<SUBMISSION>
<ACCESSION-NUMBER>0001072613-01-500833
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>3
<PERIOD>20010630
<FILING-DATE>20010814
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>CORRECTIONAL SERVICES CORP
<CIK>0000914670
<ASSIGNED-SIC>8744
<IRS-NUMBER>113182580
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>000-23038
<FILM-NUMBER>1712961
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>1819 MAIN STREET SUITE 1000
<CITY>SARASOTA
<STATE>FL
<ZIP>34236
<PHONE>9419539199
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>1819 MAIN STREET SUITE 1000
<STREET2>CORRECTIONAL SERVICES CORP
<CITY>SARASOTA
<STATE>FL
<ZIP>34236
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>ESMOR CORRECTIONAL SERVICES INC
<DATE-CHANGED>19931110
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>form10q_10798.txt
<DESCRIPTION>CORRECTIONAL SERVICES, INC. FORM 10-Q
<TEXT>
================================================================================

                       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

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.72.2
<SEQUENCE>3
<FILENAME>ex10-72_10798.txt
<DESCRIPTION>SECOND AMENDMENT TO CREDIT AGREEMENT
<TEXT>
                                                                 EXHIBIT 10.72.2
                                                                 ---------------


                      SECOND AMENDMENT TO CREDIT AGREEMENT
                      ------------------------------------

         THIS SECOND AMENDMENT TO CREDIT AGREEMENT is made as of the __ day of
August, 2001 by and among CORRECTIONAL SERVICES CORPORATION, a corporation duly
organized and validly existing under the laws of the State of Delaware (the
"Company"); each of the Subsidiaries of the Company that is a signatory hereto
or that, pursuant to Section 9.1.20(b) of the Credit Agreement (as hereinafter
defined), shall become a party hereto (individually, a "Subsidiary Guarantor"
and, collectively, the "Subsidiary Guarantors"; and the Subsidiary Guarantors
collectively with the Company, the "Obligors"); each of the lenders that is a
signatory hereto or that, pursuant to Section 12.6(b) of the Credit Agreement,
shall become a "Lender" hereunder (individually, a "Lender" and, collectively,
the "Lenders"); and FLEET NATIONAL BANK, a national banking association and
successor by merger to Summit Bank, as syndication agent for the Lenders (in
such capacity, together with its successors in such capacity, the "Syndication
Agent").

                              W I T N E S S E T H:
                               -------------------

         WHEREAS, the Company, the Subsidiary Guarantors, the Lenders and the
Syndication Agent entered into a Credit Agreement dated August 31, 1999, as
amended by a first amendment thereto dated as of November 10, 2000
(collectively, the "Credit Agreement"); and

         WHEREAS, the Company has requested the Syndication Agent and the
Lenders to make certain amendments to the Credit Agreement as more fully
described herein, and the Syndication Agent and the Lenders have agreed to do
so, subject to and in accordance with the terms and conditions hereinafter set
forth.

         NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

         1.       Defined Terms. Except as otherwise indicated herein, all words
and terms defined in the Credit Agreement shall have the same meanings when used
herein.

         2.       Amendments to Credit Agreement.

                  (a) Section 1.1 of the Credit Agreement is amended by adding
the following definition thereto:

                  "Fleet National Bank" shall mean Fleet National Bank, a
         national banking association.

                  (b) The following definitions appearing in Section 1.1 of the
Credit Agreement are hereby amended to read in their entirety as follows:

                  "Applicable Commitment Fee Rate" shall mean:

<PAGE>

                           (i) with reference to the Revolving Credit
         Commitments, a rate per annum, determined from time to time in
         accordance with the table set forth below. The Applicable Commitment
         Fee Rate shall change on the fifth Business Day following receipt by
         the Syndication Agent of a Compliance Certificate of the Company
         demonstrating that the ratio of the consolidated Total Funded Debt of
         the Company and its Subsidiaries to Adjusted EBITDA as at the last day
         of the immediately preceding fiscal quarter of the Company shall be at
         a different level in the table below, whereupon the Applicable
         Commitment Fee Rate shall be reduced or increased to the applicable
         percentage set forth in such table. Notwithstanding the foregoing, the
         Applicable Commitment Fee Rate shall not be reduced at any time during
         which an Event of Default shall have occurred and be continuing:

