1
                                                                                         ---------       ---------
Net cash used in financing activities..............................................         (4,519)            (53)
                                                                                         ---------       ---------
Decrease in cash and cash equivalents..............................................         (7,073)         (1,218)
Cash and cash equivalents at beginning of period...................................         15,259          14,912
                                                                                         ---------       ---------
Cash and cash equivalents at end of period.........................................      $   8,186       $  13,694
                                                                                         =========       =========
Supplemental disclosure of cash flow information
Cash paid for interest.............................................................      $   1,642       $   2,350
                                                                                         =========       =========
Cash paid for taxes................................................................      $      52       $     358
                                                                                         =========       =========
</TABLE>

See accompanying notes.

                                        6

<PAGE>

                       PEDIATRIC SERVICES OF AMERICA, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Unaudited


1.       Basis of Presentation

         The accompanying unaudited condensed consolidated financial statements
         of Pediatric Services of America, Inc. (the "Company") and its
         majority-owned subsidiaries have been prepared in accordance with
         accounting principles generally accepted in the United States for
         interim financial information and with the instructions to Form 10-Q
         and Rule 10-01 of Regulation S-X. Accordingly, they do not include all
         information and notes required by accounting principles generally
         accepted in the United States for complete financial statements. In the
         opinion of management, all adjustments (consisting only of normal
         recurring accruals) considered necessary for a fair presentation have
         been included. Results of operations for the three months ended
         December 31, 2001 are not necessarily indicative of the results to be
         expected for the entire fiscal year ending September 30, 2002. These
         condensed consolidated financial statements should be read in
         conjunction with the Company's audited consolidated financial
         statements for the year ended September 30, 2001 included in the
         Company's Annual Report on Form 10-K for such year filed with the
         Securities and Exchange Commission. Principal accounting policies are
         set forth in the Company's 2001 Annual Report.

2.       Description of Business

         The Company provides a broad range of pediatric health care services
         and equipment including nursing, respiratory therapy, rental and sale
         of durable medical equipment, pharmaceutical services and infusion
         therapy services. In addition, the Company provides pediatric
         rehabilitation services, day treatment centers for medically fragile
         children, pediatric well care services and special needs educational
         services for pediatric patients. The Company also provides case
         management services in order to assist the family and patient by
         coordinating the provision of services between the insurer or other
         payor, the physician, the hospital and other health care providers. The
         Company's services are designed to provide a high quality, lower cost
         alternative to prolonged hospitalization for medically fragile
         children. As a complement to its pediatric respiratory and infusion
         therapy services, the Company also provides respiratory and infusion
         therapy and related services for adults.

3.       Use of Estimates

         The preparation of the condensed consolidated financial statements in
         conformity with accounting principles generally accepted in the United
         States requires management to make estimates and assumptions that
         affect the reported amounts of assets and liabilities and the
         disclosure of contingent assets and liabilities at the date of the
         financial statements and the reported amount of net revenue and
         expenses during the reporting period. Actual results could differ from
         those estimates and the differences could be material. Due to the
         nature of the industry and the reimbursement environment in which the
         Company operates, certain estimates are required in recording net
         revenue and determining the provision for doubtful accounts. Inherent
         in these estimates is the risk that they will have to be revised or
         updated as additional information becomes available to management.

4.       Accounts Receivable

         Accounts receivable include approximately $7.8 million and $7.3 million
         for which services have been rendered but the amounts were unbilled as
         of December 31, 2001 and September 30, 2001, respectively. Such
         unbilled amounts are primarily a result of the time required to process
         bills for services rendered.

                                       7

<PAGE>

                       PEDIATRIC SERVICES OF AMERICA, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Unaudited - (Continued)

5.       Goodwill

         The Company adopted Statement of Financial Accounting Standards
         ("SFAS") No. 142, Goodwill and Other Intangible Assets, effective
         October 1, 2001. SFAS No. 142 prohibits the amortization of goodwill
         and intangibles with indefinite useful lives. SFAS No. 142 requires
         that these assets be reviewed for impairment at least annually.
         Intangible assets with finite lives will continue to be amortized over
         their estimated useful lives. The Company is required to complete the
         initial step of a transitional impairment test within six months of
         adoption of SFAS No. 142 and to complete the final step of the
         transitional impairment test by the end of the fiscal year. Any
         impairment loss resulting from the transitional impairment test will be
         recorded as a cumulative effect of a change in accounting principle for
         the quarter ended March 31, 2002. Subsequent impairment losses will be
         reflected in operating income in the income statement. The Company has
         not yet determined what the effect of these tests will be on the
         earnings and financial position of the Company. Had the Company been
         accounting for its goodwill under SFAS No. 142 for all periods
         presented, the Company's net income (in thousands) and earnings per
         share would have been as follows:

