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

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


  For the Quarter Ended                              Commission File Number
      June 30, 2001                                         0-23038
  ---------------------                              ----------------------

                        CORRECTIONAL SERVICES CORPORATION
              ----------------------------------------------------
             (Exact name of Registrant as specified in its charter)


        DELAWARE                                        11-3182580
        --------                                        ----------
(State of Incorporation)                 (I.R.S. Employer Identification Number)

              1819 MAIN STREET, SUITE 1000, SARASOTA, FLORIDA 34236
              -----------------------------------------------------
                    (Address of principal executive offices)


               Registrant's telephone number, including area code:
                                 (941) 953-9199
                                 --------------

                                 Not Applicable
               ---------------------------------------------------
             (Former name, former address and former fiscal year if
                           changed since last report)

Number of shares of common stock outstanding on August 14, 2001:  10,155,412

           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 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
                                              ---      ---
================================================================================
<PAGE>

                        CORRECTIONAL SERVICES CORPORATION

                                      INDEX
                                                                        Page No.
                                                                        -------

                         PART I. - FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS                                             3-8

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATIONS                             9-13

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK        14


                          PART II. - OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS                                                 15


ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS                         15


ITEM 3.    DEFAULTS UPON SENIOR SECURITIES                                   15


ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS               15


ITEM 5.    OTHER INFORMATION                                                 15


ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K                                  15

                                       2
<PAGE>

                        CORRECTIONAL SERVICES CORPORATION
                                AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

      ASSETS                                       JUNE 30, 2001    DECEMBER 31,
                                                    (UNAUDITED)         2000
                                                      --------        --------

CURRENT ASSETS
  Cash and cash equivalents                           $    705        $    133
  Restricted cash                                           33              92
  Accounts receivable, net                              26,960          36,976
  Notes receivable                                         200           3,730
  Deferred tax asset                                     1,926           1,926
  Recoverable costs under agreement with officer           562            --
  Prepaid expenses and other current assets              1,779           2,673
                                                      --------        --------
     Total current assets                               32,165          45,530

PROPERTY, EQUIPMENT AND LEASEHOLD
  IMPROVEMENTS, NET                                     39,072          39,543

OTHER ASSETS
  Deferred tax asset                                     5,651           5,431
  Goodwill                                                 864           1,049
  Note receivable                                        4,950            --
  Other                                                  5,047           5,222
                                                      --------        --------

                                                      $ 87,749        $ 96,775
                                                      ========        ========

      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable and accrued liabilities            $ 19,889        $ 20,020
  Current portion of subordinated debt                      10              10
  Current portion of senior debt                          --             6,669
                                                      --------        --------
     Total current liabilities                          19,899          26,699

COMMITMENTS AND CONTINGENCIES                             --              --

LONG-TERM SENIOR DEBT                                   15,313          16,338

STOCKHOLDERS' EQUITY
  Preferred stock, $.01 par value, 1,000,000
     shares authorized, none issued and
     outstanding                                          --              --
  Common stock, $.01 par value, 30,000,000
     shares authorized, 11,373,000 shares
     issued, 10,155,000 and 10,249,000
     outstanding, respectively                             114             114
  Additional paid-in capital                            82,797          82,797
  Accumulated deficit                                  (27,383)        (26,395)
  Treasury stock, at cost                               (2,991)         (2,778)
                                                      --------        --------
                                                        52,537          53,738
                                                      --------        --------

                                                      $ 87,749        $ 96,775
                                                      ========        ========

        The accompanying notes are an integral part of these statements.

                                       3
<PAGE>

                        CORRECTIONAL SERVICES CORPORATION
                                AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                      SIX MONTHS ENDED JUNE 30,
                                                      -------------------------
                                                         2001            2000
                                                      ---------       ---------

Revenues                                              $  89,484       $ 106,066
                                                      ---------       ---------

Facility expenses:
     Operating                                           82,736          92,976
     Startup costs                                          451              16
                                                      ---------       ---------
                                                         83,187          92,992
                                                      ---------       ---------
Contribution from operations                              6,297          13,074
                                                      ---------       ---------