               Ratio of Total Funded         Applicable Commitment Fee
                      Debt to                Rate for Revolving Credit
   Level          Adjusted EBITDA                  Commitments
   -----          ---------------            -------------------------
     I              < 3.25:1 and
                    -
                    > 3.00:1                           .50%
                    -

     II             < 3.00:1 and
                    -
                    > 2.50:1                           .50%
                    -

    III             < 2.50:1 and
                    -
                    > 2.00:1                          .375%
                    -

     IV             < 2.00:1                          .375%
                    -

                  "Applicable Margin" shall mean:

                           (i) with reference to Revolving Credit Loans that are
         Base Rate Loans or LIBOR Loans, an amount in excess of the Base Rate or
         the LIBOR Rate, as the case may be, determined from time to time in
         accordance with the table set forth below. The Applicable Margin shall
         change on the fifth Business Day following receipt by the Syndication
         Agent of a Compliance Certificate of the Company demonstrating that the
         ratio of the consolidated Total Funded Debt of the Company and its
         Subsidiaries to Adjusted EBITDA as at the last day of the immediately
         preceding fiscal quarter of the Company shall be at a different level
         in the table below, whereupon the Applicable Margin shall be reduced or
         increased to the applicable percentage set forth in such table.
         Notwithstanding the foregoing, the Applicable Margin shall not be
         reduced at any time during which an Event of Default shall have
         occurred and be continuing:


                                       2
<PAGE>



                                 Applicable Margin for    Applicable Margin for
              Ratio of Total       Revolving Credit       Revolving Credit Loans
              Funded Debt to        Loans that are              that are
   Level     Adjusted EBITDA        Base Rate Loans            LIBOR Loans
   -----     ---------------        ---------------            -----------
     I         < 3.25:1 and              1.75%                     3.25%
               -
               > 3.00:1
               -
     II        < 3.00:1 and              1.50%                     3.00%
               -
               > 2.50:1
               -
    III        < 2.50:1 and              1.25%                     2.75%
               -
               > 2.00:1
               -
     IV        < 2.00:1                  1.00%                     2.50%
               -

                  "Syndication Agent" shall mean Fleet National Bank, its
successors and assigns.

                  (c) Section 9.1.10 of the Credit Agreement is hereby amended
to read in its entirety as follows:

                  9.1.10  Total Funded Debt to Adjusted EBITDA Ratio.

                  The Company will not permit the ratio of (i) the consolidated
         Total Funded Debt of the Company and its Subsidiaries as of the last
         day of any fiscal quarter of the Company ending during any test period
         set forth in the table below, to (ii) Adjusted EBITDA for the period of
         four consecutive fiscal quarters ending on the same day, to be greater
         than the ratio set forth opposite such test period below:

                   Four Fiscal
                   Quarters Ending                       Ratio
                   ---------------                       -----
                   June 30, 2001                         3.25:1
                   September 30, 2001                    2.50:1
                   and thereafter

                  (d) All references in the Credit Agreement to "Summit Bank"
are hereby amended to read "Fleet National Bank".

         3. Amendment Fees. Concurrently herewith and in consideration for the
Syndication Agent and the Lenders entering into this Agreement, the Company is
paying the Syndication Agent (a) an amendment fee in the amount of $127,500 for
the ratable benefit of the Lenders and (b) an amendment fee in the amount of
$51,000 for the sole benefit of the Syndication Agent. The foregoing fees are
earned in full on the date hereof and not subject to rebate or reduction.

                                       3
<PAGE>

         4. Guaranty Reaffirmation. The Subsidiary Guarantors hereby acknowledge
and agree to the amendments to the Credit Agreement effected by this Agreement.
Each of the Subsidiary Guarantors hereby reaffirms all of the terms and
conditions of the guaranty set forth in Section 6 of the Credit Agreement and
agrees that such guaranty is applicable to all of the Guaranteed Obligations, as
amended by this Agreement. The Subsidiary Guarantors hereby acknowledge and
agree that they have no defenses, offsets or counterclaims with respect to the
Guaranteed Obligations and hereby waive and release all claims against the
Syndication Agent and the Lenders with respect thereto.

         5. Representations and Warranties. In order to induce the Syndication
Agent and the Lenders to enter into this Agreement and amend the Credit
Agreement as provided herein, each Obligor hereby represents and warrants to the
Syndication Agent and the Lenders that:

                  (a) All of the representations and warranties of the Obligors
set forth in the Credit Agreement are true, complete and correct in all material
respects on and as of the date hereof with the same force and effect as if made
on and as of the date hereof and as if set forth at length herein.