                                                              Three Months Ended
                                                                 December 31,
                                                                     2000
                                                                     ----
        Reported net income ................................        $  186
        Add back goodwill amortization .....................           557
                                                                    ------
        Adjusted net income ................................        $  743
                                                                    ======

        Basic earnings per share:
                 Reported net income .......................        $ 0.03
                 Goodwill amortization .....................          0.08
                                                                    ------
                 Adjusted net income .......................        $ 0.11
                                                                    ======

        Diluted earnings per share:
                 Reported net income .......................        $ 0.03
                 Goodwill amortization .....................          0.08
                                                                    ------
                 Adjusted net income .......................        $ 0.11
                                                                    ======

         Amortization expense on intangible assets was $42,722 and $611,772 for
         the quarter ended December 31, 2001 and 2000, respectively. In
         addition, the three month period ended December 31, 2000 included
         $556,789 related to the amortization of goodwill.

6.       Concentration of Credit Risk

         The Company's principal financial instruments subject to potential
         concentrations of credit risk are cash and cash equivalents and
         accounts receivable. Cash and cash equivalents are held primarily in
         one financial institution. The Company performs periodic evaluations of
         the relative credit standing of this financial institution. The
         concentration of credit risk with respect to accounts receivable, which
         are primarily health care industry related, represent a risk to the
         Company given the current health care environment. The risk is somewhat
         limited due to the large number of payors including Medicare and
         Medicaid, insurance companies, and individuals and the diversity of
         geographic locations in which the Company operates.

                                       8

<PAGE>

                       PEDIATRIC SERVICES OF AMERICA, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Unaudited - (Continued)


7.       Reclassifications

         Certain amounts for prior periods have been reclassified to conform to
         the current year presentation.

8.       Income Taxes

         The Company has recorded a partial valuation allowance against the net
         deferred tax assets as of December 31, 2001 and September 30, 2001. In
         recording the valuation allowance, management considered whether it is
         more likely than not that some or all of the deferred tax assets will
         be realized. This analysis includes considering scheduled reversal of
         deferred tax liabilities, projected future taxable income, carryback
         potential and tax planning strategies.

         In the three months ended December 31, 2001, the Company had a current
         income tax expense of $0.7 million which was offset by the reduction of
         the valuation allowance related to the net deferred tax asset resulting
         in zero income tax expense.

9.       Long-Term Borrowing Arrangements

         In the first quarter of fiscal year 2002, the Company completed a
         transaction to repurchase a total of $5.0 million of the Senior
         Subordinated Notes (the "Notes") for $4.5 million cash plus accrued
         interest. The gain (net of the write-off of the related deferred
         financing fees) of $0.4 million is reflected as an extraordinary item
         in the condensed consolidated statements of operations for the three
         months ended December 31, 2001.

10.      Basic and Diluted Net Income Per Share

         Basic net income per share is computed using the weighted average
         number of shares of common stock outstanding during the period. Diluted
         net income per share is computed using the weighted average number of
         shares of common stock outstanding and the dilutive effect of common
         equivalent shares (calculated using the treasury stock method). The
         dilutive effect of the weighted average options included in the diluted
         earnings per share is 387,582 and 232,872 for the three months ended
         December 31, 2001, and 2000, respectively.

11.      Workers' Compensation Bond Collateral

         The Company has agreed to post $2.2 million cash collateral in a third
         party escrow account to secure a surety bond to satisfy its workers'
         compensation program requirements. As of December 31, 2001, the Company
         had posted $1.8 million of the $2.2 million cash collateral.