Other operating expenses:
     General and administrative                           6,175           6,234
     Legal settlement                                       375            --
     Loss on disposal of assets                             146            --
                                                      ---------       ---------
                                                          6,696           6,234
                                                      ---------       ---------

Operating income (loss)                                    (399)          6,840

Interest expense, net                                      (809)         (1,654)
                                                      ---------       ---------
Income (loss)  before income taxes                       (1,208)          5,186
Income tax (expense) benefit                                220          (2,049)
                                                      ---------       ---------

Net income (loss)                                     $    (988)      $   3,137
                                                      =========       =========

Basic and diluted earnings (loss) per share           $   (0.10)      $    0.28
                                                      =========       =========

        The accompanying notes are an integral part of these statements.

                                       4
<PAGE>

                        CORRECTIONAL SERVICES CORPORATION
                                AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                         THREE MONTHS ENDED
                                                               JUNE 30,
                                                       ------------------------
                                                         2001            2000
                                                       --------        --------

Revenues                                               $ 44,394        $ 52,357
                                                       --------        --------

Facility expenses:
     Operating                                           41,325          46,265
     Startup costs                                          192              11
                                                       --------        --------
                                                         41,517          46,276
                                                       --------        --------
Contribution from operations                              2,877           6,081
                                                       --------        --------

Other operating expenses:
     General and administrative                           2,979           3,062
     Loss on disposal of assets                              10            --
                                                       --------        --------
                                                          2,989           3,062
                                                       --------        --------

Operating income (loss)                                    (112)          3,019

Interest expense, net                                      (379)           (810)
                                                       --------        --------
Income (loss) before income taxes                          (491)          2,209
Income tax (expense) benefit                                 70            (872)
                                                       --------        --------

Net income (loss)                                      $   (421)       $  1,337
                                                       ========        ========

Basic and diluted earnings (loss) per share            $  (0.04)       $   0.12
                                                       ========        ========

        The accompanying notes are an integral part of these statements.

                                       5
<PAGE>

                        CORRECTIONAL SERVICES CORPORATION
                                AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (IN THOUSANDS)
<TABLE><CAPTION>
                                                                                 SIX MONTHS ENDED
                                                                                     JUNE 30,
                                                                              ----------------------
                                                                                2001          2000
                                                                              --------      --------
<S>                                                                       <C>             <C>
Cash flows from operating activities:
  Net income (loss)                                                           $   (988)     $  3,137
  Adjustments to reconcile net income (loss) to net cash
    provided by operating activities:
      Depreciation and amortization                                              2,058         2,523
      Merger related asset writedown                                              --             357
      Deferred income tax expense (benefit)                                       (220)          358
      (Gain) loss on disposal of fixed assets, net                                 146           (81)
      Changes in operating assets and liabilities:
          Restricted cash                                                           59           100
          Accounts receivable                                                   10,017           274
          Prepaid expenses and other current assets                                894           417
          Recoverable costs under agreement with officer                          (562)         --
          Accounts payable and accrued liabilities                                (132)       (5,242)
                                                                              --------      --------
                        Net cash provided by operating activities:              11,272         1,843
                                                                              --------      --------
Cash flows from investing activities:
    Capital expenditures                                                        (1,598)       (1,374)
    Proceeds from the sale of property, equipment and improvements                 193            96
    Purchase of notes receivable, net of payments received                      (1,420)         --
    Other assets                                                                    50          (225)
                                                                              --------      --------
                        Net cash used in investing activities:                  (2,775)       (1,503)
                                                                              --------      --------
Cash flows from financing activities:
    Proceeds (repayments) on senior debt, net                                   (7,692)        6,890
    Payment of subordinated debt                                                  --         (14,180)
    Long-term portion of prepaid lease                                             (19)          200
    Treasury stock                                                                (214)         --
    Adjustment to paid-in capital                                                 --             (10)
                                                                              --------      --------
                        Net cash used in financing activities:                  (7,925)       (7,100)
                                                                              --------      --------
Net increase (decrease) in cash and cash equivalents                               572        (6,760)
Cash and cash equivalents at beginning of period                                   133         7,070
                                                                              --------      --------

Cash and cash equivalents at end of period                                    $    705      $    310
                                                                              ========      ========


Supplemental disclosures of cash flows information:
  Cash paid during the period for:
      Interest                                                                $    938      $  2,207
                                                                              ========      ========
      Income taxes, net                                                       $    223      $  1,167
                                                                              ========      ========
</TABLE>
        The accompanying notes are an integral part of these statements.