                  (b) After giving effect to this Agreement, no Default or Event
of Default presently exists and is continuing on and as of the date hereof.

                  (c) Since the date of the Obligors' most recent financial
statements delivered to the Syndication Agent, no Material Adverse Effect has
occurred, and no event has occurred or failed to occur which has had or is
likely to have a Material Adverse Effect.

                  (d) Each Obligor has full power and authority to execute,
deliver and perform any action or step which may be necessary to carry out the
terms of this Agreement and all other agreements, documents and instruments, if
any, executed and delivered by the Obligors to the Syndication Agent and the
Lenders concurrently herewith or in connection herewith (collectively, the
"Amendment Documents"); each Amendment Document to which any of the Obligors is
a party has been duly executed and delivered by such Obligors and is the legal,
valid and binding obligation of such Obligor enforceable in accordance with its
terms, subject to any applicable bankruptcy, insolvency, general equity
principles or other similar laws affecting the enforcement of creditors' rights
generally.

                  (e) The execution, delivery and performance of the Amendment
Documents will not (i) violate any provision of any existing law, statute, rule,
regulation or ordinance binding upon the Obligors, (ii) conflict with, result in
a breach of, or constitute a default under (A) the certificate of incorporation
or by-laws or other equivalent formation documents of any Obligor, (B) any
order, judgment, award or decree of any court, governmental authority, bureau or
agency, or (C) any mortgage, indenture, material lease, contract or other
material agreement or undertaking to which any Obligor is a party or by which
any Obligor or its properties or assets may be bound, or (iii) result in the
creation or imposition of any lien or other encumbrance upon or with respect to
any property or asset now owned or hereafter acquired by any Obligor, other than
liens in favor of the Syndication Agent for the ratable benefit of the Lenders.

                                       4
<PAGE>


                  (f) No consent, license, permit, approval or authorization of,
exemption by, notice to, report to, or registration, filing or declaration with
any Person is required in connection with the execution, delivery, performance
by the Obligors of the Amendment Documents or the transactions contemplated
thereby.

         6. Syndication Agent's Costs. The Company shall on demand reimburse the
Syndication Agent for all out-of-pocket costs, including legal fees and
expenses, incurred by the Syndication Agent in connection with this Agreement,
the transactions referenced herein and the administration of the facilities
described in the Credit Agreement. In the event the Company shall fail to pay
any such invoice within 10 days, the Company irrevocably authorizes the
Syndication Agent to charge the Company's account(s) with the Syndication Agent
(or its affiliate) in the amount of such out-of-pocket costs.

         7. No Change. Except as expressly set forth herein or modified hereby,
all of the terms and provisions of the Credit Agreement and the other Basic
Documents are hereby reaffirmed in their entirety shall continue in full force
and effect.

         8. Counterparts; Effectiveness. This Agreement may be executed in any
number of counterparts, each of which shall be an original and all of which
shall constitute one and the same instrument. This Agreement shall not be
binding upon any party until all parties hereto have executed this Agreement and
delivered it to the Syndication Agent.

         9. No Defenses. The Company hereby acknowledges and agrees that it has
no defenses, offsets or counterclaims with respect to its obligations under the
Credit Agreement, the Notes, the other Basic Documents and the Operative
Documents and hereby waives and releases all claims against the Syndication
Agent and the Lenders with respect thereto.








                                       5
<PAGE>


         10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.

         IN WITNESS WHEREOF, the undersigned have caused their duly authorized
representatives to execute and deliver this Agreement as of the day and year
first above written.