                                       9

<PAGE>

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

Forward-Looking Statements

         This Form 10-Q contains certain forward-looking statements (as such
term is defined in the Private Securities Litigation Reform Act of 1995)
relating to future financial performance of Pediatric Services of America, Inc.
(the "Company"). When used in this Form 10-Q, the words "may," "could,"
"should," "would," "believe," "feel," "expects," "anticipate," "estimate,"
"intend," "plan" and similar expressions may be indicative of forward-looking
statements. These statements by their nature involve substantial risks and
uncertainties, certain of which are beyond the Company's control. The Company
cautions that various factors, including the factors described hereunder and
those discussed in the Company's filings with the Securities and Exchange
Commission, as well as general economic conditions, industry trends, the
Company's ability to collect for equipment sold or rented, assimilate and manage
previously acquired field operations, collect accounts receivable, including
receivables related to acquired businesses and receivables under appeal, hire
and retain qualified personnel and comply with and respond to billing
requirements issues, including those related to the Company's billing and
collection system could cause actual results or outcomes to differ materially
from those expressed in any forward-looking statements of the Company made by or
on behalf of the Company. Any forward-looking statement speaks only as of the
date on which such statement is made, and the Company undertakes no obligation
to update any forward-looking statement or statements to reflect events or
circumstances after the date on which such statement is made or to reflect the
occurrence of an unanticipated event. New factors emerge from time to time, and
it is not possible for management to predict all of such factors. Further,
management cannot assess the impact of each such factor on the business or the
extent to which any factor, or combination of factors, may cause actual results
to differ materially from those contained in any forward-looking statements.

         The following discussion should be read in conjunction with the
unaudited condensed consolidated financial statements of the Company included in
this quarterly report.

Recent Developments

         During the first quarter of fiscal year 2002, the Company and its
senior management continued to realize substantial progress in achieving the
goals of the Strategic Plan (the "Plan"). The Company addressed issues involving
significant elements of the Plan including: revenue growth, cash flow, risk
management and payor contract pricing.

         The recent changes to the sales and marketing program appear to be
improving its effectiveness. The addition of regional managed care sales
personnel coupled with the branch office directors' initiatives have
demonstrated improvements in select markets. Management continues to focus on
select key markets with unfulfilled market share potential.

         The Company continues to experience improvement in unstaffed nursing
private duty hours and visits in certain markets. However, on a consolidated
basis the Company did not see sequential improvement in unstaffed nursing hours.
In an effort to maximize total hours staffed, the Company has implemented a
management reporting tool that includes self reporting of branch office
activity. The tool provides information regarding total hours ordered by payors,
total hours declined and case hours staffed and unstaffed. The total hours
declined category measures nursing hours that, although ordered, were declined
by the intended recipient due to various reasons including rehospitalizations,
family vacations and doctor's appointments. Branch office directors are
responsible for reporting these activities and the related explanations to the
Company's senior management.

                                       10

<PAGE>

         The following table represents the approximate total hours for the time
periods indicated:

<TABLE>
<CAPTION>
                                                     Total hours   Total hours   Total case      Total case
                                                       ordered      declined    hours staffed  hours unstaffed
                                                       -------      --------    -------------  ---------------
<S>                                                  <C>           <C>          <C>            <C>
Rolling 13 weeks ended September 27, 2001 ..........   934,573       100,425       749,901          84,247
Rolling 13 weeks ended December 27, 2001 ...........   910,777       103,406       722,115          85,256
</TABLE>

         During the first quarter of fiscal year 2002, the Company took
advantage of an opportunity to purchase large quantities of product for
hemophilia patients at a discount to the upcoming contracted rates. This
resulted in a higher than normal inventory level at the end of the first quarter
of fiscal year 2002. While the Company expects to turn the inventory in a timely
manner, management concluded it was appropriate to record a reserve of
approximately $0.2 million.

         The Company remains aware of ongoing changes in the infusion drug
delivery alternatives available to various payors. If some of these alternatives
are selected by various payors, there could be significant reductions to the
Company's future pharmacy revenues. In addition, the Company is exposed to
significant revenue fluctuations as a result of change in service or usage
levels by a limited number of hemophilia factor patients. Such changes occurred
during the first quarter of fiscal 2002, and the Company experienced an increase
in episodic pharmacy revenues. In addition, seasonal deliveries of Synagis
products used to treat flu-like symptoms increased in the first quarter of
fiscal year 2002 and are expected to continue through the majority of the second
quarter.

         During the first quarter of fiscal year 2002, the Company repurchased a
total of $5.0 million of the Notes for $4.5 million cash plus accrued interest.
The gain of $0.4 million is reflected as an extraordinary item in the condensed
consolidated statements of operations.

         The Company's existing Amended and Restated Loan Security Agreement
expired November 1, 2001. The Company is currently assessing alternatives for
senior debt financing. Such financing will be pursued as needed.

