UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549

                                  FORM 10-QSB/A

(Mark  One)

  X     QUARTERLY  REPORT  UNDER  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
-----
        ACT  OF  1934

                              For the quarterly period ended  September 30, 1998
                                                             -------------------

_____     TRANSITION  REPORT  UNDER  SECTION  13  OR  15(d)  OF THE EXCHANGE ACT

               For  the  transition  period  from  ________  to  ________

                        COMMISSION FILE NUMBER:000-24807

                             CORECARE SYSTEMS, INC.
                             ----------------------
           (Name of small business issuer as specified in its charter)

                 Delaware                                23-2840367
            -------------------                        --------------
       (State  of  jurisdiction  of                  (I.R.S.  Employer
     incorporation  or  organization)               Identification  No.)

           c/o Kirkbride Center, 111 North 49th St., Phila., PA 19139
           ----------------------------------------------------------
                    (Address of principal executive offices)

                                 (215) 471-2600
                                 --------------
                           (Issuer's Telephone Number)

Check  whether  the issuer (1) filed all reports required to be filed by Section
13  or  15(d)  of  the  Exchange  Act during the past 12 months (or 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  No  X
                                                                           ---

           As of April 15, 1999 the issuer had issued and outstanding
               15,949,128 shares, $.001 par value, of Common Stock


<PAGE>
<TABLE>
<CAPTION>
                               CARE SYSTEMS, INC.
                                  FORM 10-QSB/A

                                TABLE OF CONTENTS
                                -----------------




PART I - FINANCIAL INFORMATION
                                                              PAGE
<S>      <C>                                                  <C>
Item 1:  Financial Statements                                     2
Item 2:  Management's Discussion
         and Analysis of Financial Condition
         and Results of Operations                              2-7
Item 3:  Quantitative and Qualitative
         Disclosures About Market Risk                            8



PART II - OTHER INFORMATION
                                                              PAGE

Item 1:  Legal Proceedings                                      8-9
Item 2:  Changes in Securities and Use of Proceeds             9-11
Item 3:  Default and Senior Securities                           11
Item 4:  Submission of Matters to a Vote of Security Holders     11
Item 5:  Other Information                                    11-12
Item 6:  Exhibits and Reports on Form 8-K                        12



                     INDEX TO FINANCIAL STATEMENTS
         ---------------------------------------------------

RESTATED Consolidated Balance Sheet
         Nine months ended
         September 30, 1998 and
         Fiscal Year Ended
         December 31, 1997                                       14

RESTATED Consolidated Statement of Operations
         Nine months ended
         September 30, 1998 and 1997                             15

RESTATED Consolidated Statement of operations
         Quarter ended
         September 30, 1998 and 1997                             16
</TABLE>


<PAGE>
ITEM  1.     FINANCIAL  STATEMENTS

     The  financial  statements can be found at the end of this report beginning
on  pages  14  through  17.


ITEM  2.     Management's  Discussion  and  Analysis


     CoreCare Systems, Inc. (the "Company") is a regional behavioral health care
network  operating  in  Eastern  Pennsylvania.  The  Company's  headquarters are
located  at c/o Kirkbride Center, 111 North 49th Street, Philadelphia, PA  19139
having  recently  moved  its  executive offices from 940 West Valley Road, Suite
2102,  Wayne,  PA  19087.  Its  telephone  number  at  its new location is (215)
471-2600.  In  1996,  the  Company  transferred  its state of incorporation from
Nevada  to  Delaware.

     Management's  discussion  and  analysis  is  based  upon  the  unaudited
consolidated  financial  statements  of  the  Company for the nine month periods
ended  September  30, 1998 and 1997, and include the accounts of the Company and
its  subsidiaries  after  elimination  of  any  inter-company  balances  and
transactions.



RESTATEMENT


     In  its  Registration  Statement on Form 10-SB, the Company reported a loss
from  operations  of  $(460,259)  for  the  year ended December 31, 1997, a loss
before  income  tax  benefit  of  $(2,586,076)  and  net income after income tax
benefit  of  $1,197,656.  Subsequent  to the filing of the Company's Form 10-SB,
the  Company  determined  that  the reported 1997 results were overstated due to
over-accrual  of  revenues.  The  Company  over-accrued  amounts  due  from  a
significant  third party payor, resulting from a miscalculation of the allowable
per  diem  charges  for  in-patient  services.  Primarily  as  a  result  of the
restatement of these revenues, the Company's loss from operations is anticipated
to  be  restated  from  ($460,259) to approximately $(2,840,000).  The Company's
operating  loss  in  1998  is  anticipated  to  be  approximately  $(2,730,000).

