<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549



                                    FORM 10-Q

[X]    Quarterly report pursuant to Section13 or 15(d) of the Securities
       Exchange Act of 1934

       For the period ended February 28, 2001.

[ ]    Transition report pursuant to Section 13 or 15(d) of the Securities
       Exchange Act of 1934

       For the transition period from                to              .
                                      --------------    -------------

       Commission File Number 1-9927
                             -------



                         COMPREHENSIVE CARE CORPORATION
                         ------------------------------
             (Exact name of registrant as specified in its charter)


        DELAWARE                                       95-2594724
----------------------------               ---------------------------------
(State or other jurisdiction               (IRS Employer Identification No.)
 of incorporation or organization)



               200 SOUTH HOOVER BLVD., SUITE 200, TAMPA, FL 33609
               --------------------------------------------------
              (Address of principal executive offices and zip code)


                                 (813) 288-4808
              ----------------------------------------------------
              (Registrant's telephone number, including area code)



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

                                                                 Yes [X] No [ ]


         Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable date:

                  CLASSES                      OUTSTANDING AT APRIL 9, 2001
--------------------------------------         ----------------------------
Common Stock, par value $.01 per share                  3,817,803


<PAGE>   2


                 COMPREHENSIVE CARE CORPORATION AND SUBSIDIARIES

                                      INDEX
<TABLE>
<CAPTION>

                                                                                                               PAGE
                                                                                                               ----
<S>                                                                                                          <C>

PART I - FINANCIAL INFORMATION

         ITEM 1-- CONSOLIDATED FINANCIAL STATEMENTS

                  Consolidated Balance Sheets,
                           February 28, 2001 and May 31, 2000.....................................................3

                  Consolidated Statements of Operations for
                  the Three and Nine months ended February 28, 2001 and  February 29, 2000....................... 4

                  Consolidated Statements of Cash Flows for
                           the Nine months ended February 28, 2001 and  February 29, 2000.........................5

                  Notes to Consolidated Financial Statements...................................................6-10


         ITEM 2 -  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                   RESULTS OF OPERATIONS......................................................................10-14


PART II - OTHER INFORMATION

         ITEM 1 -  LEGAL PROCEEDINGS..........................................................................14-15

         ITEM 4 -  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........................................16

         ITEM 6 -  EXHIBITS AND REPORTS ON FORM 8-K..............................................................16

         SIGNATURES..............................................................................................17
</TABLE>

                                       2
<PAGE>   3


PART I. - FINANCIAL INFORMATION

ITEM 1 -- CONSOLIDATED FINANCIAL STATEMENTS





                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                            FEBRUARY 28,       MAY 31,
                                                                                2001             2000
                                                                            --------------  ---------------
                                                                                (unaudited)
                                                                                (Amounts in thousands)
<S>                                                                             <C>               <C>
ASSETS
Current assets:
   Cash and cash equivalents ..........................................         $  2,716          $  2,518
   Restricted cash ....................................................               48             1,444
   Accounts receivable, less allowance for doubtful accounts of $22 and
     $13 ..............................................................              379               276
   Accounts receivable - pharmacy and laboratory costs ................               --            10,469
   Other receivable ...................................................            2,548             2,548
   Other current assets ...............................................              226               147
                                                                                --------          --------
Total current assets ..................................................            5,917            17,402

Property and equipment, net ...........................................              658             1,086
Notes receivable ......................................................              164             1,145
Goodwill, net .........................................................              954             1,008
Restricted cash .......................................................              561               486
Other assets ..........................................................               75               148
                                                                                --------          --------
Total assets ..........................................................         $  8,329          $ 21,275
                                                                                ========          ========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
   Accounts payable and accrued liabilities ...........................         $  2,971          $  4,028
   Accrued claims payable .............................................            2,639             3,014
   Accrued pharmacy and laboratory costs payable ......................             --              10,469
   Unbenefitted tax refunds received ..................................           12,092            12,092
   Income taxes payable ...............................................               39                44
                                                                                --------          --------
Total current liabilities .............................................           17,741            29,647
                                                                                --------          --------
Long-term liabilities:
   Long-term debt .....................................................            2,244             2,244
   Other liabilities ..................................................               21                56
                                                                                --------          --------
Total long-term liabilities ...........................................            2,265             2,300
                                                                                --------          --------
Total liabilities .....................................................           20,006            31,947
                                                                                --------          --------
Commitments and Contingencies (Notes 5 and 7) Stockholders' deficit:
   Preferred stock, $50.00 par value; authorized 60,000 shares; none
    issued and outstanding ............................................               --                --
   Common stock, $0.01 par value; authorized 12,500,000 shares; issued
    and outstanding 3,817,803 and 3,817,822 ...........................               38                38
   Additional paid-in-capital .........................................           51,813            51,812
   Deferred compensation ..............................................               --               (10)
   Accumulated deficit ................................................          (63,528)          (62,512)
                                                                                --------          --------
Total stockholders' deficit ...........................................          (11,677)          (10,672)
                                                                                --------          --------
Total liabilities and stockholders' deficit ...........................         $  8,329          $ 21,275
                                                                                ========          ========
</TABLE>

                             See accompanying notes.




                                       3
<PAGE>   4



                 COMPREHENSIVE CARE CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                (Amounts in thousands, except per share amounts)

<TABLE>
<CAPTION>


                                                                      THREE MONTHS ENDED                  NINE MONTHS ENDED
                                                               --------------------------------     ------------------------------
                                                               FEBRUARY  28,      FEBRUARY  29,     FEBRUARY 28,     FEBRUARY  29,
                                                                   2001              2000             2001              2000
                                                               -------------      -------------     ------------     -------------
<S>                                                               <C>              <C>               <C>               <C>
OPERATING REVENUES ......................................         $ 4,560          $  3,790          $ 12,740          $ 13,922

COSTS AND EXPENSES:
  Healthcare operating expenses .........................           3,653             3,824            10,478            12,444
  General and administrative expenses ...................             930             1,767             2,811             5,744
  Restructuring expenses ................................              --               884                --               884
  Depreciation and amortization .........................             168               181               509               611
  Recovery of doubtful accounts .........................             (41)              (76)              (82)             (575)
                                                                  -------          --------          --------          --------
                                                                    4,710             6,580            13,716            19,108
                                                                  -------          --------          --------          --------