         As the Company was finalizing the renewal of its Risk Insurance
Program, the impact of the events of September 11, 2001 was evident in the
pricing by a number of insurance carriers. The Company received from a number of
insurance carriers rate quotes which were substantially higher than the rates
the Company had previously paid. Faced with declining coverage and increased
pricing for all property and casualty lines of insurance, the Company determined
it was necessary to select insurance coverage with higher deductibles and
premiums than previously maintained. In addition, the Company's workers'
compensation program's collateral requirements were significantly increased in
both form and amount. As a result, the Company has agreed to post $2.2 million
cash collateral in a third party escrow account to secure a surety bond to
satisfy these requirements. To date the Company has posted $1.8 million of the
cash collateral, which is included in other assets in the accompanying condensed
consolidated financial statements for the period ended December 31, 2001.

         The Company's management assesses its various growth opportunities,
ranging from evaluation of acquisition alternatives in key markets, geographical
expansion through the use of start-up branch offices and the marketing impact on
existing branch office growth, in order to ration capital available from
operations.

Results of Operations

Significant Accounting Policies

Net Revenue

         Due to the nature of the industry and the reimbursement environment in
which the Company operates, certain estimates are required to record net
revenues and accounts receivable at their realizable values. Inherent in these
estimates is the risk that they will need to be revised or updated with the
changes recorded in subsequent periods as additional information becomes
available to management. Specifically, the complexity of many third-party
billing arrangements and the uncertainty of reimbursement amounts for certain
services from certain payors may result in adjustments to amounts originally
recorded. Such adjustments are typically identified and recorded at the point of
cash application, claim denial or account review. As of December 31, 2001, the
Company had no

                                       11

<PAGE>

material claims, disputes or unsettled matters with third-party payors nor were
there any material settlements with third-party payors.

         Net revenue represents the estimated net realizable amounts from
patients, third-party payors and others for patient services and products
rendered. Such revenue is recognized as the treatment plan is administered to
the patient and recorded at amounts estimated to be received under reimbursement
arrangements with payors. Net revenues to be reimbursed by contracts with
third-party payors are recorded at an amount to be realized under these
contractual arrangements. Revenues from Medicaid and Medicare are generally
based on reimbursement of the reasonable direct and indirect costs of providing
services to program participants. In certain situations the services and
products are recorded separately. In other situations, the service and products
are billed and reimbursed on a per diem or contract basis whereby the insurance
carrier pays the Company one combined amount for treatment. Because the
reimbursement arrangements in these situations are based on a per diem or
contract amount, the Company does not maintain records that provide a breakdown
between the service and product components.

         The Company has developed a methodology to quantify the impact to net
revenue of the inherent time lag between certain patient treatment and input of
the related information into its billing and collection system. This methodology
measures relative changes in the time and overall activity level at each branch
office location and aggregates these measurements to estimate the impact to
consolidated net revenue. Any unforeseen volatility to either the time or
activity level at specific branch offices has the potential to significantly
impact the estimate.

         In other select cases patient treatment may cease for a number of
reasons including; rehospitalizations, change in treatment needs, or death, and
a time lag may exist before this information is reflected in the Company's
billing and collection system. The Company has developed a methodology which
measures the relative magnitude of these events over recent time periods and
applies this methodology to reduce net revenues recognized in the current
period.

Allowance for Doubtful Accounts

         In determining the adequacy of the allowance and related provision for
doubtful accounts, the Company has developed a process which combines
statistical analysis of historical collection and write-off activity with a
detailed review of existing account balances meeting certain criteria and their
likelihood of being collected at the amounts recorded. This detailed review
involves both the assigned corporate reimbursement department personnel and the
respective branch office location personnel assessing each patient claim that
falls within prescribed age and amount criteria. These assessments are
aggregated and compared to the results of the statistical analysis to provide to
management guidance in making the estimate regarding the allowance balance.
Inherent in this estimate is the risk that it will need to be revised or updated
with the changes recorded in subsequent periods as additional information
becomes available to management.

Accrued Insurance

         The Company's insurance broker retained the services of an independent
actuary to prepare an actuarial analysis of the Company's development of
reported and incurred but not reported claims. These estimates are updated
quarterly and are used in the valuation of the accrued insurance liability.
Inherent in these estimates is the risk that they will need to be revised or
updated with the changes recorded in subsequent periods as additional
information becomes available to management.