                                         CORRECTIONAL SERVICES CORPORATION,
                                         a Delaware corporation

                                         By:_________________________________
                                               Name:
                                               Title:


                                         YOUTH SERVICES INTERNATIONAL, INC.
                                         a Maryland corporation

                                         By:_________________________________
                                               Name:
                                               Title:


                                         FF&E, INC., a New Jersey corporation


                                         By:_________________________________
                                               Name:
                                               Title:


                                         COMMUNITY CORRECTIONS, INC., a
                                         Texas corporation

                                         By:_________________________________
                                               Name:
                                               Title:


                       (Signatures continued on next page)


                                       6
<PAGE>


                                         YOUTH SERVICES INTERNATIONAL
                                         OF NORTHERN IOWA, INC., an
                                         Iowa corporation

                                         By:_________________________________
                                               Name:
                                               Title:


                                         YOUTH SERVICES INTERNATIONAL
                                         OF BALTIMORE, INC., a Maryland
                                         corporation

                                         By:_________________________________
                                               Name:
                                               Title:

                                         YOUTH SERVICES INTERNATIONAL
                                         OF VIRGINIA, INC., a Virginia
                                         corporation

                                         By:_________________________________
                                               Name:
                                               Title:


                                         YOUTH SERVICES INTERNATIONAL
                                         HOLDINGS, INC., a Delaware corporation


                                         By:_________________________________
                                               Name:
                                               Title:


                       (Signatures continued on next page)


                                       7
<PAGE>


                                         YOUTH SERVICES INTERNATIONAL
                                         REAL PROPERTY PARTNERSHIP, LLP,
                                         a Maryland limited liability
                                         partnership


                                         By:_________________________________
                                               Name:
                                               Title:


                                         YOUTH SERVICES INTERNATIONAL
                                         OF DELAWARE, INC., a Delaware
                                         corporation

                                         By:_________________________________
                                               Name:
                                               Title:


                                         YOUTH SERVICES INTERNATIONAL
                                         OF ILLINOIS, INC., a Maryland
                                         corporation

                                         By:________________________________
                                               Name:
                                               Title:



                                         YOUTH SERVICES INTERNATIONAL
                                         OF MARYLAND, INC., a Maryland
                                         corporation

                                         By:_________________________________
                                               Name:
                                               Title:


                       (Signatures continued on next page)


                                       8
<PAGE>


                                         YOUTH SERVICES INTERNATIONAL
                                         OF MINNESOTA, INC., a Maryland
                                         corporation

                                         By:_________________________________
                                               Name:
                                               Title:


                                         YOUTH SERVICES INTERNATIONAL
                                         OF SOUTH DAKOTA, INC., a South Dakota
                                         corporation

                                         By:_________________________________
                                               Name:
                                               Title:


                                         YOUTH SERVICES INTERNATIONAL
                                         OF TEXAS, INC., a Texas corporation


                                         By:_________________________________
                                               Name:
                                               Title:

                                         YSI OF CENTRAL IOWA, INC.,
                                         an Iowa corporation

                                         By:_________________________________
                                               Name:
                                               Title:



                       (Signatures continued on next page)


                                       9
<PAGE>



                                         YOUTH SERVICES INTERNATIONAL
                                         OF IOWA, INC., a Maryland
                                         corporation

                                         By:_________________________________
                                               Name:
                                               Title:


                                         YOUTH SERVICES INTERNATIONAL
                                         OF MICHIGAN, INC., a Michigan
                                         corporation

                                         By:_________________________________
                                               Name:
                                               Title:


                                         YOUTH SERVICES INTERNATIONAL
                                         OF MISSOURI, INC., a Missouri
                                         corporation

                                         By:_________________________________
                                               Name:
                                               Title:


                                         YOUTH SERVICES INTERNATIONAL
                                         OF TENNESSEE, INC., a Maryland
                                         corporation

                                         By:_________________________________
                                               Name:
                                               Title:

                       (Signatures continued on next page)


                                       10

<PAGE>


                                          YOUTH SERVICES INTERNATIONAL
                                          SOUTHEASTERN PROGRAMS, INC.,
                                          a Maryland corporation

                                          By:_________________________________
                                                Name:
                                                Title:


                                          CSC MANAGEMENT DE PUERTO RICO, INC.,
                                          a Puerto Rico corporation

                                          By:_________________________________
                                                 Name:
                                                 Title:


                                          FLEET NATIONAL BANK,
                                          as the Syndication Agent and a Lender


                                          By:_________________________________
                                                Lisa Cohen
                                                Vice President

                                          SUNTRUST BANK, NASHVILLE, N.A.,
                                          as a Lender

                                          By:_________________________________
                                                Name:
                                                Title:


                                          BANCO POPULAR NORTH AMERICA


                                          By:_________________________________
                                                Name:
                                                Title:


                                       11

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.73.2
<SEQUENCE>4
<FILENAME>ex10-73_10798.txt
<DESCRIPTION>SECOND AMENDMENT TO MASTER AGREEMENT
<TEXT>
                                                                 EXHIBIT 10.73.2
                                                                 ---------------



                      SECOND AMENDMENT TO MASTER AGREEMENT
                          AND OTHER OPERATIVE DOCUMENTS
                          -----------------------------

         THIS SECOND AMENDMENT TO MASTER AGREEMENT AND OTHER OPERATIVE DOCUMENTS
is made as of the ___ day of August, 2001 by and among CORRECTIONAL SERVICES
CORPORATION, a corporation duly organized and validly existing under the laws of
the State of Delaware (the "Company"); each of the Subsidiaries of the Company
that is a signatory hereto or that, pursuant to Section 3.6 of the Master
Agreement (as hereinafter defined), shall become a party hereto as a lessee
(individually, together with the Company in its capacity as a lessee, a "Lessee"
and collectively the "Lessees"); each of the Subsidiaries of the Company
identified under the caption "SUBSIDIARY GUARANTORS" on the signature pages
hereto (individually a "Subsidiary Guarantor" and, collectively, the "Subsidiary
Guarantors"); ATLANTIC FINANCIAL GROUP, LTD., a Texas limited partnership (the
"Lessor"); certain financial institutions parties hereto as lenders (together
with any other financial institution that becomes a party hereto as a lender,
collectively referred to as "Lenders" and individually as a "Lender"); FLEET
NATIONAL BANK, a national banking association and successor by merger to Summit
Bank, as syndication agent for the Lenders (in such capacity, together with its
successors in such capacity, the "Syndication Agent"); and SUNTRUST BANK,
NASHVILLE, N.A., a national banking association, as documentation agent (in such
capacity, the "Document Agent").

                              W I T N E S S E T H:
                               -------------------

         WHEREAS, the Company, the Lessees, the Subsidiary Guarantors, the
Lessor, the Lenders, the Syndication Agent and the Documentation Agent entered
into a Master Agreement dated as of August 31, 1999, as amended by a first
amendment thereto dated as of November 10, 2000 (collectively, the "Master
Agreement"); and

         WHEREAS, the Company has requested the Lessor, the Lenders, the
Syndication Agent and the Documentation Agent to make certain amendments to the
Master Agreement as more fully described herein, and the Lessor, the Lenders,
the Syndication Agent and the Documentation Agent have agreed to do so, subject
to and in accordance with the terms and conditions hereinafter set forth.

         NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

         1.       Defined Terms. Except as otherwise indicated herein, all words
and terms defined in the Appendix A to the Master Agreement shall have the same
meanings when used herein.

         2.       Amendments to Master Agreement.

                  (a) Appendix A to the Master Agreement is amended by adding
the following definition thereto:


<PAGE>


                  "Fleet National Bank" shall mean Fleet National Bank, a
         national banking association.

                  (b) The following definitions appearing in Appendix A to the
Master Agreement are hereby amended to read in their entirety as follows:

                  "Applicable Margin" shall mean:

                           (i) with reference to Advances that are Base Rate
         Advances or LIBOR Advances, an amount in excess of the Base Rate or the
         LIBOR Rate, as the case may be, determined from time to time in
         accordance with the table set forth below. The Applicable Margin shall
         change on the fifth Business Day following receipt by the Syndication
         Agent of a Compliance Certificate of the Company demonstrating that the
         ratio of the consolidated Total Funded Debt of the Company and its
         Subsidiaries to Adjusted EBITDA as at the last day of the immediately
         preceding fiscal quarter of the Company shall be at a different level
         in the table below, whereupon the Applicable Margin shall be reduced or
         increased to the applicable percentage set forth in such table.
         Notwithstanding the foregoing, the Applicable Margin shall not be
         reduced at any time during which an Event of Default shall have
         occurred and be continuing:

<TABLE><CAPTION>
                                            Applicable Margin for           Applicable Margin for
                   Ratio of Total        Revolving Credit Loans that        Revolving Credit Loans
                   Funded Debt to                    are                           that are
   Level          Adjusted EBITDA              Base Rate Loans                    LIBOR Loans
   -----          ---------------            -------------------                 -------------
    <S>             <C>                            <C>                             <C>
     I              < 3.25:1 and                    1.75%                           3.25%
                    -
                    > 3.00:1
                    -
     II             < 3.00:1 and                    1.50%                           3.00%
                    -
                    > 2.50:1
                    -
    III             < 2.50:1 and                    1.25%                           2.75%
                    -
                    > 2.00:1
                    -
     IV             < 2.00:1                        1.00%                           2.50%
                    -
</TABLE>

                  "Funding Termination Date" shall mean the earlier of (i) July
         31, 2001, or (ii) the date which is six months prior to the end of the
         Base Term, as it may be renewed pursuant to Section 14.9 of the Lease.