OPERATING LOSS BEFORE ITEMS SHOWN BELOW .................            (150)           (2,790)             (976)           (5,186)

OTHER INCOME (EXPENSE):

   Loss in connection with prepayment of note receivable.              --                --              (496)               --
   Asset write-down/write-off ...........................              --               (10)               --               (10)
   Reduction in accrued interest expense ................              --                --               290                --
   Interest income ......................................              37                90               130               326
   Interest expense .....................................             (43)              (79)             (164)             (267)
   Gain on sale of assets ...............................              --                 2                --                 8
   Loss on sale of assets ...............................              --                --                --                (1)
   Other non-operating income ...........................             230                --               230                51
                                                                  -------          --------          --------          --------
INCOME (LOSS) BEFORE INCOME TAXES .......................              74            (2,787)             (986)           (5,079)
Income tax expense ......................................               9                --                30                 2
                                                                  -------          --------          --------          --------

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS ...         $    65          $ (2,787)         $ (1,016)         $ (5,081)
                                                                  =======          ========          ========          ========

BASIC AND DILUTED EARNINGS PER SHARE:
Net income (loss) .......................................         $  0.02          $  (0.73)         $  (0.27)         $  (1.33)
                                                                  =======          ========          ========          ========
</TABLE>



                             See accompanying notes.



                                       4
<PAGE>   5



                 COMPREHENSIVE CARE CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                           NINE MONTHS ENDED
                                                                                     ------------------------------
                                                                                     FEBRUARY 28,      FEBRUARY 29,
                                                                                         2001              2000
                                                                                     ------------      ------------
                                                                                          (Amounts in Thousands)

<S>                                                                                 <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss ..................................................................         $ (1,016)         $(5,081)

ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES:

   Depreciation and amortization ..........................................              509              611
   Compensation expense - stock options issued ............................               11               --
   Loss in connection with prepayment of note receivable ..................              496               --
   Gain on sale of assets .................................................               --               (8)
   Loss on sale of assets .................................................               --                1
   Reduction in accrued interest expense ..................................             (290)              --
   Restructuring expense ..................................................               --              144

    Asset write-down/write-off ............................................               --               10

CHANGES IN ASSETS AND LIABILITIES:

   Accounts receivable ....................................................             (103)             604
   Accounts receivable-pharmacy and laboratory costs ......................           10,469               --
   Other current assets, restricted funds, and other non-current assets ...            1,291              320
   Accounts payable and accrued liabilities ...............................             (768)             (56)
   Accrued claims payable .................................................             (375)          (1,120)
   Accrued pharmacy and laboratory costs payable ..........................          (10,469)              --
   Income taxes payable ...................................................               (5)             (35)
   Other liabilities ......................................................              (35)              13
                                                                                    --------          -------
   NET CASH USED IN OPERATIONS ............................................             (285)          (4,597)
                                                                                    --------          -------

CASH FLOWS FROM INVESTING ACTIVITIES:

   Net proceeds from sale of property and equipment .......................               --              137
   Payments received on note receivable ...................................              509               19
   Additions to property and equipment ....................................              (26)            (104)
                                                                                    --------          -------
   NET CASH PROVIDED BY INVESTING ACTIVITIES ..............................              483               52
                                                                                    --------          -------

CASH FLOWS FROM FINANCING ACTIVITIES:

   Repayment of debt ......................................................               --               (2)
                                                                                    --------          -------
   NET CASH USED IN FINANCING ACTIVITIES ..................................               --               (2)
                                                                                    --------          -------
Net increase (decrease) in cash and cash equivalents ......................              198           (4,547)
Cash and cash equivalents at beginning of year ............................            2,518            8,026
                                                                                    --------          -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................................         $  2,716          $ 3,479
                                                                                    ========          =======

</TABLE>


                             See accompanying notes.


                                       5
<PAGE>   6


NOTE 1-- BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

         The consolidated balance sheet as of February 28, 2001, and the related
consolidated statements of operations and cash flows for the three and nine
months ended February 28, 2001 and February 29, 2000 are unaudited and have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. In the opinion of management, all adjustments necessary for a
fair presentation of such financial statements have been included. Such
adjustments consisted only of normal recurring items. The results of operations
for the nine months ended February 28, 2001 are not necessarily indicative of
the results to be expected during the balance of the fiscal year.

         The consolidated financial statements do not include all information
and footnotes necessary for a complete presentation of financial position,
results of operations and cash flows in conformity with generally accepted
accounting principles. The balance sheet at May 31, 2000 has been derived from
the audited financial statements at that date, but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statement presentation. Notes to consolidated financial
statements included in Form 10-K for the year ended May 31, 2000 on file with
the Securities and Exchange Commission provide additional disclosures and a
further description of accounting policies.

         The Company's financial statements are presented on the basis that it
is a going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The consolidated
financial statements do not include any adjustments to reflect the possible
future effects on the recovery and classification of assets or the amount and
classification of liabilities that may result from the outcome of the
uncertainties described in Note 2-- "Liquidity and Capital Resources".

         The accrued claims payable liability represents the estimated ultimate
net amounts owed for all behavioral healthcare services provided through the
respective balance sheet dates. The unpaid claims liability is estimated using
an actuarial paid completion factor methodology and other statistical analyses.
These estimates are subject to the effects of trends in utilization and other
factors. Although considerable variability is inherent in such estimates,
management believes that the unpaid claims liability is adequate. The estimates
are continually reviewed and adjusted as experience develops or new information
becomes known with adjustments included in current operations.

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.

NOTE 2 -- LIQUIDITY AND CAPITAL RESOURCES

         At February 28, 2001, the Company had unrestricted cash and cash
equivalents of $2.7 million. During the nine months ended February 28, 2001, the
Company used $0.3 million in operations. Additionally, $0.5 million was provided
by its investing activities. The Company reported a net loss of $1.0 million for
the nine months ended February 28, 2001, which included the $0.5 million
non-operating loss related to the note receivable prepayment arrangement (see
Note 4 - "Notes Receivable"), a $0.3 million reduction in interest expense in
connection with a change in estimate specific to one third party liability (see
Note 7, Item 2 - "Commitments and Contingencies"), and $0.4 million of income in
connection with two legal settlements. This compares to a net loss of $5.1
million for the nine months ended February 29, 2000. The Company has an
accumulated deficit of $63.5 million and total stockholders' deficit of $11.7
million as of February 28, 2001. Additionally, the Company's current assets at
February 28, 2001 amounted to approximately $5.9 million and current liabilities
were approximately $17.7 million, resulting in a working capital deficiency of
approximately $11.8 million. The working capital deficiency referred to above
results primarily from a $12.1 million liability related to Federal income tax
refunds received in prior years. The ultimate outcome of the Internal Revenue
Service audit whereby it is seeking recovery of the refunds from the Company,
including the amount to be repaid, if any, and the timing thereof, is not
determinable (see Note 5 -- "Income Taxes").