                                       12

<PAGE>

         The following table is derived from the Company's unaudited condensed
consolidated statements of operations for the periods indicated and presents
results of operations as a percentage of net revenue and the percentage change
in the dollar amounts of each item from the comparative prior period:

<TABLE>
<CAPTION>
                                                                                              Period-to-Period
                                                                     Percentage of               Percentage
                                                                      Net Revenue            Increase (Decrease)
                                                                      -----------            -------------------
                                                                      Three Months              Three Months
                                                                         Ended                      Ended
                                                                      December 31,               December 31,
                                                                      ------------               ------------
                                                                   2001          2000                2001
                                                                   ----          ----                ----
<S>                                                               <C>           <C>          <C>
Net revenue ...................................................   100.0%        100.0%                 8%
Operating salaries, wages and employee
   benefits ...................................................    46.1          45.3                 10
Other operating costs .........................................    35.1          36.0                  5
Corporate, general and administrative .........................     9.6           9.8                  6
Provision for doubtful accounts ...............................     0.6           2.1                (68)
Depreciation and amortization .................................     2.2           4.1                (42)
                                                                  -----         -----
Operating income ..............................................     6.4           2.7                164
Interest income ...............................................     0.1           0.5                (73)
Interest expense ..............................................    (1.5)         (2.7)               (41)
                                                                  -----         -----
Income before extraordinary item ..............................     5.0%          0.5%             1,227%
                                                                  =====         =====
</TABLE>

         The following table sets forth for the periods indicated the net
revenue breakdown by service: (in thousands)

<TABLE>
<CAPTION>
                                                                       Three Months
                                                                          Ended
                                                                        December 31,
                                                                     2001         2000
                                                                     ----         ----
<S>                                                                <C>          <C>
Pediatric Home Health Care
  Nursing ......................................................   $ 22,128     $ 21,204
  Respiratory Therapy Equipment ................................      4,183        3,711
  Home Medical Equipment .......................................        328          332
  Pharmacy and Other ...........................................     11,123        9,924
                                                                   --------     --------
         Total Pediatric Home Health Care ......................     37,762       35,171
                                                                   --------     --------

Adult Home Health Care:
  Nursing ......................................................      2,974        2,820
  Respiratory Therapy Equipment ................................      4,620        3,980
  Home Medical Equipment .......................................        633          708
  Pharmacy and Other ...........................................      3,151        2,882
                                                                   --------     --------
         Total Adult Home Health Care ..........................     11,378       10,390
                                                                   --------     --------
         Total Net Revenue .....................................   $ 49,140     $ 45,561
                                                                   ========     ========
</TABLE>

Three Months Ended December 31, 2001 Compared to Three Months Ended December 31,
2000

         Net revenue increased $3.6 million, or 8%, to $49.1 million in the
three months ended December 31, 2001 from $45.6 million in the three months
ended December 31, 2000. Pediatric home health care net revenue increased by
$2.6 million for the three months ended December 31, 2001, due to a number of
factors, including, increased reimbursement rates for select pediatric nursing
payors, increased episodic pharmacy deliveries and increased core respiratory
products and services as compared to the three months ended December 31, 2000.
Adult health care net revenue increased $1.0 million for the three months ended
December 31, 2001, primarily as a result of an increase in core products and
services to pharmacy and respiratory therapy patients. In the three months ended
December 31, 2001, the Company derived approximately 50% of its net revenue from
commercial insurers and other private payors, 43%

                                       13

<PAGE>

from Medicaid and 7% from Medicare.

         Operating salaries, wages and employee benefits consist primarily of
branch office employee costs. Operating salaries, wages and employee benefits
increased $2.0 million, or 10%, to $22.6 million in the three months ended
December 31, 2001 from $20.7 million in the three months ended December 31,
2000. The Company experienced seasonal increases in its nursing labor costs due
to increased levels of nurses eligible for benefits. In addition, the Company
incurred labor costs for new start-up branches in the three months ended
December 31, 2001. As a percentage of net revenue, operating salaries, wages and
employee benefits for the three months ended December 31, 2001 increased to 46%
from 45% for the three months ended December 31, 2000.

         Other operating costs include medical supplies, branch office rent,
utilities, vehicle expenses, allocated insurance costs and cost of sales. Cost
of sales consists primarily of the costs of pharmaceuticals and related
services. Other operating costs increased $0.8 million, or 5%, to $17.3 million
in the three months ended December 31, 2001, from $16.4 million in the three
months ended December 31, 2000. The increase in other operating costs relates
primarily to increased business insurance costs. As a percentage of net revenue,
other operating costs for the three months ended December 31, 2001 decreased to
35% from 36% for the three months ended December 31, 2000.