     Based  on  the  prior  calculation  of  the  allowable per diem charges for
inpatient services, at the time the 1997 financial statements were issued and at
the  time  the  10-SB was filed, Management's estimates permitted the Company to
record  a  deferred  tax  benefit  in 1997 in accordance with SFAS 109.  Had the
recalculated  per  diem charge been used in Management's estimates, the deferred
tax  benefit  would  not  have been recognized.  As a result, the Company's 1997
results  will  be  restated  to  eliminate  the  $3,783,732  income  tax benefit
previously  reported.  As a result of the elimination of this income tax benefit
and  the  reduction in revenues, the Company's previously reported net income of
$1,197,656  in  1997  will  be  restated  to  a  net  loss  of  $(4,960,000).

<PAGE>
     1998  revenues  increased  over  100%  over restated 1997 revenues, but the
Company  anticipates  reporting  a  loss  from  operations  of  approximately
($2,730,000)  in  1998  and  a  net  loss  of  approximately  ($4,590,000).  The
operating  loss  includes  amortization  of  deferred  financing  charges  of
approximately  $2,400,000,  an  increase  of  approximately  $1,700,000 from the
previous  year.  This  amortization  is  primarily related to deferred financing
charges  from  the  Company's  various debt financing. The Company considers the
deferred  financing  charges  to  be non-recurring expenses.  The operating loss
also  includes  an  impaired  asset write-down of approximately $369,000, also a
non-recurring  expense.  A  summary  of  the previously reported and anticipated
restated  1997  results  and  anticipated  1998  results  is  as  follows:


<TABLE>
<CAPTION>
                                 1997 PREVIOUSLY    1997 RESTATED       1998
                                     STATED          (ESTIMATED)    (ESTIMATED)
                                -----------------  ---------------  ------------
<S>                             <C>                <C>              <C>

Net Revenues                    $     12,854,184   $   10,465,000   $21,617,000 

Income (Loss) from Operations   $       (460,259)  $   (2,840,000)  $(2,730,000)

Net Income (Loss)               $      1,197,656   $   (4,966,000)  $(4,590,000)
</TABLE>


     A  summary  of  the  effects of the restatement are shown on pages 6 and 7.


RESULTS  OF  OPERATIONS:

          Revenue  - Revenue in the nine month period ending September 30, 1998,
          -------
was  $15,606,009,  representing  an  increase  of  approximately 100% over total
income  in  the comparable 1997 period. The material increase in total income in
the  first  nine  months  of  1998,  compared  with  the  prior  year period, is
attributable  to  a  number  of  factors,  including  the  following:

          (a)  Nine months operation of Kirkbride Center during 1998 as compared
to  seven  months  during  1997;

<PAGE>
          (b)  Patient  days  at  the  Kirkbride Center and Westmeade at Warwick
tripled  during  1998  from  1997;

          (c)  Outpatient  revenues  at  the  Kirkbride  Center  and  Penn
Interpersonal  Communications,  Inc.  doubled  in  1998  over  1997;

          (d)  New  programs  at  the  Kirkbride  Center consisting of geriatric
partial  hospitalization  and  43 drug and alcohol rehabilitation beds opened in
July,1998;

          (e)  Dual  diagnosis  program  at the Kirkbride Center expanded during
1998;  and

          (f)  One  of  the Company's subsidiaries, Managed Careware, Inc. d/b/a
CoreCare Management, Inc. ("CMI"), had three months of operations in 1997 versus
nine  months  in  1998.


          Direct  Costs  -  Direct  costs  include  costs principally related to
          -------------
patient  care  such  as  costs  of  nursing,  physicians, technicians, pharmacy,
dietary,  laboratory,  housekeeping  and supplies.  The ratio of direct costs to
revenue was 46% in 1998 versus 61% in 1997.  The improvement in gross profit was
due  to  the  stabilization  of  operations  compared  to  the  less  efficient
utilization  of  resources  following  the  acquisition of the Kirkbride Center.

     Operating,  selling,  general  and  administrative  expenses  -  Operating
     ------------------------------------------------------------
expenses  increased  by  approximately  $5,050,000  from  $5,256,924  in 1997 to
$10,307,214.  The  increase  was  due  to  increases  of $1,727,627 in salaries,
$1,013,990  in  selling  and administrative expenses, $1,250,564 in amortization
expense,  and  $982,607  in  bad  debt  expense.  Salaries and employee benefits
expense  increased  as  a result of the Company's decision to manage and operate
the  Kirkbride  Center  in  1998  as  compared to under a third party management
contract  during  a  portion  of  the  same  period  in  1997.