         The Company cannot state with any degree of certainty whether any
required additional equity or debt financing to meet its obligations will be
available to it during Fiscal 2001 and, if available, that the source of
financing would be available on terms and conditions acceptable to the Company.

         The above conditions raise substantial doubt about the Company's
ability to continue as a going concern. The accompanying consolidated financial
statements do not include any adjustment that may result from the outcome of
this uncertainty.




                                       6
<PAGE>   7

         Commencing in Fiscal 2000 and continuing in Fiscal 2001, management
took steps to trim costs and save cash, including making significant staff
reductions, centralizing certain contract management and clinical functions, and
eliminating the Company's California administrative office and related executive
staff positions. The Company's continuation as a going concern is dependent upon
its ability to generate sufficient cash flow to meet its obligations on a timely
basis, to obtain additional financing as may be required and, ultimately, to
attain profitability.

NOTE 3 -- MAJOR CUSTOMERS/CONTRACTS

         The Company manages the delivery of a continuum of psychiatric and
substance abuse services to commercial, Medicare, and Medicaid members on behalf
of employers, health maintenance organizations ("HMOs"), preferred provider
organizations ("PPOs"), government organizations, third-party claims
administrators, and commercial and other group purchasers of behavioral
healthcare services. The Company is subject to changes in Medicaid and Medicare
regulations. As of February 28, 2001, the Company services approximately 800,000
members consisting of approximately 560,000 lives covered through Medicaid and
Medicare programs.

(1)      During Fiscal 2001, the Company had contracts with Humana Health Plans
         ("Humana") under which it provided services to members in Florida.
         Fiscal 2001 operations include $0.7 million of revenue specific to the
         Humana contracts compared to $4.6 million for the nine months ended
         February 29, 2000.

         Effective June 30, 2000, Humana, Inc. ("Humana") completed the sale of
         its North Florida Medicaid business to HealthEase of Florida, Inc.
         Effective July 1, 2000, the Company entered into a one-year contract
         with HealthEase of Florida, Inc. to continue to provide behavioral
         healthcare services to approximately 100,000 of 160,000 Florida members
         that were managed by the Company under contracts with Humana as of June
         2000. Additionally, Humana's contracts with the Company, which cover
         specific commercial, Medicaid and Medicare populations of approximately
         60,000 members terminated September 30, 2000.

         The combined revenue from the contracts that were transitioned to
         HealthEase of Florida, Inc., plus one existing contract that the
         Company had with this HMO, accounted for 17.9%, or $2.3 million, of the
         Company's operating revenues during the nine months ended February 29,
         2001 compared to 2.3% or $0.3 million, for the nine months ended
         February 29, 2000.

(2)      The Company has two contracts with one HMO to provide behavioral
         healthcare services to contracted members in Texas. These combined
         contracts represented approximately 10.3%, or $1.3 million, and 11.3%,
         or $1.6 million, of the Company's operating revenue for the nine months
         ended February 28, 2001 and February 29, 2000, respectively. The
         Company renewed these contracts for two years, with effective dates of
         February 8, 2000.

(3)      During the nine months ended February 28, 2001, the Company implemented
         five new contracts to provide behavioral healthcare services to Florida
         members under contracts with one HMO. For the nine months ended
         February 28, 2001, these five contracts represented approximately
         18.7%, or $2.4 million, of the Company's operating revenue.

NOTE 4 -- NOTES RECEIVABLE

         On August 31, 2000, the Company entered into a prepayment agreement and
note modification with Jefferson Hills Corporation ("JHC") in connection with
the secured promissory note, which originated out of the sale in Fiscal 2000 of
the Company's Aurora, Colorado facility to JHC. The terms of the prepayment
agreement required JHC to immediately remit $500,000 to the Company as a
prepayment on the note. Additionally, the note was modified to reflect a
remaining balance due totaling $170,000 and to require JHC to make monthly
principal and interest payments until April 2006. One final principal payment in
the amount of approximately $146,000 will be due from JHC in April 2006. As an
inducement to JHC to make such prepayment, the Company credited JHC with an
aggregate of approximately $996,000. As a result, the Company recorded a
non-operating loss during the quarter ended August 31, 2000 of approximately
$496,000 in connection with this transaction.

NOTE 5 -- INCOME TAXES

         The Company's provision for income taxes differs from the statutory
rate of 34% due, primarily, to the Company's increased valuation allowance for
losses generated during the nine months ended February 28, 2001 and 2000.

         In connection with the filing of its Federal income tax returns for
fiscal year 1995 and 1996, the Company filed a tentative refund claim to carry
back losses described in Section 172(f) of the Internal Revenue Code ("IRC"),
requesting a refund of $9.4 million and $5.5 million, respectively, of which




                                       7
<PAGE>   8

refunds of $9.4 million and $5.4 million were received. In addition, the Company
also filed amended Federal income tax returns for fiscal years prior to 1995,
requesting similar refunds for losses carried back under Section 172(f) of $6.2
million for 1986; $0.4 million for 1985; $0.7 million for 1983; and $0.4 million
for 1982, a total of $7.7 million.

         Section 172(f) of the IRC provides for a ten year net operating loss
carryback for specific losses attributable to (1) a product liability or (2) a
liability arising under a federal or state law or out of any tort if the act
giving rise to such liability occurs at least three years before the beginning
of the taxable year. The applicability of Section 172(f) to the type of business
in which the Company operates is unclear. No assurance can be provided that the
Company will be able to retain the refunds received to date or that the other
refunds requested will be received.