         Corporate, general and administrative costs increased $0.3 million, or
6%, to $4.7 million in the three months ended December 31, 2001, from $4.4
million in the three months ended December 31, 2000. The increase relates
primarily to an increase in the Company's portion of benefits costs and
estimates for professional fees in the three months ended December 31, 2001 as
compared to December 31, 2000. As a percentage of net revenue, corporate,
general and administrative costs for the three months ended December 31, 2001,
decreased slightly compared to the three months ended December 31, 2000.

         Provision for doubtful accounts decreased $0.7 million, or 68%, to $0.3
million in the three months ended December 31, 2001, from $1.0 million in the
three months ended December 31, 2000. Cash collections as a percentage of net
revenue were 99% and 100% for the three months ended December 31, 2001 and 2000,
respectively. The Company continues to experience strong cash collections and
improvements in the reimbursement processes contributing to a lower provision
for doubtful accounts.

         Depreciation and amortization decreased $0.8 million, or 42%, to $1.1
million in the three months ended December 31, 2001 from $1.9 million in the
three months ended December 31, 2000. The Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets,
effective October 1, 2001. SFAS No. 142 prohibits the amortization of goodwill
and intangibles with indefinite useful lives. SFAS No. 142 requires that these
assets be reviewed for impairment at least annually. Intangible assets with
finite lives will continue to be amortized over their estimated useful lives.
Amortization expense on intangible assets was $0.04 million and $0.6 million for
the quarter ended December 31, 2001 and 2000, respectively. In addition, the
three month period ended December 31, 2000 included $0.6 million related to the
amortization of goodwill.

         Interest expense decreased $0.5 million, or 41%, to $0.7 million in the
three months ended December 31, 2001, from $1.2 million in the three months
ended December 31, 2000. The Company's average debt outstanding decreased $17.6
million as the Company completed a series of transactions to repurchase a
portion of the Notes.

         Interest income decreased $0.2 million in the three months ended
December 31, 2001. The Company invested its excess cash balances in highly
liquid investments whose yields continue to decline.

Liquidity and Capital Resources

         In the first quarter of fiscal year 2002, the Company completed a
transaction to repurchase a total of $5.0 million of the Notes for $4.5 million
cash plus accrued interest. The gain (net of the write-off of the related
deferred financing fees) of $0.4 million is reflected as an extraordinary item
in the condensed consolidated statements of operations for the three months
ended December 31, 2001. At December 31, 2001, total borrowings under the Notes
were approximately $27.4 million.

         The Indenture under which the Notes were issued allows the Company to
repurchase the Notes at its discretion. All bids to repurchase have been based
upon a number of factors including: cash availability, interest

                                       14

<PAGE>

rates on invested cash, other capital investment alternatives, and relative ask
prices quoted by the market maker. Each decision by the Company to repurchase
has been arrived at independently using the above criteria and the Company does
not have a formal plan in place to repurchase the Notes. Further, the fair
market value of the Notes has increased, making future repurchases of the Notes
less likely.

         Cash collections as a percentage of net revenue for the three months
ended December 31, 2001 and 2000 were 99% and 100%, respectively. The
organizational restructuring of the Company's reimbursement process continues
and indications of progress to date are positive. While management anticipates
that continued implementation of the Plan will achieve the desired results,
there can be no assurance that this will result in the Company realizing
operating improvements and improved cash flow.

         The Company's investments in property and equipment are attributable
largely to purchases of medical equipment rented to patients and computer
equipment. For the three months ended December 31, 2001 the Company has
purchased medical equipment with technology upgrades to service existing
patients. Capital expenditures for computer equipment and software development
have been substantially completed. The Company anticipates future capital
expenditures for enhancements of existing technology. However, the Company does
not anticipate that these capital expenditures will be significant.