                  "Syndication Agent" shall mean Fleet National Bank, its
         successors and assigns.

                  (c) Section 5.1(j) of the Master Agreement is hereby amended
to read in its entirety as follows:


                                       2
<PAGE>

                  9.1.10  Total Funded Debt to Adjusted EBITDA Ratio.
                          ------------------------------------------

                  The Company will not permit the ratio of (i) the consolidated
         Total Funded Debt of the Company and its Subsidiaries as of the last
         day of any fiscal quarter of the Company ending during any test period
         set forth in the table below, to (ii) Adjusted EBITDA for the period of
         four consecutive fiscal quarters ending on the same day, to be greater
         than the ratio set forth opposite such test period below:

                   Four Fiscal
                   Quarters Ending                           Ratio
                   ---------------                           -----
                   June 30, 2001                             3.25:1

                   September 30, 2001                        2.50:1
                   and thereafter

                  (d) All references in the Credit Agreement to "Summit Bank"
are hereby amended to read "Fleet National Bank".

         3.       Loan Agreement Availability. The Lessor and the Company
acknowledge and agree that, as a result of the amendment to the term "Funding
Termination Date" effected by this Agreement, the Lessor may not request further
Loans under the Loan Agreement after the date hereof.

         4.       Amendments to Other Operative Documents. Appendix A to each of
the Lease, the Loan Agreement, and the Construction Agency Agreement are hereby
amended to incorporate therein the changes to Appendix A to the Master Agreement
effected by paragraphs 2(a) and (b) of this Agreement.

         5.       Guaranty Reaffirmation. The Company hereby reaffirms all of
the terms and conditions of the Guaranty Agreement and acknowledges and agrees
that it has no defenses, offsets or counterclaims with respect to its
obligations thereunder.

         6.       Representations and Warranties.

                  (a) In order to induce the Syndication Agent and the Lenders
to enter into this Agreement and amend the Master Agreement as provided herein,
each Obligor, as to itself, hereby represents and warrants to the other parties
hereto as follows:

                           (i) All of the representations and warranties of the
Obligors set forth in the Master Agreement are true, complete and correct in all
material respects on and as of the date hereof with the same force and effect as
if made on and as of the date hereof and as if set forth at length herein.

                           (ii) After giving effect to this Agreement, no
Potential Event of Default or Event of Default presently exists and is
continuing on and as of the date hereof.

                                       3
<PAGE>

                           (iii) Since the date of the Obligors' most recent
financial statements delivered to the Syndication Agent, no Material Adverse
Effect has occurred, and no event has occurred or failed to occur which has had
or is likely to have a Material Adverse Effect.

                           (iv) Each Obligor has full power and authority to
execute, deliver and perform any action or step which may be necessary to carry
out the terms of this Agreement and all other agreements, documents and
instruments, if any, executed and delivered by the Obligor to the Syndication
Agent and the Lenders concurrently herewith or in connection herewith
(collectively, the "Amendment Documents"); each Amendment Document to which any
of the Obligors is a party has been duly executed and delivered by such party
and is the legal, valid and binding obligation of such party enforceable in
accordance with its terms, subject to any applicable bankruptcy, insolvency,
general equity principles or other similar laws affecting the enforcement of
creditors' rights generally.

                           (v) The execution, delivery and performance of the
Amendment Documents will not (i) violate any provision of any existing law,
statute, rule, regulation or ordinance binding upon the Obligors, (ii) conflict
with, result in a breach of, or constitute a default under (A) the certificate
of incorporation or by-laws or other equivalent formation documents of any
Obligor, (B) any order, judgment, award or decree of any court, governmental
authority, bureau or agency, or (C) any mortgage, indenture, material lease,
contract or other material agreement or undertaking to which any Obligor is a
party or by which such party or its properties or assets may be bound, or (iii)
result in the creation or imposition of any lien or other encumbrance upon or
with respect to any property or asset now owned or hereafter acquired by any
Obligor, other than liens in favor of the Syndication Agent for the ratable
benefit of the Lenders.