                                       6
<PAGE>

                        CORRECTIONAL SERVICES CORPORATION
                                AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2001

NOTE 1 - BASIS OF PRESENTATION

The condensed consolidated financial statements include the accounts of
Correctional Services Corporation and its wholly owned subsidiaries (the
"Company").

In the opinion of the Company's management the accompanying unaudited condensed
consolidated financial statements as of June 30, 2001, and for the three and six
months ended June 30, 2001 and 2000, include all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation. The statements
herein are presented in accordance with the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in the financial statements on Form 10-K for the Company have
been omitted from these statements, as permitted under the applicable rules and
regulations. The statements should be read in conjunction with the consolidated
financial statements and the related notes included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2000.

The results of operations for the three and six months ended June 30, 2001 are
not necessarily indicative of the results to be expected for the full year.

NOTE 2 - NEW ACCOUNTING PRONOUNCEMENTS

On July 20, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 141, Business Combinations,
and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is effective for all
business combinations completed after June 30, 2001. SFAS 142 is effective for
the year beginning January 1, 2002; however certain provisions of that Statement
apply to goodwill and other intangible assets acquired between July 1, 2001 and
the effective date of SFAS 142. The Company has not yet analyzed the effect, if
any, of these new standards; accordingly, the Company is unable at present to
state what effect, if any, the adoption of these standards will have on the
Company's financial statements.

NOTE 3 - DEBT

In November 2000, the Company amended its financing arrangement with Fleet
National Bank, N.A., formerly Summit Bank, N.A. The amendment to the Credit
Agreement will allow the Company the option of utilizing a percentage of both:
(i) excess cash flow (as defined by the agreement) and (ii) the proceeds from
the sale of certain assets, to repurchase Company stock in furtherance of the
Company's stock repurchase plan (see Treasury Stock below). Borrowings under the
line are subject to compliance with various financial covenants and borrowing
base criteria (which were also amended). Subsequent to June 30, 2001, the
Company further amended its financing arrangement with Fleet National Bank,
which modified one of its financial covenants effective as of June 30, 2001. The
Company was in compliance with its covenants as of June 30, 2001.

The financing arrangement is secured by all of the assets of the Company and
consists of the following components:

o     $25 million (as amended) revolving line of credit to be used by the
      Company and its subsidiaries for working capital and general corporate
      purposes and to finance the acquisition of facilities, properties and
      other businesses. At June 30, 2001 the Company had $15.0 million
      outstanding under the revolving line of credit and $6.0 million of
      availability.

o     $20 million delayed drawdown credit facility which provided the Company
      with additional financing to be used to fund the redemption of the
      outstanding 7% Convertible Subordinated Debentures. As of June 30, 2001
      this was paid in full.

o     $35 million (as amended) in financing which may be used to purchase land
      and property and to finance the construction of new facilities through an
      operating lease arrangement. As of June 30, 2001, the Company had
      approximately $26.2 million outstanding under this operating lease
      financing facility. Pursuant to the June 30, 2001 amendment, there is no
      additional funding available under this component of the financing
      arrangement.

The $25 million revolving line of credit and the $35 million operating
lease-financing facility, as amended, mature on August 31, 2002.

                                       7
<PAGE>

NOTE 4 - EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per
share in accordance with SFAS No. 128:

Six Months Ended June 30,                           2001            2000
--------------------------------------------------------------------------------

Numerator:
     Net income (loss)                          $       (988)   $      3,137
                                                ============    ============
Denominator:
     Basic earnings per share:
     Weighted average shares outstanding              10,206          11,373
     Effect of dilutive securities -
       stock options and warrants                          -               5
                                                ------------    ------------

Denominator for diluted earnings per share            10,206          11,378
                                                ============    ============



Three Months Ended June 30,                         2001            2000
--------------------------------------------------------------------------------