         As a result of operating in the health care industry, the Company's
business entails an inherent risk of lawsuits alleging malpractice, product
liability or related legal theories, which can involve large claims and
significant defense costs. The Company is, from time to time, subject to such
suits arising in the ordinary course of business. The Company currently
maintains professional and commercial liability insurance intended to cover such
claims. As of December 31, 2001, this insurance coverage is provided under a
"claims-made" policy which provides, subject to the terms and conditions of the
policy, coverage for certain types of claims made against the Company during the
term of the policy and does not provide coverage for losses occurring during the
terms of the policy for which a claim is made subsequent to the termination of
the policy. Should the policy not be renewed or replaced with equivalent
insurance, claims based on occurrences during its term but asserted subsequently
would be uninsured. There can be no assurance that the coverage limits of the
Company's insurance policy will be adequate. In addition, while the Company has
been able to obtain various forms of insurance in the past, such insurance
varies in coverage, cost and collateral requirements, and is difficult to obtain
and may or may not be available in the future on acceptable terms.

         In addition, the Company is subject to accident claims arising out of
the normal operation of its fleet of vans and small trucks, and maintains
insurance intended to cover such claims. A successful claim against the Company
in excess of the Company's insurance coverage could have an adverse effect upon
the Company's business. Claims against the Company, regardless of their merits
or eventual outcome also may have an adverse effect upon the Company's
reputation and business.

         Management currently believes that its liquidity position will be
adequate to satisfy the Company's working capital requirements, selected
potential acquisitions, workers' compensation collateral requirements, and
income tax payments. The primary source of liquidity is cash flow from
operations. To this extent, the Company is exposed to fluctuations in cash
collection results. However, the Company has evaluated several senior debt
proposals and believes that it could secure such financing if needed.

Variation in Quarterly Operating Results

         The Company's quarterly results may vary significantly depending
primarily on factors such as rehospitalizations of patients, the timing of new
branch office openings and pricing pressures due to legislative and regulatory
initiatives to contain health care costs. Because of these factors, the
Company's operating results for any particular quarter may not be indicative of
the results for the full fiscal year.

ITEM 3.  Quantitative and Qualitative Disclosures about Market Risk

         The Company faces a number of market risk exposures including risks
related to cash and cash equivalents, accounts receivable and interest rates.
Cash and cash equivalents are held primarily in one financial institution. The

                                       15

<PAGE>


Company performs periodic evaluations of the relative credit standing of this
financial institution. The concentration of credit risk with respect to accounts
receivable, which are primarily health care industry related, represent a risk
to the Company given the current environment in the health care industry. The
risk is somewhat limited due to the large number of payors including Medicare
and Medicaid, insurance companies, individuals and the diversity of geographic
locations in which the Company operates.

         The Company's Notes, issued in 1998, have a fixed coupon rate of 10%.
The fair value of the Company's Notes is subject to change as a result of
changes in market prices or interest rates. The Company estimates potential
changes in the fair value of interest rate sensitive financial instruments based
on the hypothetical increase (or decrease) in interest rates. The Company's use
of this methodology to quantify the market risk of such instruments should not
be construed as an endorsement of its accuracy or the accuracy of the related
assumptions. The quantitative information about market risk is necessarily
limited because it does not take into account other factors such as the
Company's financial performance and credit ratings.

         Based on a hypothetical immediate 150 basis point increase in interest
rates at December 31, 2001 the market value of the Company's Notes would be
reduced by approximately $1.8 million. Conversely, a 150 basis point decrease in
interest rates would result in a net increase in the market value of the
Company's Notes outstanding at December 31, 2001 of approximately $2.0 million.


                           PART II - OTHER INFORMATION


ITEM 1.  Legal Proceedings.

          On March 11, 1999, a putative class action complaint was filed against
the Company in the United States District Court for the Northern District of
Georgia. The Company and certain of its then current officers and directors were
among the named defendants. To the Company's knowledge, no other putative
class action complaints were filed within the 60-day time period provided for in
the Private Securities Litigation Reform Act. The plaintiffs and their counsel
were appointed lead plaintiffs and lead counsel, and an amended complaint was
filed on or about July 22, 1999. The amended complaint did not specify an amount
or range of damages that the plaintiffs were seeking. In general, the plaintiffs
alleged that prior to the decline in the price of the Company's Common Stock on
July 28, 1998, there were violations of the Federal Securities Laws arising from
misstatements of material information in and/or omissions of material
information from certain of the Company's securities filings and other public
disclosures principally related to its reporting of accounts receivable and the
allowance for doubtful accounts. The amended complaint purported to expand the
class to include all persons who purchased the Company's Common Stock during the
period from July 29, 1997 through and including July 29, 1998. On October 8,
1999, the Company and the individuals named as defendants moved to dismiss the
amended complaint on both substantive and procedural grounds. On March 30, 2000,
the Court denied the motions to dismiss. On May 15, 2000, the Company and the
individuals named as defendants filed their answer, denying liability.