                           (vi) No consent, license, permit, approval or
authorization of, exemption by, notice to, report to, or registration, filing or
declaration with any Person is required in connection with the execution,
delivery or performance by the Obligors of the Amendment Documents or the
transactions contemplated thereby.

                  (b) The Lessor hereby represents and warrants to the other
parties hereto as follows:

                           (i) All of the representations and warranties of the
Lessor set forth in the Master Agreement are true, complete and correct in all
material respects on and as of the date hereof with the same force and effect as
if made on and as of the date hereof and as if set forth at length herein.

                           (ii) Since the date of the Lessor's most recent
financial statements delivered to the Syndication Agent, no Material Adverse
Effect has occurred, and no event has occurred or failed to occur which has had
or is likely to have a Material Adverse Effect.

                           (iii) The Lessor has full power and authority to
execute, deliver and perform any action or step which may be necessary to carry
out the terms of this Agreement and any other Amendment Document; each Amendment
Document to which the Lessor is a party has been duly executed and delivered by
the Lessor and is the legal, valid and binding obligation of the

                                       4
<PAGE>

Lessor enforceable in accordance with its terms, subject to any applicable
bankruptcy, insolvency, general equity principles or other similar laws
affecting the enforcement of creditors' rights generally.

                           (iv) The execution, delivery and performance of the
Amendment Documents will not (i) violate any provision of any existing law,
statute, rule, regulation or ordinance binding upon the Lessor, (ii) conflict
with, result in a breach of, or constitute a default under (A) the formation
documents of the Lessor, (B) any order, judgment, award or decree of any court,
governmental authority, bureau or agency, or (C) any mortgage, indenture,
material lease, contract or other material agreement or undertaking to which the
Lessor is a party or by which the Lessor or its properties or assets may be
bound, or (iii) result in the creation or imposition of any lien or other
encumbrance upon or with respect to any property or asset now owned or hereafter
acquired by the Lessor.

                           (v) No consent, license, permit, approval or
authorization of, exemption by, notice to, report to, or registration, filing or
declaration with any Person is required in connection with the execution,
delivery or performance by the Lessor of the Amendment Documents or the
transactions contemplated thereby.

         7. Syndication Agent's Costs. The Company shall on demand reimburse the
Syndication Agent for all out-of-pocket costs, including legal fees and
expenses, incurred by the Syndication Agent in connection with this Agreement
and the other Amendment Documents and the transactions referenced herein. In the
event the Company shall fail to pay any such invoice within 10 days, the Company
irrevocably authorizes the Syndication Agent to charge the Company's account(s)
with the Syndication in the amount of such out-of-pocket costs.

         8. No Change. Except as expressly set forth herein or modified hereby,
all of the terms and provisions of the Master Agreement and the other Operative
Documents are hereby reaffirmed in their entirety shall continue in full force
and effect.

         9. Counterparts; Effectiveness. This Agreement may be executed in any
number of counterparts, each of which shall be an original and all of which
shall constitute one and the same instrument. This Agreement shall not be
binding upon any party until all parties hereto have executed this Agreement and
delivered it to the Syndication Agent.


                   [Balance of page intentionally left blank]


                                       5
<PAGE>


         10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.

         IN WITNESS WHEREOF, the undersigned have caused their duly authorized
representatives to execute and deliver this Agreement as of the day and year
first above written.

                                        CORRECTIONAL SERVICES CORPORATION,
                                        a Delaware corporation

                                        By:_________________________________
                                              Name:
                                              Title:


                                        YOUTH SERVICES INTERNATIONAL, INC.
                                        a Maryland corporation

                                        By:_________________________________
                                              Name:
                                              Title:

                                        FF&E, INC., a New Jersey corporation


                                        By:_________________________________
                                              Name:
                                              Title:


                                        COMMUNITY CORRECTIONS, INC., a
                                        Texas corporation

                                        By:_________________________________
                                              Name:
                                              Title:



                       (Signatures continued on next page)



                                       6
<PAGE>


                                        YOUTH SERVICES INTERNATIONAL
                                        OF NORTHERN IOWA, INC., an
                                        Iowa corporation