Numerator:
     Net income (loss)                          $       (421)   $      1,337
                                                ============    ============
Denominator:
     Basic earnings per share:
     Weighted average shares outstanding              10,165          11,373
     Effect of dilutive securities -
       stock options and warrants                          -               9
                                                ------------    ------------

Denominator for diluted earnings per share            10,165          11,382
                                                ============    ============

NOTE 5 - RELATED PARTY TRANSACTIONS

In May 2000, the Company was awarded a contract from the Federal Bureau of
Prisons to operate a community corrections center, often referred to as a
halfway house, in New York, New York. Subject to approval by the Bureau of
Prisons, the Company planned to use a building purchased shortly thereafter by
James Slattery, the Company's Chairman of the Board and Chief Executive Officer,
as the facility for the halfway house and paid for certain leasehold renovations
and other costs with respect to the building. Due to community opposition, the
Company was unable to use the building as a halfway house and requested that Mr.
Slattery pay for all leasehold renovations, and other associated costs incurred
by the Company. Mr. Slattery agreed to pay these costs on or before September
30, 2001 and, as a result of this agreement, these costs, in the amount of
$562,000 recorded as leasehold improvements and other deferred costs, have been
reclassified to "recoverable costs under agreement with officer" as of June 30,
2001.

NOTE 6 - NOTE RECEIVABLE

The Company purchased a $5 million note receivable that is in default, and is
secured by a building that is currently being used by one of the Company's
programs, in accordance with the note sale agreement. The Company expects to
obtain title to the building during the third quarter of 2001.

                                       8
<PAGE>

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

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
--------------------------------------------------------------------------------

This document contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and 21E of the Securities
Exchange Act of 1934, as amended, which are not historical facts and involve
risks and uncertainties. These include statements regarding the expectations,
beliefs, intentions or strategies regarding the future. The Company intends that
all forward-looking statements be subject to the safe-harbor provisions of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements reflect the Company's views as of the date they are made with respect
to future events and financial performance, but are subject to many
uncertainties and risks which could cause the actual results of the Company to
differ materially from any future results expressed or implied by such
forward-looking statements. Examples of such uncertainties and risks include,
but are not limited to: fluctuations in occupancy levels and labor costs; the
ability to sell assets or enter into sale lease-back transactions; the ability
to secure both new contracts and the renewal of existing contracts; the
availability of financing to redeem common shares and expand business; the
ability to reduce various operating costs; and public resistance to
privatization. Additional risk factors include those contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 2000. The Company
does not undertake any obligation to update any forward-looking statements.

GENERAL

Correctional Services Corporation and its wholly owned subsidiaries (the
"Company") is one of the largest and most comprehensive providers of juvenile
rehabilitative services with 30 facilities and approximately 4,200 juveniles in
its care. In addition, the Company is a leading developer and operator of adult
correctional facilities operating 13 facilities representing approximately 4,700
beds. On a combined basis, as of June 30, 2001, the Company provided services in
17 states and Puerto Rico, representing approximately 8,900 beds including
aftercare services.

The Company's primary source of revenue is generated from the operation of its
facilities pursuant to contracts with federal, state and local governmental
agencies, and management agreements with third parties that contract directly
with governmental agencies. Generally, the Company's contracts are based on a
daily rate per resident, some of which have guaranteed minimum payments; others
provide for fixed monthly payments irrespective of the number of residents. In
addition, the Company receives revenue for educational and aftercare services.
The Company recognizes revenue at the time the Company performs the services
pursuant to its contracts.

The Company typically pays all facility operating expenses, except for rent or
lease payments in the case of certain government-provided facilities or for
facilities for which the Company has only a management contract. Operating
expenses are principally comprised of costs directly attributable to the
management of the facility which include salaries and benefits of administrative
and direct supervision personnel and costs associated with the care of the
residents, which include food, clothing, medical services and personal hygiene
supplies. Other operating expenses are comprised of indirect costs, which
consist of rent and lease payments, utilities, insurance, depreciation and
professional fees.

The Company also incurs costs relating to the start-up of new facilities. Such
costs are principally comprised of expenses associated with the recruitment,
hiring and training of staff, travel of personnel, certain legal expenses and
other costs incurred after a contract has been awarded.