     Amortization  expense  increased  due  to  the  capitalized  finance  costs
associated  with  the  WRH Mortgage on the Kirkbride Center being amortized over
the  one  year  term  of  the  financing.

     Operating  expenses as a percentage of revenue improved slightly in 1998 at
66.1%  versus  67.0%  in  1997.  When depreciation and amortization are excluded
from  operating expenses the ratio of the remaining expenses to revenue is 52.7%
in  1998  compared  to  57.3%  in  1997.

     Earnings  Before  Interest  Taxes  Depreciation  and  Amortization {EBITDA}
improved  by  $1,615,974  from  ($1,412,788)  in  1997  to  $203,186  in  1998.

<PAGE>
<TABLE>
<CAPTION>
                              CALCULATION OF EBITDA
                             Corecare Systems, Inc.
                        For the Years ended September 30


                             1998          1997
                          -----------  ------------
<S>                       <C>          <C>

Revenue                   $15,606,009  $ 7,848,828 

Direct Costs              $ 7,179,165  $ 4,762,235 

Gross Profit              $ 8,426,844  $ 3,086,653 

Operating Expenses
Salaries & Employee Ben.  $ 2,562,453  $   834,830 
Selling & Admin. Exp.     $ 4,278,263  $ 3,264,273 
Provision for Bad Debts   $ 1,382,942  $   400,338 
------------------------  -----------  ------------
Sub-Total                 $ 8,223,658  $ 4,499,441 

EBITDA                    $   203,186  $(1,412,788)
</TABLE>


OTHER  EXPENSES:

     Interest expense declined by $254,989 from $1,582,596 in 1997 to $1,327,607
for  the  first nine months in 1998 primarily due to lower interest costs of the
WRH  Mortgage  compared  to  the bridge loan it replaced, and to a lesser extent
interest  costs  that  were  capitalized on vacant space at the Kirkbride Center
that  had  not  been  placed  into  service.

          The  Impaired  Asset Write Down Expense of $369,380 is attributable to
the Lakewood property. The property is under a letter of intent for sale and its
net  book  value  was  reduced to reflect its value under the contemplated sale.

     Net  loss  for  the  nine  months ended September 30, 1998 was ($3,577,357)
compared  to  the  loss  of  ($3,752,867)  for  the  same  period  in  1997.


LIQUIDITY  AND  CAPITAL  RESOURCES:

          Due  to  the  Company's  rapid  growth  during  1998,  the Company has
experienced  liquidity  constraints  from  time  to  time.  This was offset by a
completion of a major financing with WRH Mortgage, Inc. during the first quarter
of 1998.  These funds provided capital for improvements to the Kirkbride Center,
reduction  of  more  expensive debt, and working capital.  The Company is in the
process  of  attempting  to consolidate its short-term debt and to refinance the
Kirkbride  Center  mortgage  at  a  lower  interest  rate.


<PAGE>
ITEM  3.     QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  AND  MARKET  RISK

     Not  Applicable



                           PART II - OTHER INFORMATION


ITEM  1.     LEGAL  PROCEEDINGS


     An  affiliate  of  UNION CHELSEA NATIONAL BANK holds a mortgage foreclosure
judgment  against  property  comprising the site of CENTER AT LAKEWOOD, which is
owned  by  LAKEWOOD  RETREAT,  INC.,  a  subsidiary of CRCS.  Pursuant to a loan
modification  agreement  executed  in  April  1995,  and  furthers  extension
agreements,  Union  Chelsea  agreed  to  take no action to enforce this judgment
before  September  16,  1996.  CRCS  has  requested continued forbearance by the
lender  while CRCS attempts to sell the property or refinance the mortgage.  The
lender,  while cooperating with CRCS to sell the property, has not agreed to any
further  extensions.  If  the  lender  were  to  commence  enforcement  of  its
foreclosure  judgment, CRCS would be required to submit the Deed in satisfaction
of  the indebtedness or seek bankruptcy court protection for the subsidiary that
holds  title  to the property.  As of 12/31/1998, the book value of the property
was  judged  to  be  1.1  million  dollars.