         On February 27, 2001, Plaintiffs' Motion for Class Certification was
granted by the Court. Fact discovery in the case closed on July 31, 2001, with a
period of expert discovery to follow.

         On September 5, 2001, Plaintiffs' moved for leave to file a Second
Amended Complaint and to expand the class period. The proposed Second Amended
Complaint purported to expand the class to include all persons who purchased the
Company's stock between November 11, 1996 and July 28, 1998. The Court denied
Plaintiffs' Motion on October 12, 2001.

         In January, 2002, the parties entered into a Stipulation of Settlement
settling all claims asserted in the lawsuit against all parties for a total of
$3.2 million, subject to court approval. Notice has been sent to all members of
the plaintiff class for a settlement hearing, which the court will conduct on
March 15, 2002, to consider the fairness, reasonableness and adequacy of the
proposed settlement. Under the terms of the settlement, the $3.0 million
contribution of the Company to the settlement will be fully funded by its
insurance carrier under its Directors and Officers insurance policy.

                                       16

<PAGE>


         On July 28, 1999, a civil action was filed against the Company and
certain of its current and former officers and directors in the United States
District Court for the Middle District of Tennessee. The action was filed by
Phyllis T. Craighead and Healthmark Partners, LLC, as well as a liquidating
trust apparently established to wind up the business affairs of their
corporation, Kids & Nurses, Inc. In the original complaint, in general, the
plaintiffs alleged that the defendants violated Federal and Tennessee Securities
Laws and committed common law fraud in connection with the Company's purchase of
Kids and Nurses, Inc. in November, 1997. The plaintiffs seek actual damages in
an amount between $2.5 million and $3.5 million, plus punitive damages and the
costs of litigation, including reasonable attorneys' fees. On September 24,
1999, the defendants filed a motion to dismiss the complaint on both substantive
and procedural grounds. On December 20, 1999, the plaintiffs filed an amended
complaint in which they withdrew their claims under the Federal Securities Laws,
and added claims under Georgia's securities laws. The plaintiffs also filed a
brief in response to the Company's motion to dismiss. On February 1, 2000, the
defendants filed an amended motion to dismiss addressing the allegations of the
amended complaint. On March 29, 2001, the motion to dismiss was denied without
prejudice pending a ruling by the Tennessee Supreme Court on an unrelated case.
On May 2, 2001, the Company and the individuals named as defendants, filed their
answer, denying liability. The Company and the individuals named as defendants
deny that they have violated any of the requirements or obligations of any
applicable Federal or State securities laws, or any other applicable law.

         In the opinion of the Company's management, the ultimate disposition of
these two lawsuits should not have a material adverse effect on the Company's
financial condition or results of operations, however, there can be no assurance
that the Company will not sustain material liability as a result of or related
to these lawsuits.

ITEM 6.          Exhibits and Reports on Form 8-K.

     (a)         Exhibits
                 --------

                 The following exhibits are filed with this Report.

         10.9(t) Amended and Restated Stock Option Plan, effective as of
                 November 28, 2001, filed herewith.

         10.9(u) Amended and Restated Directors' Stock Option Plan, effective
                 as of November 28, 2001, filed herewith.

         10.9(v) Amendment No. 3 to the Employee Stock Purchase Plan, effective
                 as of February 1, 2002, filed herewith.


     (b)         Reports on Form 8-K
                 -------------------

The Company did not file a Current Report on Form 8-K during the quarter ended
December 31, 2001.

                                       17

<PAGE>

                                   SIGNATURES

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


                                             PEDIATRIC SERVICES OF AMERICA, INC.
                                                       (Registrant)



Date: February 1, 2002             By:  /s/ James M. McNeill
                                       --------------------------------------
                                                James M. McNeill
                                                Senior Vice President,
                                                Chief Financial Officer,
                                                Treasurer and Secretary
                                                (Duly authorized officer and
                                                 Principal Financial Officer)


                                       18

<PAGE>

                                INDEX TO EXHIBITS

The following exhibits are filed with this Report.





Exhibit 10.9(t)  Amended and Restated Stock Option Plan

Exhibit 10.9(u)  Amended and Restated Directors' Stock Option Plan

Exhibit 10.9(v)  Amendment No. 3 to the Employee Stock Purchase Plan


                                       19