Contribution from operations consists of revenues minus operating expenses and
start-up costs. Contribution from operations, in general, is lower in the
initial stages of a facility's operations. This is due to the need to incur a
significant portion of the facility's operating expenses while the facility is
in the process of attaining full occupancy.

General and administrative costs primarily consist of salaries and benefits of
non-facility based personnel, insurance, professional fees, rent and utilities
associated with the operation of the Company's corporate offices. In addition,
general and administrative costs consist of development costs principally
comprised of travel, proposal development, legal fees, and various consulting
and other fees incurred prior to the award of a contract.

On July 20, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 141, BUSINESS COMBINATIONS,
and SFAS 142, GOODWILL AND INTANGIBLE ASSETS. SFAS 141 is effective for all
business combinations completed after June 30, 2001. SFAS 142 is effective for
the year beginning January 1, 2002; however certain provisions of that Statement
apply to goodwill and other intangible assets acquired between July 1, 2001 and
the effective date of SFAS 142. The Company has not yet analyzed the effect, if
any, of these new standards; accordingly, the Company is unable at present to
state what effect, if any, the adoption of these standards will have on the
Company's financial statements.
                                       9
<PAGE>

RESULTS OF OPERATIONS

The following table sets forth certain operating data as a percentage of total
revenues:

                                                 Percentage of Total Revenue
                                                      Six Months Ended
                                                          June 30,
                                                    2001            2000
                                                ------------    ------------

        Revenues                                      100.0%          100.0%

        Expenses:
             Operating                                 92.5%           87.7%
             Startup costs                              0.5%            0.0%
                                                ------------    ------------
                                                       93.0%           87.7%
                                                ------------    ------------
        Contribution from operations                    7.0%           12.3%
                                                ------------    ------------
        Other operating expenses:
             General and administrative                 6.9%            5.9%
             Legal settlement                           0.4%            0.0%
             Loss on disposal of fixed assets           0.2%            0.0%
                                                ------------    ------------
                                                        7.5%            5.9%
                                                ------------    ------------
        Operating income (loss)                        -0.5%            6.4%

        Interest expense, net                          -0.9%           -1.5%
                                                ------------    ------------

        Income (loss) before income                    -1.4%            4.9%
        Income tax (provision) benefit                  0.3%           -1.9%
                                                ------------    ------------

        Net income (loss)                              -1.1%            3.0%
                                                ============    ============


The following tables sets forth certain operating data as a percentage of total
revenues:

                                                 Percentage of Total Revenue
                                                     Three Months Ended
                                                          June 30,
                                                    2001            2000
                                                ------------    ------------

          Revenues                                    100.0%          100.0%

          Expenses:
               Operating                               93.1%           88.4%
               Startup costs                            0.4%            0.0%
                                                ------------    ------------
                                                       93.5%           88.4%
                                                ------------    ------------
          Contribution from operations                  6.5%           11.6%
          Other operating expenses:
               General and administrative               6.7%            5.8%
                                                ------------    ------------
          Operating income                             -0.2%            5.8%

          Interest expense, net                        -0.9%           -1.6%
                                                ------------    ------------

          Income before income taxes                   -1.1%            4.2%
          Income tax provision                          0.2%           -1.6%
                                                ------------    ------------
          Net income                                   -0.9%            2.6%
                                                ============    ============

                                       10
<PAGE>

SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000

Revenue decreased by $16.6 million or 15.6% for the six months ended June 30,
2001 to $89.5 million compared to the same period in 2000 due primarily to:

o     An increase of $4.3 million generated from the opening of the Summit View
      Treatment Center in Las Vegas, Nevada (96 beds), and the Bill Clayton
      Detention Center in Littlefield, Texas (152 beds), offset by:

o     A decrease of $18.9 million generated from the discontinuance of
      operations at 11 facilities (3,064 beds).

o     A net decrease of $1.5 million generated from per diem rate increases
      offset by net occupancy level decreases in existing facilities.

o     A decrease of $0.5 million in other revenues due to fulfillment of a
      contract with a third party related to the sale of assets in December 1995
      at the Company's Elizabeth, New Jersey facility, and the cessation of
      rental income related to the sale of the Tampa Bay Academy.