     In  July,  1996,  a  lawsuit was filed in the Superior Court of New Jersey,
Somerset  County  by  certain  therapists  formerly  associated  with  CRCS
subsidiaries,  AMERICAN  INSTITUTE  FOR  BEHAVIORAL  COUNSELING,  INC.  and PENN
INTERPERSONAL  COMMUNICATIONS, INC.  The complainant names these subsidiaries as
defendants  as well as CRCS, Anthony and Marlene Todaro, Thomas Fleming and Rose
DiOttavio.  The  suit  alleges that the Plaintiffs were damaged because the fees
charged,  by  CRCS'  subsidiaries  for  providing  office  space  and management
services, exceeded the reasonable value of the services provided.  The suit also
claims  that  CRCS'  subsidiaries  have  not  remitted  to  the  Plaintiffs  an
unspecified  amount  of  fees  collected from patients by the subsidiaries which
allegedly  were  to have been remitted to the plaintiffs.  The suit also alleges
that  the  defendants  tortuously  interfered  with  the plaintiffs' contractual
relationships  with  patients  and  managed  care  companies  and  defamed  the
plaintiffs.  The  complaint  does  not  specify  the  damages  sought  by  the
plaintiffs.  Management  does not believe there is any validity to these claims.
CRCS  does not believe that the ultimate resolution of this litigation will have
a  material,  adverse  effect  upon  the  business, finances or affairs of CRCS.

<PAGE>
     In  November,  1998,  a  former  employee  of CoreCare filed a complaint in
Federal  District  Court  for the Eastern District of Pennsylvania alleging that
the  Company  discriminated  against her in employment by failing to accommodate
her disability, and that the Company retaliated against her for filing a workers
compensation  claim.  The  Company  has  denied  all  of  these  claims.  The
plaintiff's  complaint  asks  for compensatory and punitive damages in excess of
$100,000.  We believe that the ultimate resolution of this claim will not have a
material,  adverse  effect  on  CoreCare's  operations  or  financial condition.

     CRCS is subject to professional malpractice and related claims from time to
time  in the ordinary course of business.  CRCS maintains insurance against such
claims.  Insurers are defending all such claims, and, except as discussed above,
CRCS  is confident that it's ultimate liability or settlement obligation in such
claims  will  be  within  policy  limits.


ITEM  2.     CHANGES  IN  SECURITIES  AND  USE  OF  PROCEEDS

RECENT  SALES  OF  UNREGISTERED  SECURITIES

     The  following  sales  of securities of the Company took place as indicated
below.  Unless otherwise described, all such sales were a result of transactions
that  were exempt from registration under the Securities Act pursuant to Section
4(2)  of the Securities Act, and the shares of the Company's Common Stock issued
(or  issuable  in  the  case  of  warrants  or options granted) were "restricted
securities"  as  that  term  is  defined  in  Rule 144 and may be resold only in
compliance  with  registration  provisions of the Securities Act or an exemption
thereunder.

SHARES  ISSUED  FOR  SERVICES  -  1998
--------------------------------------
     As  of July 1, 1998, the Company issued a total of 711,444 shares of Common
Stock  to  four consultants and advisors of the Company for consulting and other
services  rendered.

ACQUISITION  OF  ASSETS  OF  PREFERRED  MEDICAL  SERVICES,  INC.
----------------------------------------------------------------
     On  April  15,  1998,  the  Company  acquired  certain assets and scheduled
liabilities  of  Preferred  Medical  Services, Inc. ("Preferred,") a billing and
practice  management  business.  Pursuant to the terms of the Assets Acquisition
Agreement, the Company issued on May 4, 1998 a total of 250,000 shares of Common
Stock  to  stockholders of Preferred. The transaction was exempt from securities
registration,  as  the  principals  were  experienced  and  knowledgeable in the
industry.  In  issuing  the shares to the two shareholders of Preferred Medical,
the  Company relied on the exemption from registration under Section 4(2) of the

<PAGE>
Securities  Act.  The  Company  relied  on  4(2)  because  there  were  only two
offerees,  both  of  whom were knowledgeable in the Company's industry, and, the
Company  believes,  in  financial  matters  generally;  the  transaction  was  a
negotiated sale of a business in which the Company believed the two shareholders
were  advised by counsel; and the shares issued were "restricted securities" and
had  transfer  restrictions  placed  on  them which are customary for restricted
securities.

1998  -  SHARES  ISSUED  TO  EMPLOYEES  UNDER  COMPANY  1996  STOCK  PLAN
-------------------------------------------------------------------------
     Out  of  the  shares  reserved  for issuance pursuant to the Company's 1996
Stock  Plan,  as of July 1, 1998, the Company issued a total of 62,300 shares of
Common Stock to a total of 199 employees of the Company. These transactions were
exempt from registration under the Securities Act pursuant to Rule 701 under the
Securities  Act.  The shares of Common Stock issued are restricted securities as
that  term  is defined in Rule 144 and may be resold only in compliance with the
registration  provisions  of  the  Securities  Act  or  an exemption thereunder.