         During fiscal years 1997 and 1996, the Company recognized a portion of
the refunds received as a tax benefit of $0.3 million and $2.4 million,
respectively. The balance of the refunds received, $12.1 million, is recorded as
a deferred liability, "Unbenefitted tax refunds received", pending resolution by
the Internal Revenue Service ("IRS") of the appropriateness of the 172(f)
carryback. The other refunds requested under Section 172(f) for prior years of
$7.7 million have not been received, nor has the Company recognized any tax
benefit related to these potential refunds.

         On August 21, 1998, the Company received an examination report, dated
August 6, 1998, from the IRS advising the Company that it was disallowing $12.4
million of the $14.8 million of refunds previously received, and the additional
refunds requested of $7.7 million. If the position of the IRS were to be upheld
the Company would be required to repay $12.4 million in refunds previously
received, plus accrued interest of approximately $6.3 million through February
28, 2001. Accordingly, the Company would be entitled to a repayment of the fees
advanced to its tax advisor relating to these refunds of approximately $2.5
million, which is reported as "other receivable" in the accompanying balance
sheets. This report commenced the administrative appeals process. The Company
filed a protest letter with the IRS on November 6, 1998. The IRS reserves the
right to assess and collect the tax previously refunded to the Company at any
time during the appeals process.

         On July 11, 2000, the Company submitted an Offer in Compromise (the
"Offer") to the Appeals Office of the IRS to resolve the controversy with
respect to the refunds at a substantially reduced amount. The IRS is currently
evaluating the Offer. A preliminary meeting with the IRS with respect to the
Offer took place in October 2000. The Company expects that continued discussions
will take place during the fourth quarter of Fiscal 2001. There can be no
assurance that the IRS will accept the Offer.

NOTE 6--  EARNINGS PER SHARE

         The following table sets forth the computation of basic and diluted
earnings per share in accordance with Statement No. 128, Earnings Per Share:

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                                  -----------------------------     ----------------------------
                                                                  FEBRUARY 28,     FEBRUARY 29,     FEBRUARY  28,   FEBRUARY 29,
                                                                     2001             2000             2001             2000
                                                                  ------------     ------------     -------------   ------------
                                                                          (Amounts in thousands, except per share data)
<S>                                                               <C>              <C>               <C>               <C>
NUMERATOR:
Net income (loss) from operations available to common
stockholders ................................................     $         65     $     (2,787)     $     (1,016)     $(5,081)
                                                                  ============     ============      ============      =======

DENOMINATOR:
Denominator for basic and diluted loss per share - adjusted
weighted average shares .....................................            3,818            3,818             3,818        3,818
                                                                  ============     ============      ============      =======

BASIC AND DILUTED EARNINGS PER SHARE:
Net income (loss) ...........................................     $       0.02     $      (0.73)     $      (0.27)     $ (1.33)
                                                                  ============     ============      ============      =======

</TABLE>

The following number of potentially convertible shares of common stock related
to convertible debentures and stock options, all of which are anti-dilutive for
the purposes of computing diluted earnings per share, are as follows at February
28, 2001:

         For conversion of convertible debentures .........         9,044
         Outstanding stock options ........................       889,825
         Possible future issuance under stock options plans       212,884
                                                                ---------
             Total ........................................     1,111,753
                                                                =========

                                       8
<PAGE>   9


NOTE 7 -- COMMITMENTS AND CONTINGENCIES

(1)      During the fiscal year ended May 31, 2000, the Company renewed one
         contract, which included a requirement that the Company maintains a
         $550,000 performance bond throughout the two-year renewal term of the
         contract. This bond was secured by a $150,000 cash deposit, which is
         included in the non-current, restricted cash balance at February 28,
         2001. The original term of the bond was for one year and the bond is
         automatically renewable as long as the contract remains in force.

(2)      On February 19, 2000, the California Superior Court denied the
         Company's Petition for Writ of Mandate of an adverse administrative
         appeal decision regarding application of the Maximum Inpatient
         Reimbursement Limitation ("MIRL") to Medi-Cal reimbursement paid to
         Brea Neuropsychiatric Hospital for its fiscal periods 1983 through
         1986. This facility was owned by the Company until its disposal in
         fiscal year 1991. The subject matter of the Superior Court action
         involved the refusal of the administrative law judge to order further
         reductions in the liability for costs associated with treating high
         cost, long stay Medi-Cal patients, which are commonly referred to as
         "outliers". The Company does not plan to appeal the California Superior
         Court decision for which the Notice of Entry of Judgment was entered on
         February 26,1999.

         During the quarter ended November 30, 2000, the Company lowered its
         estimate by approximately $0.3 million specific to interest charges
         that were previously accrued in connection with this liability. This
         change in estimate was based on information provided to the Company by
         the California Department of Health Services. As of February 28, 2001,
         the Company has approximately $1.0 million accrued relating to this
         matter.

         On March 29, 2001, the Company submitted an offer to the State of
         California to resolve this liability at a substantially reduced amount.
         There can be no assurance that the State of California will accept this
         offer.

(3)      With respect to the contingency related to prior years' income taxes,
         see Note 5, "Income Taxes".

(4)      Though no formal claim or litigation had been instituted, the Company
         had previously reported a pending dispute with Humana Health Plans of
         Puerto Rico, Inc. ("Humana") related to the Company's contract with
         Humana, which expired on March 31, 1999. Effective February 8, 2001,
         the Company reached an agreement with Humana to resolve all outstanding
         legal matters with Humana with no material, adverse impact on the
         Company's financial position.

         As a result of the resolution to this claim, the Company has removed
         the $10.5 million receivable and related accrued claims payable from
         the accompanying balance sheet as of February 28, 2001. These amounts
         were specific to the pharmacy and laboratory costs that were the
         financial responsibility of the Company, but were administered by
         Humana. Because of the uncertainty surrounding the determination of the
         actual pharmacy and laboratory costs incurred, the Company had
         previously reported a 100% loss ratio for the contract.

         Additionally, as a result of the resolution to this claim, Humana
         released approximately $1.0 million to the Company, which was
         previously restricted in accordance with the terms of the contract that
         terminated March 31, 1999. As such, the February 28, 2001 balance sheet
         reflects the reclassification of approximately $1.0 million from
         restricted cash to cash and cash equivalents.