Operating expenses decreased $10.2 million or 11.0% for the six months ended
June 30, 2001 to $82.7 million compared to the same period in 2000 due primarily
to the closing of the eleven facilities mentioned above. As a percentage of
revenues, operating expenses increased to 92.5% for the six months ended June
30, 2001 from 87.7% for the six months ended June 30, 2000. The increase was
primarily due to the closing of the facilities mentioned above, lower occupancy
rates and increases in operating expenses on a same-facility basis of
approximately $2.8 million or 3.7%.

Startup costs were $451,000 for the six months ended June 30, 2001 compared to
$16,000 for the six months ended June 30 2000. Startup costs for the six months
ended June 30, 2001, related primarily to the startup of the Salinas, Puerto
Rico facility and the relocation of the Genesis Treatment Program to the Newport
News, Virginia property.

General and administrative expenses remained relatively consistent at $6.2
million for the periods ended June 30, 2001 and 2000. As a percentage of
revenues, general and administrative expenses increased to 6.9% for the six
months ended June 30, 2001 from 5.9% for the six months ended June 30, 2000. The
increase in general and administrative expenses as a percentage of revenue is a
result of the decrease in revenues from the closure of the eleven facilities
mentioned above. Strategies to reduce general and administrative expenses were
implemented during the first half of 2001. However, those reductions were offset
by increases in business development expenses, as the Company continued to
pursue opportunities for growth.

In addition to less significant settlements included in general and
administrative expenses, the Company recorded a $375,000 legal settlement
related to the Mansfield, Texas facility. The settlement was paid in April 2001.

The Company recorded a loss on the sale of assets of $146,000. The loss relates
primarily to one of the airplanes previously used to transport residents from
the various contracting jurisdictions to the facilities in the Midwest region.

Interest expense, net of interest income, was $0.8 million for the six months
ended June 30, 2001 compared to interest expense, net of interest income of $1.7
million for the six months ended June 30, 2000, a net decrease in interest
expense of approximately $0.8 million. This decrease resulted from payments made
on the Company's credit facility, decreasing the outstanding balance on the
credit facility by approximately $15.3 million, and a decrease in interest
rates.

For the six months ended June 30, 2001 the Company recognized an income tax
benefit of $220,000 representing an effective tax rate of 18.2%. For the six
months ended June 30, 2000 the Company recognized an expense for income taxes of
$2.0 million representing an effective tax rate of 39.5%. The decrease in the
effective tax rate was a result of fully reserving the loss for the six months
ended June 30, 2001 at the Bayamon, Puerto Rico facility and non-deductible
items.

THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000

       Revenue decreased by $8.0 million or 15.2% for the three months ended
June 30, 2001 to $44.4 million compared to the same period in 2000 due primarily
due to:

o     A decrease of $8.7 million from the discontinuance of operations at 10
      facilities (2,764 beds) offset by an;

o     An increase of $2.2 million generated from the opening of the Summit View
      Treatment Center in Las Vegas, Nevada (96 beds), and the Bill Clayton
      Detention Center in Littlefield, Texas (152 beds).

o     A net decrease of $1.0 million generated from per diem rate increases
      offset by net occupancy level decreases in existing facilities.

o     A decrease of $400,000 in other revenues due to fulfillment of a contract
      with a third party related to the sale of assets in December 1995, at the
      Company's Elizabeth, New Jersey facility, and the cessation of rental
      income related to the sale of the Tampa Bay Academy.

                                       11
<PAGE>

Operating expenses decreased $4.9 million or 10.7% for the three months ended
June 30, 2001 to $41.3 million compared to the same period in 2000 due primarily
to the closing of the ten facilities mentioned above. As a percentage of
revenues, operating expenses increased to 93.1% for the three months ended June
30, 2001 compared to 88.4% for the three months ended June 30, 2000. The
increase was primarily due to the closing of the facilities mentioned above, and
increases in operating expenses on a same-facility basis of approximately $1.5
million or 4.1%.

Startup costs were $192,000 for the three months ended June 30, 2001 compared to
$11,000 for the three months ended June 30, 2000. Startup costs for the three
months ended June 30, 2001, related primarily to the startup of the Salinas,
Puerto Rico facility and the relocation of the Genesis Treatment Program to the
Newport News, Virginia property.