                                        By:_________________________________
                                              Name:
                                              Title:


                                        YOUTH SERVICES INTERNATIONAL
                                        OF BALTIMORE, INC., a Maryland
                                        corporation

                                        By:_________________________________
                                              Name:
                                              Title:


                                        YOUTH SERVICES INTERNATIONAL
                                        OF VIRGINIA, INC., a Virginia
                                        corporation

                                        By:_________________________________
                                              Name:
                                              Title:

                                        YOUTH SERVICES INTERNATIONAL
                                        HOLDINGS, INC., a Delaware corporation


                                        By:_________________________________
                                              Name:
                                              Title:




                       (Signatures continued on next page)


                                       7
<PAGE>


                                        YOUTH SERVICES INTERNATIONAL
                                        REAL PROPERTY PARTNERSHIP, LLP,
                                        a Maryland limited liability partnership


                                        By:_________________________________
                                              Name:
                                              Title: of Both Partners


                                        YOUTH SERVICES INTERNATIONAL
                                        OF DELAWARE, INC., a Delaware
                                        corporation

                                        By:_________________________________
                                              Name:
                                              Title:


                                        YOUTH SERVICES INTERNATIONAL
                                        OF ILLINOIS, INC., a Maryland
                                        corporation

                                        By:________________________________
                                              Name:
                                              Title:


                                        YOUTH SERVICES INTERNATIONAL
                                        OF MARYLAND, INC., a Maryland
                                        corporation

                                        By:_________________________________
                                              Name:
                                              Title:



                       (Signatures continued on next page)



                                       8

<PAGE>


                                        YOUTH SERVICES INTERNATIONAL
                                        OF MINNESOTA, INC., a Maryland
                                        corporation

                                        By:_________________________________
                                              Name:
                                              Title:


                                        YOUTH SERVICES INTERNATIONAL
                                        OF SOUTH DAKOTA, INC., a South Dakota
                                        corporation

                                        By:_________________________________
                                              Name:
                                              Title:


                                        YOUTH SERVICES INTERNATIONAL
                                        OF TEXAS, INC., a Texas
                                        corporation

                                        By:_________________________________
                                              Name:
                                              Title:


                                        YSI OF CENTRAL IOWA, INC.,
                                        an Iowa corporation

                                        By:_________________________________
                                              Name:
                                              Title:



                       (Signatures continued on next page)


                                       9
<PAGE>


                                        YOUTH SERVICES INTERNATIONAL
                                        OF IOWA, INC., a Maryland
                                        corporation

                                        By:_________________________________
                                              Name:
                                              Title:


                                        YOUTH SERVICES INTERNATIONAL
                                        OF MICHIGAN, INC., a Michigan
                                        corporation

                                        By:_________________________________
                                              Name:
                                              Title:


                                        YOUTH SERVICES INTERNATIONAL
                                        OF MISSOURI, INC., a Missouri
                                        corporation

                                        By:_________________________________
                                              Name:
                                              Title:


                                        YOUTH SERVICES INTERNATIONAL
                                        OF TENNESSEE, INC., a Maryland
                                        corporation

                                        By:_________________________________
                                              Name:
                                              Title:


                       (Signatures continued on next page)




                                       10
<PAGE>


                                        YOUTH SERVICES INTERNATIONAL
                                        SOUTHEASTERN PROGRAMS, INC.,
                                        a Maryland corporation

                                        By:_________________________________
                                              Name:
                                              Title:


                                        CSC MANAGEMENT DE PUERTO RICO, INC.,
                                        a Puerto Rico corporation

                                        By:_________________________________
                                              Name:
                                              Title:


                                        FLEET NATIONAL BANK,
                                        as the Syndication Agent and a Lender


                                        By:_________________________________
                                              Lisa Cohen
                                              Vice President

                                        ATLANTIC FINANCIAL GROUP, LTD.,
                                        as Lessor

                                        By:  Atlantic Financial Managers, Inc.,
                                             its General Partner



                                                By:________________________
                                                    Name:
                                                    Title:



                       (Signatures continued on next page)

                                       11

<PAGE>



                                        SUNTRUST BANK, NASHVILLE, N.A.,
                                        as the Documentation Agent and a Lender



                                        By:_________________________________
                                           Name:
                                           Title:

























                                       12

</TEXT>
</DOCUMENT>
</SUBMISSION>