         From time to time, the Company and its subsidiaries are also parties
and their property is subject to ordinary, routine litigation incidental to
their business. In some pending cases, claims may exceed insurance policy limits
and the Company or any one of its subsidiaries may have exposure to a liability
that is not covered by insurance. Management believes that the outcome of such
lawsuits will not have a material adverse impact on the Company's financial
statements.

REGULATORY MONITORING AND COMPLIANCE

         The Company is subject to extensive and evolving state and federal
regulations. These regulations range from licensure and compliance with
regulations related to insurance companies and other risk-assuming entities, to
licensure and compliance with regulations related to healthcare providers. These
laws and regulations may vary considerably among states. As a result, the
Company may be subject to the specific regulatory approach adopted by each state
for the regulation of managed care companies and for providers of behavioral
healthcare treatment services.



                                       9
<PAGE>   10


         Currently, management cannot quantify the potential effects of
additional regulation of the managed care industry, but such costs could have an
adverse effect on future operations to the extent that they are not able to be
recouped in future managed care contracts. Management believes that the Company
is currently in material compliance with the laws and regulations of the
jurisdictions in which it operates.

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

         This Quarterly Report on Form 10-Q includes forward-looking statements,
the realization of which may be impacted by certain important factors discussed
below under "Risk Factors - Important Factors Related to Forward-Looking
Statements and Associated Risks" (page 12).

GENERAL

RESULTS OF OPERATIONS

         The Company reported a net loss of $1.0 million for the nine months
ended February 28, 2001, which included the $0.5 million non-operating loss
related to the note receivable prepayment arrangement (see Note 4 to the
consolidated financial statements - "Notes Receivable"), a $0.3 million
reduction in interest expense in connection with a change in estimate specific
to one third party liability (see Note 7, Item 2 to the consolidated financial
statements - "Commitments and Contingencies"), and $0.4 million of income in
connection with two legal settlements.

         The following table summarizes the Company's financial data for the
three months ended February 28, 2001 and February 29, 2000 (in thousands):

THE THREE MONTHS ENDED FEBRUARY 28, 2001 COMPARED TO THE THREE MONTHS ENDED
FEBRUARY 29, 2000:

<TABLE>
<CAPTION>

                                                           CORPORATE AND
THREE MONTHS ENDED                                             OTHER          CONSOLIDATED
FEBRUARY 28, 2001                         MANAGED CARE       OPERATIONS        OPERATIONS
------------------                      ----------------  ---------------  ------------------
<S>                                        <C>               <C>                 <C>
Operating revenues ............            $4,463            $    97             $ 4,560

Healthcare operating expenses .             3,556                 97               3,653
General/administrative expenses               581                349                 930
Other operating expenses ......               151                (24)                127
                                           ------            -------             -------
                                            4,288                422               4,710
                                           ------            -------             -------
Operating income (loss) .......            $  175            $  (325)            $  (150)
                                           ======            =======             =======
</TABLE>


<TABLE>
<CAPTION>

                                                           CORPORATE AND
THREE MONTHS ENDED                                             OTHER          CONSOLIDATED
FEBRUARY 29, 2000                         MANAGED CARE       OPERATIONS        OPERATIONS
--------------------                    ----------------  ---------------  ------------------
<S>                                        <C>                 <C>                 <C>
Operating revenues ............            $ 3,645             $   145             $ 3,790

Healthcare operating expenses .              3,677                 147               3,824
General/administrative expenses              1,061                 706               1,767

Restructuring expenses ........                 (9)                893                 884
Other operating expenses ......                123                 (18)                105
                                           -------             -------             -------
                                             4,852               1,728               6,580
                                           -------             -------             -------
Operating loss ................            $(1,207)            $(1,583)            $(2,790)
                                           =======             =======             =======

</TABLE>

         The Company reported an operating loss of approximately $0.2 million
for the quarter ended February 28, 2001. Operating revenues increased by $0.8
million, or 20.3%, for the quarter ended February 28, 2001 compared to the
quarter ended February 29, 2000. This increase is attributable to the new
business added during Fiscal 2001.

         Healthcare operating expenses decreased by approximately $0.2 million,
or 4.5%, for the quarter ended February 28, 2001 as compared to the quarter
ended February 29, 2000. Healthcare operating expense as a percentage of net
revenue for managed care operations decreased from 100.9% for the quarter ended
February 29, 2000 to 80.1% for the quarter ended February 28, 2001. This
decrease is attributable to $0.2 million of claims expense recorded in Fiscal




                                       10
<PAGE>   11

2000 specific to the Puerto Rico contract, which terminated in Fiscal 1999.
Additionally, the benefit from the Company's restructuring efforts was not fully
realized until after the centralization project was completed in February 2000.
This restructuring included the centralization of certain contract management
and clinical functions as well as a reduction in costs to manage the company's
healthcare information systems. Efforts are being made to increase revenues
during Fiscal 2001 without adding significantly to our healthcare operating
costs.

         General and administrative expenses decreased by approximately $0.8
million, or 47.4%, for the quarter ended February 28, 2001 as compared to the
quarter ended February 29, 2000. General and administrative expense as a
percentage of revenue decreased from 46.6% for the quarter ended February 29,
2000 to 20.4% for the quarter ended February 28, 2001. This decrease is
attributable to the significant cost reductions that were initiated following
the loss of two major, managed care contracts in Fiscal 2000. The Company is
continuing efforts to reduce its general and administrative costs. These efforts
have included the relocation in March 2001 of the Company's principal business
and executive offices.