FEBRUARY  1998  INVESTMENT
--------------------------
     In  consideration  of  the payment of $.50 per share, on February 26, 1998,
the  Company issued a total of 250,000 shares of Company Stock to two accredited
investors.  In  connection  with the sale, the company further agreed that for a
period of one-year beginning May 18, 1998, the investors shall have the right to
require  the  Company  to  repurchase  the  shares  for  $1.00  per  share.  The
transactions  with  the  investors  were  exempt  from  registration  under  the
Securities  Act  pursuant  to Section 4(2) of the Securities Act.  The shares of
Common  Stock  issued to the investors are restricted securities as that term is
defined  in  Rule 144 and may be resold only in compliance with the registration
provisions  of  the  Securities  Act  or  an  exemption  thereunder.

NOTES  AND  WC/WD  WARRANTS
---------------------------
     Between  November  1995  and  February  1996,  in  separately  negotiated
transactions,  the  Company  borrowed a total of $359,750 from eight individual,
accredited  investors,  for a term of one year from the date of investment.  The
debts  were  evidenced  by Promissory Notes bearing interest initially at 7% per
annum  and  later  by  amendment  at  10%  per annum. In addition, the investors
received  warrants  to  purchase an aggregate of 334,771 shares of the Company's
Common  Stock at $1.125 per share.  None of the investors were previously or are
currently  affiliated  with  the  Company.  The issuance of these securities was
exempt  from  registration  under Rule 506 of Regulation D. Subsequently, during
1997  and  1998,  the  Company, in consideration of the investors' agreements to

<PAGE>
waive  alleged  defaults under the notes and to forbear payment, issued warrants
to  purchase  an  aggregate  of  246,935 shares of the Company's Common Stock at
$1.125  per  share,  and  an aggregate of 418,366 shares of the Company's Common
Stock. The transactions with the lenders were exempt from registration under the
Securities  Act  pursuant  to Section 4(2) of the Securities Act.  The shares of
Common  Stock  issued  to  the lender, and the shares underlying the warrants if
exercised, are restricted securities as that term is defined in Rule 144 and may
be  resold only in compliance with the registration provisions of the Securities
Act  or  an  exemption  thereunder.

ISSUANCE  OF  COMMON  STOCK  TO  CONVERT  DEBT
----------------------------------------------
     Pursuant  to  an  agreement dated December 31, 1995, the Company on May 14,
1997  issued 50,000 shares of restricted Common Stock to an investor in exchange
for  all  outstanding  obligations  owed  to  him  by  the  Company's subsidiary
Westmeade  Healthcare,  Inc.  On  January  27,  1998, the Company issued 100,000
shares  of  restricted  Common  Stock  to  the  investor  as payment in full for
CoreCare  Behavioral  Health Care, P.C., a Pennsylvania professional corporation
owned  by  the  investor.



ITEM  3.     DEFAULTS  ON  SENIOR  SECURITIES

          None.


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

          None.



ITEM  5.     OTHER  INFORMATION

In October, 1998 the company announced a relationship with the Temple University
Behavioral  Network  to  integrate the Kirkbride continuum of care with services
provided  by  the Temple University Behavioral Health Network (TUHS) to increase
the  services to TUHS' patient population. The scope of the affiliation includes
medical  education  and cooperation in the area of conducting clinical trials on
new  pharmaceutical  products.

Also,  in  October Quantum Clinical Services Group, a wholly owned subsidiary of
Corecare  Systems,  Inc.,  began  generating  revenues from previously announced
contracts  to  conduct  clinical  trials  at  the  Kirkbride  Center on new drug
products  sponsored  by  pharmaceutical  companies.  The  company  initiated two
additional  clinical  trial  contracts  in  the  fourth  quarter.

<PAGE>

The  company  has  applied for the necessary approvals to increase the number of
beds  for its drug and alcohol rehabilitation program from 43 to 63. The company
expects  to  receive  the  approvals  in  January  1999.  The  drug  and alcohol
rehabilitation  program has been operating at or close to capacity shortly after
its  inception.



ITEM  6.     EXHIBITS  AND  REPORTS

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

                  SEC
Exhibit           Reference
  No.             No.
-----             ---

 27               Financial  Data  Schedule





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

               No  new  reports  on  Form  8-K  were  filed in the quarter ended
September  30,  1998.

<PAGE>
                                   SIGNATURES



          In  accordance  with the requirements of the Exchange Act of 1934, the
registrant  caused  this  report  to be signed on its behalf by the undersigned,
thereunto  duly  authorized.