General and administrative expenses remained relatively consistent, decreasing
to $3.0 million for the three months ended June 30, 2001, from $3.1 million for
the three months ended June 30, 2000. As a percentage of revenues, general and
administrative expenses increased to 6.7% for the three months ended June 30,
2001 from 5.9% for the three months ended June 30, 2000. The increase in general
and administrative expenses as a percentage of revenue resulted from decreased
revenues from the closure of the ten facilities mentioned above. Strategies to
reduce general and administrative expenses were in effect during the three
months ended June 30, 2001. However, those reductions were offset by increases
in business development, as the Company continued to pursue opportunities for
growth.

Interest expense, net of interest income, was $379,000 for the three months
ended June 30, 2001 compared to interest expense, net of interest income of $0.8
million for the three months ended June 30, 2000, a net decrease in interest
expense of $431,000. This decrease resulted from payments made on the Company's
credit facility, decreasing the outstanding balance on the credit facility by
approximately $12.7 million, and a decrease in interest rates.

For the three months ended June 30, 2001 the Company recognized an income tax
benefit of $70,000 representing an effective tax rate of 14.3%. For the three
months ended June 30, 2000 the Company recognized an income tax expense of $0.9
million representing an effective tax rate of 39.5%. The decrease in the
effective tax rate was a result of fully reserving the loss for the six months
ended June 30, 2001 at the Bayamon, Puerto Rico facility and non-deductible
items.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2001 the Company had $0.7 million of cash and working capital of
$12.3 million compared to December 31, 2000 when the Company had $133,000 in
cash and working capital of $18.8 million.

Net cash provided by operating activities was $11.3 million for the six months
ended June 30, 2001 compared to net cash provided by operating activities of
$1.8 million for the six months ended June 30, 2000. The change was attributed
primarily to:

o     A decrease in net income, as discussed above, offset by:

o     A decrease in accounts receivable due to improved receivables turnover and
      the decrease in revenues due to the closed facilities mentioned above.

Net cash of $2.8 million was used in investing activities during the six months
ended June 30, 2001 as compared to $1.5 million used in investing activities in
the six months ended June 30, 2000. In the 2001 period such cash was used
principally for:

o     The purchase of property and equipment at existing facilities, offset by
      cash received from the sale of assets.

o     The purchase of a note receivable related to the Newport News property,
      partially offset by the collection of a note receivable related to the
      December 2000 sale of the Tampa Bay Academy.

In the comparable period for 2000, the principal investing activities of the
Company were:

o     The purchase of property and equipment and expenditures for leasehold
      improvements at existing facilities.

o     Deposits on land purchases for future development.

o     Costs associated with exploring business alternatives and financial
      strategies to enhance shareholder value.

Net cash of $7.9 million was used in financing activities for the six months
ended June 30, 2001 as compared to $7.1 million used in financing activities for
the six months ended June 30, 2000. During the 2001 period the Company's primary
uses of funds were:

o     Repayment of senior debt of $7.7 million.

                                       12
<PAGE>

o     The purchase of $214,000 in treasury stock.

In the comparable period for 2000, the primary uses of funds were repayments of
$14.2 million on subordinated debt offset by proceeds of $6.9 million from
senior debt.

At June 30, 2001 the Company had $15.0 million outstanding under the revolving
line of credit with $6.0 million in availability, and $26.2 million outstanding
under the operating lease credit facility.

During the second quarter the Company realized that it was unlikely that it
would comply with the existing total funded debt to adjusted EBITDA covenant and
entered into negotiations with its lender which culminated with an amendment to
its Credit Agreement and Master Agreement (the "second amendment"). The second
amendment modified the required total funded debt to adjusted EBITDA ratio to
3.25:1 from 2.50:1 for the quarter ended June 30, 2001. The ratio will become
2.50:1 for the quarters ending September 30, 2001, and thereafter. As of June
30, 2001, the Company was in compliance with the amended covenants. Also as a
result of the second amendment, there is no additional funding availability
under the operating lease arrangement.

At June 30, 2001 the Company had construction commitments of approximately
$880,000, which is expected to be funded by the revolving line of credit.