         The following table summarizes the Company's financial data for the
nine months ended February 28, 2001 and February 29, 2000 (in thousands):

THE NINE MONTHS ENDED FEBRUARY 28, 2001 COMPARED TO THE NINE MONTHS ENDED
FEBRUARY 29, 2000:

<TABLE>
<CAPTION>

                                                           CORPORATE AND
NINE MONTHS ENDED                                              OTHER          CONSOLIDATED
FEBRUARY 28, 2001                         MANAGED CARE       OPERATIONS        OPERATIONS
-----------------                        ----------------  ---------------  ------------------
<S>                                        <C>                <C>                  <C>
Operating revenues ............            $12,418            $    322             $ 12,740

Healthcare operating expenses .             10,156                 322               10,478
General/administrative expenses              1,760               1,051                2,811
Other operating expenses ......                480                 (53)                 427
                                           -------            --------             --------
                                            12,396               1,320               13,716
                                           -------            --------             --------
Operating income (loss) .......            $    22            $ ( 998)             $   (976)
                                           =======            ========             ========

</TABLE>


<TABLE>
<CAPTION>

                                                          CORPORATE AND
NINE MONTHS ENDED                                             OTHER          CONSOLIDATED
FEBRUARY 29, 2000                        MANAGED CARE       OPERATIONS        OPERATIONS
------------------                      ----------------  ---------------  ------------------
<S>                                        <C>                  <C>                  <C>
Operating revenues ............            $ 13,431             $    491             $ 13,922

Healthcare operating expenses .              11,971                  473               12,444
General/administrative expenses               3,682                2,062                5,744

Restructuring expenses ........                  (9)                 893                  884
Other operating expenses ......                 206                 (170)                  36
                                           --------             --------             --------
                                             15,850                3,258               19,108
                                           --------             --------             --------
Operating loss ................            $ (2,419)            $ (2,767)            $ (5,186)
                                           ========             ========             ========
</TABLE>

         The Company reported an operating loss of approximately $1.0 million
for the nine months ended February 28, 2001. Additionally, operating revenues
decreased by $1.2 million, or 8.5%, for the nine months ended February 28, 2001
compared to the nine months ended February 29, 2000. This decrease is
attributable to the loss of two major, managed care contracts during the third
quarter of Fiscal 2000, which accounted for $2.2 million of operating revenues
during the nine months ended February 29, 2000, offset by a $1.0 million
increase in operating revenue from new business added during Fiscal 2001.

         Healthcare operating expenses decreased by approximately $2.0 million,
or 15.8%, for the nine months ended February 28, 2001 as compared to the nine
months ended February 29, 2000. This decrease is primarily attributable to the
loss of revenues specific to two major contracts that terminated during Fiscal
2000. Healthcare operating expense as a percentage of net revenue for managed
care operations decreased from 89.4% for the nine months ended February 29, 2000
to 82.2% for the nine months ended February 28, 2001. Efforts are being made to
further increase revenues during Fiscal 2001 without adding significantly to our
healthcare operating costs.

         General and administrative expenses decreased by approximately $2.9
million, or 51.1%, for the nine months ended February 28, 2001 as compared to




                                       11
<PAGE>   12

the nine months ended February 29, 2000. General and administrative expense as a
percentage of revenue decreased from 41.3% for the nine months ended February
29, 2000 to 22.1% for the nine months ended February 28, 2001. This decrease is
attributable to the significant cost reductions that were initiated following
the loss of two major, managed care contracts in Fiscal 2000. The Company is
continuing efforts to reduce its general and administrative costs.

         Other operating expenses increased by $0.4 million for the nine months
ended February 28, 2001 compared to the nine months ended February 29, 2000.
This increase is attributable to $0.2 million of bad debt recoveries in the nine
months ended February 29, 2000 specific to the Puerto Rico contract performance
guarantees. Additionally, results for the nine months ended February 29, 2000
included $0.1 million of bad debt recoveries specific to the discontinued
operations and $0.1 million of bad debt recoveries specific to one existing
managed care contract.

CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Except for historical
information, the matters discussed that may be considered forward-looking
statements may be subject to certain risks and uncertainties that could cause
the actual results to differ materially from those projected, including
uncertainties in the market, pricing, competition, procurement efficiencies,
other matters discussed in this quarterly report on Form 10-Q, and other risks
detailed from time to time in the Company's SEC reports.

RISK FACTORS

IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

         This Quarterly Report on Form 10-Q contains certain forward-looking
statements that are based on current expectations and involve a number of risks
and uncertainties. Factors that may materially affect revenues, expenses and
operating results include, without limitation, the Company's success in (i)
expanding the managed behavioral healthcare operations, (ii) effective
management in the delivery of services, (iii) risk and utilization in context of
capitated payouts, and (iv) retaining certain refunds from the IRS.

CONCENTRATION OF RISK

         The Company currently has nine contracts with three HMOs to provide
behavioral healthcare services under commercial, Medicaid, and Medicare plans,
to contracted members in Florida and Texas. These combined contracts represent
approximately 51.0% and 16.2% of the Company's operating revenue for the nine
months ended February 28, 2001 and 2000, respectively. The terms of each
contract are generally for one-year periods and are automatically renewable for
additional one-year periods unless terminated by either party.

UNCERTAINTY OF FUTURE PROFITABILITY

         As of February 28, 2001, the Company had stockholders' deficit of $11.7
million and a working capital deficiency of approximately $11.8 million. The
Company had a net loss for the nine months ended February 28, 2001 of $1.0
million. There can be no assurance that the Company will be able to achieve and
sustain profitability or that the Company can achieve and maintain positive cash
flow on an ongoing basis. Present results of operations are not necessarily
indicative of anticipated future results of operations.

NEED FOR ADDITIONAL FUNDS; UNCERTAINTY OF FUTURE FUNDING

         During prior fiscal years, a principal source of liquidity has been the
private sale of equity securities and debt securities convertible into equity.
Issuance of additional equity securities by the Company could result in
substantial dilution to stockholders.

         The Company may be required to repay a portion of the tax refunds
received from the Internal Revenue Service for Fiscal 1996 and 1995, which
amounted to $9.4 million and $5.4 million, respectively (see "Taxes" below and
Note 5 to the consolidated financial statements - "Income Taxes"). Further, the
Company may be required to repay some amount to Medi-Cal in connection with the
judgment entered on February 26, 1999, which is more fully described under Part
II - Item 2, Legal Proceedings, below.

TAXES

         In connection with the filing of its Federal income tax returns for
fiscal years 1995 and 1996, the Company filed a tentative refund claim to carry
back losses described in Section 172(f) of the IRC, requesting a refund to the




                                       12
<PAGE>   13


Company of $9.4 million and $5.5 million, respectively, of which refunds of $9.4
million and $5.4 million were received. In addition, the Company also filed
amended Federal income tax returns for fiscal years prior to 1995, requesting
similar refunds of losses carried back under Section 172(f) of $6.2 million for
1986; $0.4 million for 1985; $0.7 million for 1983; and $0.4 million for 1982, a
total of $7.7 million.