Date:  April  15,  1999
     ------------------


                                   CORECARE  SYSTEMS,  INC.



BY:_____________________________
       ROSE  S.  DIOTTAVIO,  PRESIDENT


<PAGE>
<TABLE>
<CAPTION>
CORECARE  SYSTEMS,  INC.
BALANCE  SHEET
                                                   SEPTEMBER  30,  1998         DECEMBER  31,  1997
                                              ----------------------------  ----------------------------
                                              AS PREVIOUSLY     RESTATED    AS PREVIOUSLY     RESTATED
                                                 REPORTED       REPORTED

<S>                                           <C>             <C>           <C>             <C>
 CURRENT ASSETS
   CASH                                                                           304,267       304,267 
   ACCOUNTS RECEIVABLE, NET                       9,636,831     5,210,277       4,955,473     2,575,473 
   PREPAID AND OTHER ASSETS                       1,674,388       119,388       1,767,367       212,367 
                                              --------------  ------------  --------------  ------------
      TOTAL CURRENT ASSETS                       11,311,219     5,329,665       7,027,107     3,092,107 
                                              --------------  ------------  --------------  ------------

 CONTRACT RIGHTS                                    415,111       415,111         548,663       548,663 
                                              --------------  ------------  --------------  ------------

 REAL ESTATE AND OTHER ASSETS HELD FOR SALE               -     1,365,894       1,513,723     1,513,723 
                                              --------------  ------------  --------------  ------------

 PROPERTY, PLANT, AND EQUIPMENT, NET             15,296,529    13,782,806      10,727,385    10,727,385 
                                              --------------  ------------  --------------  ------------

 OTHER ASSETS:
   GOODWILL, NET                                  1,603,513     1,603,513       1,801,155     1,801,155 
   DEFERRED FINANCE COSTS, NET                    2,190,392       760,799         305,354       305,354 
   SECURITY DEPOSITS                                109,334       109,334         108,468       108,468 
   RESTRICTED CASH                                   13,644        13,644         197,394       197,394 
   OTHER                                          3,096,505       867,773       2,475,964       247,232 
                                              --------------  ------------  --------------  ------------
                                                  7,013,388     3,355,063       4,888,335     2,659,603 
                                              --------------  ------------  --------------  ------------

 TOTAL ASSETS                                    34,036,247    24,248,539      24,705,213    18,541,481 
                                              ==============  ============  ==============  ============


 LIABILITIES AND SHAREHOLDERS'S EQUITY

 CURRENT LIABILITIES:
   LINE OF CREDIT                                 4,047,310     4,047,310       1,582,240     1,582,240 
   CURRENT PORTION OF:                                                                  -             - 
       LONG-TERM DEBT                            15,178,279    15,139,714      10,203,425    10,203,425 
       LEASE TERMINATION FEE PAYABLE                 48,810        72,492          38,565        38,565 
       OBLIGATIONS UNDER CAPITAL LEASE                    -             -          71,763        71,763 
   ACCOUNTS PAYABLE                               3,816,693     3,816,693       2,275,442     2,275,442 
   ADVANCES, OFFICERS-SHAREHOLDERS                  913,172       913,172       1,013,428     1,013,428 
   ACCRUED EXPENSES                               1,200,788       681,296       2,091,675     2,091,675 
   PAYROLL AND PAYROLL TAXES PAYABLE              1,813,004     2,332,496       1,688,105     1,688,105 
   DUE TO MEDICARE                                        -       600,000 
                                              --------------  ------------  --------------  ------------
        TOTAL CURRENT LIABILITIES                27,018,056    27,603,173      18,964,643    18,964,643 
                                              --------------  ------------  --------------  ------------

 LONG TERM DEBT
   NOTES PAYABLE                                  2,206,460     2,206,460       2,192,798     2,192,798 
   LEASE TERMINATION FEE PAYABLE                                                   93,467        93,467 
                                              --------------  ------------  --------------  ------------
                                                  2,206,460     2,206,460       2,286,265     2,286,265 
                                              --------------  ------------  --------------  ------------
 COMMITMENTS AND CONTINGENCIES

 COMPANY OBLIGATED MANDATORILY REDEEMABLE
      SERIES E CONVERTIBLE PREFERRED STOCK                -     1,293,271       1,293,271     1,293,271 
                                              --------------  ------------  --------------  ------------