It is not the Company's strategy to make significant cash investments in the
acquisition or construction of new facilities or the expansion of existing
facilities. However, the Company expects to continue to have cash needs as it
relates to financing start-up costs in connection with new contracts that would
improve the profitability of the Company. There can be no assurances that the
Company's operations together with amounts available under the revolving line of
credit will continue to be sufficient to finance its existing level of
operations, fund start-up costs and meet its debt service obligations. Also, a
continued decline in the Company's financial performance, as a result of
decreased occupancy or an increase in operational expenses, could negatively
impact the Company's ability to meet its financial covenants included in the
Credit Agreement. If the Company is unable to generate sufficient cash flow from
operations or meet its covenant requirements, it may be required to further
restructure its Credit Agreement, sell assets or obtain additional financing.
There can be no assurance that the Company will be able to obtain such
restructure or additional financing.

The Company is in negotiations to refinance two of its facilities. One facility
is currently financed under the operating lease credit facility and the other is
now owned by the Company and is encumbered by the Credit Agreement. The
refinancing through municipal revenue bonds are expected to generate
approximately $18 million which will be utilized to reduce the Company's
borrowings under its Credit Agreement including the operating lease credit
facility and revolving line of credit. There can be no assurances that the
Company will be successful in these negotiations.

TREASURY STOCK

On October 20, 2000, the Company announced that its Board of Directors had
authorized a share repurchase program of up to $10.0 million. The repurchases
are funded from the proceeds of asset sales and excess cash flow. In conjunction
with the stock repurchase plan, the Company renegotiated its Credit Agreement
(see above). The Company repurchased approximately 88,000 shares during the six
months ended June 30, 2001 at a cost of approximately $202,000. Based on the
Company capital resources as discussed above, there can be no assurances that
the Company can or will repurchase additional shares subsequent to June 30,
2001.

                                       13
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's current financing is subject to variable rates of interest and is
therefore exposed to fluctuations in interest rates. The Company's subordinated
debt and mortgage on property accrues interest at fixed rates of interest.

The table below presents the principal amounts, weighted average interest rates,
fair value and other terms, by year of expected maturity, required to evaluate
the expected cash flows and sensitivity to interest rate changes. Actual
maturities may differ because of prepayment rights.

<TABLE><CAPTION>
                                                                            EXPECTED MATURITY DATES
                                                                            -----------------------
<S>                              <C>          <C>        <C>        <C>        <C>        <C>        <C>         <C>         <C>
                                                                                                      THERE                   FAIR
                                               2001       2002       2003       2004       2005       AFTER       TOTAL       VALUE
                                               ----       ----       ----       ----       ----       -----       -----       -----

  Fixed rate debt (in thousands)               $  1       $  3       $  3       $  3       $  4       $ 302       $ 316       $ 316
                                               ====       ====       ====       ====       ====       =====       =====       =====
  Weighted average Interest
    Rate at June 30, 2001         10.00%
                                  ======
  Variable rate LIBOR debt (in
    thousands)                                 $  -       $  -      $15,000     $  -       $          $          $15,000     $15,000
                                               ====       ====      =======     ====       ====       =====      =======     =======
   Weighted average interest
     Rate at June 30, 2001        8.00%
                                  =====
</TABLE>













                                       14
<PAGE>

PART II  - - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

           The Company is not party to any legal proceedings, other than
ordinary and routine litigation incidental to its business, which in the opinion
of the Company are material to the Company, either individually or in the
aggregate.

ITEM 2.  CHANGES IN SECURITIES AND USER PROCEEDS

           None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

           None.

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

           No matters were submitted to security holders for a vote during the
           second quarter of 2001.

ITEM 5.  OTHER INFORMATION

           None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

           (a)       Exhibits
                     --------
                     10.72.2  Second Amendment to Credit Agreement
                     10.73.2  Second Amendment to the Master Agreement and Other
                              Operative Documents


           (b)       Reports on Form 8-K
                     -------------------
                     None

                                       15
<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.


CORRECTIONAL SERVICES CORPORATION
Registrant


By:  /s/ Bernard A. Wagner
   ----------------------------------------
   Bernard A. Wagner, Senior Vice President
   Chief Financial Officer


   Dated:  August 14, 2001




















                                       16