         During fiscal years 1997 and 1996, the Company recognized a portion of
the refunds received as a tax benefit of $0.3 million and $2.4 million,
respectively. The balance of the refunds received, $12.1 million, are recorded
as a deferred liability, "Unbenefitted tax refunds received", pending resolution
by the IRS of the appropriateness of the Section 172(f) carryback. The
additional refunds requested under Section 172(f) for prior years of $7.7
million have not been received, nor has the Company recognized any tax benefit
related to these potential refunds.

         Section 172(f) of the IRC provides for a ten-year net operating loss
carryback for specific losses attributable to (1) a product liability or (2) a
liability arising under a federal or state law or out of any tort if the act
giving rise to such liability occurs at least three years before the beginning
of the taxable year. The applicability of Section 172(f) to the type of business
in which the Company operates is unclear. No assurance can be provided that the
Company will be able to retain the refunds received to date or that the other
refunds requested will be received.

         As a result of the Section 172(f) carryback claims filed by the
Company, and the tentative refunds received, the Company came under audit with
respect to the tax years previously mentioned.

         On August 21, 1998, the Company received an examination report, dated
August 6, 1998, from the IRS advising the Company that it was disallowing $12.4
million of the $14.8 million of refunds previously received, and the additional
refunds requested of $7.7 million. If the position of the IRS were to be upheld,
the Company would be required to repay $12.4 million in refunds previously
received, plus accrued interest of approximately $6.3 million through February
28, 2001. Accordingly, the Company would be entitled to a repayment of the fees
advanced to its tax advisor relating to these refunds of approximately $2.5
million, which is reported as "other receivable" in the accompanying balance
sheets. This report commenced the administrative appeals process. The Company
filed a protest letter with the IRS on November 6, 1998. The IRS reserves the
right to assess and collect the tax previously refunded to the Company at any
time during the appeals process.

         On July 11, 2000, the Company submitted an Offer in Compromise (the
"Offer") to the Appeals Office of the IRS to resolve the controversy with
respect to the refunds at a substantially reduced amount. The IRS is currently
evaluating the Offer. A preliminary meeting with the IRS with respect to the
Offer took place in October 2000. The Company expects that further discussions
will take place during the fourth quarter of Fiscal 2001. There can be no
assurance that the IRS will accept the Offer.

UNCERTAINTY OF PRICING; HEALTHCARE REFORM AND RELATED MATTERS

         Managed care operations are at risk for costs incurred to supply agreed
upon levels of service. Failure to anticipate or control costs could have
material, adverse effects on the Company. Additionally, the business of
providing services on a full-risk capitation basis exposes the Company to the
additional risk that contracts negotiated and entered into may ultimately be
determined to be unprofitable if utilization levels require the Company to
deliver and provide services at capitation rates which do not account for or
factor in such utilization levels.

         The levels of revenues and profitability of healthcare companies may be
affected by the continuing efforts of governmental and third party payors to
contain or reduce the costs of healthcare through various means. In the United
States, there have been, and the Company expects that there will continue to be,
a number of federal and state proposals to implement governmental controls on
the price of healthcare. It is uncertain what legislative proposals will be
adopted or what actions federal, state or private payors for healthcare goods
and services may take in response to any healthcare reform proposals or
legislation. The Company cannot predict the effect healthcare reforms may have
on its business and no assurance can be given that any such reforms will not
have a material adverse effect on the Company.

SHARES ELIGIBLE FOR FUTURE SALE

         The Company has issued or committed to issue 9,000 shares related to
the 7 1/2% convertible subordinated debentures due April 15, 2010, and options
or other rights to purchase approximately 1,094,000 shares. The Company may
contemplate issuing additional amounts of debt, equity or convertible securities
in public or private transactions for use in fulfilling its future capital needs
(see "Need for Additional Funds; Uncertainty of Future Funding"). Issuance of
additional equity could adversely affect the trading price of the Company's
Common Stock.




                                       13
<PAGE>   14

ANTI-TAKEOVER PROVISIONS

         The Company's Restated Certificate of Incorporation provides for 60,000
authorized shares of Preferred Stock, the rights, preferences, qualifications,
limitations and restrictions of which may be fixed by the Board of Directors
without any vote or action by the stockholders that could have the effect of
diluting the Common Stock or reducing working capital that would otherwise be
available to the Company. As of February 28, 2001, there are no outstanding
shares of Preferred Stock. The Company's Restated Certificate of Incorporation
also provides for a classified board of directors with directors divided into
three classes serving staggered terms. The Company's stock option plans
generally provide for the acceleration of vesting of options granted under such
plans in the event of certain transactions which result in a change of control
of the Company. Section 203 of the General Corporation Law of Delaware prohibits
the Company from engaging in certain business combinations with interested
stockholders. In addition, each share of the Company's Common Stock includes one
right on the terms and subject to the conditions of the Rights Agreement between
the Company and Continental Stock Transfer & Trust Company. These provisions may
have the effect of delaying or preventing a change in control of the Company
without action by the stockholders and therefore could adversely affect the
price of the Company's Common Stock or the possibility of sale of shares to an
acquiring person.

LIMITATIONS ON THE DEDUCTIBILITY OF COMPENSATION UNDER CERTAIN CIRCUMSTANCES

         Pursuant to the 1993 Omnibus Budget Reconciliation Act, a portion of
annual compensation payable after 1993 to any of the Company's five highest paid
executive officers would not be deductible by the Company for federal income tax
purposes to the extent such officers' overall compensation exceeds $1.0 million
per executive officer. Qualifying performance-based incentive compensation,
however, would be both deductible and excluded for purposes of calculating the
$1.0 million base. The Board of Directors has determined that no portion of
anticipated compensation payable to any executive officer in Fiscal 2001 would
be non-deductible.

         Assumptions relating to the foregoing involve judgments that are
difficult to predict accurately and are subject to many factors that can
materially affect results. Budgeting and other management decisions are
subjective in many respects and thus susceptible to interpretations and periodic
revisions based on actual experience and business developments, the impact of
which may cause the Company to alter its budgets which may in turn affect the
Company's results. In light of the factors that can materially affect the
forward-looking information included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives or plans of the Company will be achieved.