 SHAREHOLDERS EQUITY (DEFICIENCY)
   PREFERRED STOCK                                       36            26              26            26 
   COMMON STOCK                                      13,846        13,846          12,694        12,694 
   ADDITIONAL PAID IN CAPITAL                    11,276,426    10,082,252       9,357,714     9,357,714 
   ACCUMULATED DEFICIT                           (6,478,577)  (16,950,489)     (7,209,400)  (13,373,132)
                                              --------------  ------------  --------------  ------------
                                                  4,811,731    (6,854,365)      2,161,034    (4,002,698)
                                              --------------  ------------  --------------  ------------

                                                 34,036,247    24,248,539      24,705,213    18,541,481 
                                              ==============  ============  ==============  ============
</TABLE>


                                       14
<PAGE>
<TABLE>
<CAPTION>
 CORECARE  SYSTEMS,  INC.
 BALANCE  SHEET


                                                 09/30/98      12/31/97
                                                 RESTATED      RESTATED
<S>                                           <C>           <C>
 CURRENT ASSETS
   CASH                                                         304,267 
   ACCOUNTS RECEIVABLE, NET                     5,210,277     2,575,473 
   PREPAID AND OTHER ASSETS                       119,388       212,367 
                                              ------------  ------------
      TOTAL CURRENT ASSETS                      5,329,665     3,092,107 
                                              ------------  ------------

 CONTRACT RIGHTS                                  415,111       548,663 
                                              ------------  ------------

 REAL ESTATE AND OTHER ASSETS HELD FOR SALE     1,365,894     1,513,723 
                                              ------------  ------------

 PROPERTY, PLANT, AND EQUIPMENT, NET           13,782,806    10,727,385 
                                              ------------  ------------

 OTHER ASSETS:
   GOODWILL, NET                                1,603,513     1,801,155 
   DEFERRED FINANCE COSTS, NET                    760,799       305,354 
   SECURITY DEPOSITS                              109,334       108,468 
   RESTRICTED CASH                                 13,644       197,394 
   OTHER                                          867,773       247,232 
                                              ------------  ------------
                                                3,355,063     2,659,603 
                                              ------------  ------------

 TOTAL ASSETS                                  24,248,539    18,541,481 
                                              ============  ============


 LIABILITIES AND SHAREHOLDERS'S EQUITY

 CURRENT LIABILITIES:
   LINE OF CREDIT                               4,047,310     1,582,240 
   CURRENT PORTION OF:                                                - 
       LONG-TERM DEBT                          15,139,714    10,203,425 
       LEASE TERMINATION FEE PAYABLE               72,492        38,565 
       OBLIGATIONS UNDER CAPITAL LEASE                  -        71,763 
   ACCOUNTS PAYABLE                             3,816,693     2,275,442 
   ADVANCES, OFFICERS-SHAREHOLDERS                913,172     1,013,428 
   ACCRUED EXPENSES                               681,296     2,091,675 
   PAYROLL AND PAYROLL TAXES PAYABLE            2,332,496     1,688,105 
   DUE TO MEDICARE                                600,000 
                                              ------------  ------------
        TOTAL CURRENT LIABILITIES              27,603,173    18,964,643 
                                              ------------  ------------

 LONG TERM DEBT
   NOTES PAYABLE                                2,206,460     2,192,798 
   LEASE TERMINATION FEE PAYABLE                                 93,467 
                                              ------------  ------------
                                                2,206,460     2,286,265 
                                              ------------  ------------
 COMMITMENTS AND CONTINGENCIES

 COMPANY OBLIGATED MANDATORILY REDEEMABLE
      SERIES E CONVERTIBLE PREFERRED STOCK      1,293,271     1,293,271 
                                              ------------  ------------

 SHAREHOLDERS EQUITY (DEFICIENCY)
   PREFERRED STOCK                                     26            26 
   COMMON STOCK                                    13,846        12,694 
   ADDITIONAL PAID IN CAPITAL                  10,082,252     9,357,714 
   ACCUMULATED DEFICIT                        (16,950,489)  (13,373,132)
                                              ------------  ------------
                                               (6,854,365)   (4,002,698)
                                              ------------  ------------

                                               24,248,539    18,541,481 
                                              ============  ============
</TABLE>


                                       15
<PAGE>
<TABLE>
<CAPTION>
CORECARE  SYSTEMS,  INC.
CONSOLIDATED  STATEMENT  OF  OPERATIONS
QUARTER  ENDING  SEPTEMBER  30,  1998


                                    1998         1997
RESTATED                          RESTATED
<S>                              <C>          <C>
REVENUE:                          5,543,260    3,992,140 
                                 -----------  -----------

Total Direct Costs                2,474,017    2,385,598 
                                 -----------  -----------

Gross Profit                      3,069,243    1,606,542 
                                 -----------  -----------

Operating Expenses:
Salaries and employee benefits      823,835      149,853 
Selling and administrative        1,346,715    1,226,109 
Depreciation                        130,515       87,194 
Amortization                        535,619      146,344 
                                          0            0 
Bad debt expense                    510,147      193,722 
Total operating expenses          3,346,831    1,803,222 
                                 -----------  -----------

INCOME(LOSS) FROM OPERATIONS       (277,588)    (196,680)
                                 -----------  -----------

Other expenses:
Interest expense                    528,165      466,303 
Impaired asset write down                 0            0 

Total other expenses/(income)       528,165      466,303 
                                 -----------  -----------

NET INCOME(LOSS) BEFORE TAXES      (805,753)    (662,983)

INCOME TAXES                              0            0 
                                 -----------  -----------

NET INCOME                         (805,753)    (662,983)

EARNINGS PER SHARE
   Primary                       $   (0.053)  $   (0.049)
  Fully Diluted                  $   (0.053)  $   (0.049)
</TABLE>


                                       16
<PAGE>
<TABLE>
<CAPTION>
CORECARE  SYSTEMS,  INC.
CONSOLIDATED  STATEMENT  OF  OPERATIONS
NINE  MONTHS  ENDING  SEPTEMBER  30,  1998


                                     1998          1997
                                   RESTATED      RESTATED
<S>                              <C>           <C>
Revenue:
  Net patient service revenue     13,750,072     6,137,771 
  Management service revenue       1,517,473     1,320,056 
  Fitness club revenue               338,464       391,061 
                                  15,606,009     7,848,888 
                                 ------------  ------------

Direct Costs:
  Patient services                 6,338,630     3,564,782 
  Management services                625,322       190,702 
  Fitness club                       215,213       228,041 
Total Direct Costs                 7,179,165     3,983,525 
                                 ------------  ------------

Gross Profit                       8,426,844     3,865,364 
                                 ------------  ------------

Operating Expenses:
Salaries and employee benefits     2,562,453     2,037,378 
Selling and administrative         4,278,263     2,797,878 
Depreciation                         335,388       315,388 
Amortization                       1,748,168       448,168 
                                           0             0 
Bad debt expense                   1,382,942       332,943 
Total operating expenses          10,307,214     5,931,755 
                                 ------------  ------------

INCOME(LOSS) FROM OPERATIONS      (1,880,370)   (2,066,392)
                                 ------------  ------------

Other expenses:
Interest expense                   1,327,607     1,327,607 
Impaired asset write down            369,380             0 


Total other expenses/(income)      1,696,987     1,327,607 
                                 ------------  ------------

NET INCOME(LOSS) BEFORE TAXES     (3,577,357)   (3,393,999)
 Income Taxes                              -             - 
-------------------------------  ------------  ------------
 Net income (loss)                (3,577,357)   (3,393,999)
                                 ------------  ------------

EARNINGS PER SHARE
   Primary                       $    (0.235)  $    (0.250)
  Fully Diluted                  $    (0.235)  $    (0.250)
</TABLE>

                                       17
<PAGE>
Notes  to  Financial  Statements

1.     Basis  of  presentation:
The accompanying unaudited financial statements have been prepared in accordance
with  generally accepted accounting principles for interim financial information
and  with  the  instructions  for  Form  10-Q  and Article 10 of Regulation S-X.
Accordingly,  they  do not include all of the information and footnotes required
by  generally  accepted accounting principles for complete financial statements.
In  the  opinion  of management, all adjustments (consisting of normal recurring
accruals)  considered  necessary  for  a  fair  presentation have been included.
Operating  results  for  the  nine  months  ended  September  30,  1998  are not
necessarily  indicative  of the results that may be expected for the year ending
December  31,  1998.  The  unaudited  financial  statements  should  be  read in
conjunction  with  the financial statements and footnote thereto included in the
Company's  report  on  Form  10-SB  for  the  year  ended  December  31,  1997.

2.     The  Business:
Corecare  Systems,  Inc.  through  its  nine  operating  subsidiaries,  provides
management  services to behavioral health service providers; provides, owns, and
operates  outpatient and inpatient behavioral health services; provides clinical
trial services to the pharmaceutical industry; and develops billing software for
the  health  industry.

3.     Summary  of  significant  accounting  policies:

Principles  of  consolidation:
The September 30, 1998 and December 31, 1997 financial statements of the Company
include  accounts  of  Corecare Systems, Inc. and its wholly owned subsidiaries.


<PAGE>