PART II - OTHER INFORMATION

ITEM 1 -- LEGAL PROCEEDINGS

(1)  Though no formal claim or litigation had been instituted, the Company had
     previously reported a pending dispute with Humana Health Plans of Puerto
     Rico, Inc. ("Humana") related to the Company's contract with Humana, which
     expired on March 31, 1999. Effective February 8, 2001, the Company reached
     an agreement with Humana to resolve all outstanding legal matters with
     Humana with no material, adverse impact on the Company's financial
     position.

     As a result of the resolution to this claim, the Company has removed the
     $10.5 million receivable and related accrued claims payable from the
     accompanying balance sheet as of February 28, 2001. These amounts were
     specific to the pharmacy and laboratory costs that were the financial
     responsibility of the Company, but were administered by Humana. Because of
     the uncertainty surrounding the determination of the actual pharmacy and
     laboratory costs incurred, the Company had previously reported a 100% loss
     ratio for the contract to date.

     Additionally, as a result of the resolution to this claim, Humana released
     approximately $1.0 million to the Company, which was previously restricted
     in accordance with the terms of the contract that terminated March 31,
     1999. As such, the February 28, 2001 balance sheet reflects the
     reclassification of approximately $1.0 million from restricted cash to cash
     and cash equivalents.

(2)  On February 19, 2000, the California Superior Court denied the
     Company's Petition for Writ of Mandate of an adverse administrative appeal
     decision regarding application of the Maximum Inpatient Reimbursement
     Limitation ("MIRL") to Medi-Cal reimbursement paid to Brea Neuropsychiatric
     Hospital for its fiscal periods 1983 through 1986. The Company owned this
     facility until its disposal in fiscal year 1991. The subject matter of the
     Superior Court action involved the refusal of the administrative law judge



                                       14
<PAGE>   15


     to order further reductions in the liability for costs associated with
     treating high cost, long stay Medi-Cal patients, which are commonly
     referred to as "outliers". The Company does not plan to appeal the
     California Superior Court decision for which the Notice of Entry of
     Judgment was entered on February 26,1999.

     During the quarter ended November 30, 2000, the Company lowered its
     estimate by approximately $0.3 million specific to interest charges that
     were previously accrued in connection with this liability. This change in
     estimate was based on recent information provided to the Company by the
     California Department of Health Services. As of February 28, 2001, the
     Company has approximately $1.0 million accrued relating to this matter.

     On March 29, 2001, the Company submitted an offer to the State of
     California to resolve this liability at a substantially reduced amount.
     There can be no assurance that the State of California will accept this
     offer.

(3)  In connection with the filing of its Federal income tax returns for fiscal
     years 1995 and 1996, the Company filed a tentative refund claim to carry
     back losses described in Section 172(f) of the IRC, requesting a refund to
     the Company of $9.4 million and $5.5 million, respectively, of which
     refunds of $9.4 million and $5.4 million were received. In addition, the
     Company also filed amended Federal income tax returns for fiscal years
     prior to 1995, requesting similar refunds of losses carried back under
     Section 172(f) of $6.2 million for 1986; $0.4 million for 1985; $0.7
     million for 1983; and $0.4 million for 1982, a total of $7.7 million.

     During fiscal years 1997 and 1996, the Company recognized a portion of the
     refunds received as a tax benefit of $0.3 million and $2.4 million,
     respectively. The balance of the refunds received, $12.1 million, is
     recorded as a deferred liability, "Unbenefitted tax refunds received"
     pending resolution by the IRS of the appropriateness of the Section 172(f)
     carryback. The additional refunds requested under Section 172(f) for prior
     years of $7.7 million have not been received, nor has the Company
     recognized any tax benefit related to these potential refunds.

     Section 172(f) of the IRC provides for a ten-year net operating loss
     carryback for specific losses attributable to (1) a product liability or
     (2) a liability arising under a federal or state law or out of any tort if
     the act giving rise to such liability occurs at least three years before
     the beginning of the taxable year. The applicability of Section 172(f) to
     the type of business in which the Company operates is unclear. No assurance
     can be provided that the Company will be able to retain the refunds
     received to date or that the additional refunds requested will be received.

     As a result of the Section 172(f) carryback claims filed by the Company,
     and the tentative refunds received, the Company came under audit with
     respect to the tax years previously mentioned.

     On August 21, 1998, the Company received an examination report, dated
     August 6, 1998, from the IRS advising the Company that it was disallowing
     $12.4 million of the $14.8 million of refunds previously received, and the
     additional refunds requested of $7.7 million. If the position of the IRS
     were to be upheld the Company would be required to repay $12.4 million in
     refunds previously received, plus accrued interest of approximately $6.3
     million through February 28, 2001. Accordingly, the Company would be
     entitled to a repayment of the fees advanced to its tax advisor relating to
     these refunds of approximately $2.5 million, which is reported as "other
     receivable" in the accompanying balance sheets. This report commenced the
     administrative appeals process. The Company filed a protest letter with the
     IRS on November 6, 1998. The IRS reserves the right to assess and collect
     the tax previously refunded to the Company at any time during the appeals
     process.

     On July 11, 2000, the Company submitted an Offer in Compromise (the
     "Offer") to the Appeals Office of the IRS to resolve the controversy with
     respect to the refunds at a substantially reduced amount. The IRS is
     currently evaluating the Offer. A preliminary meeting with the IRS with
     respect to the Offer took place in October 2000. The Company expects to
     continue its discussions during the fourth quarter of Fiscal 2001. There
     can be no assurance that the IRS will accept the Offer.

         From time to time, the Company and its subsidiaries are also parties to
and their property is subject to ordinary, routine litigation incidental to
their business. In some pending cases, claims may exceed insurance policy limits
and the Company or any one of its subsidiaries may have exposure to liability
that is not covered by insurance. Management believes that the outcome of such
lawsuits will not have a material adverse impact on the Company's financial
statements.



                                       15
<PAGE>   16



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

         The results of the Company's Annual Shareholders' Meeting, which was
held on December 15, 2000, were reported in the Company's current report on Form
8-K, dated December 15, 2000.

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

(a)      Exhibits - None.
(b)      Reports on Form 8-K -

         1)       The Company filed a current report on Form 8-K, dated December
                  15, 2000, to report under Item 5 the results of its Annual
                  Meeting of Stockholders which included the election of one
                  Class I Director to the Company's Board of Directors.

         2)       The Company filed a current report on Form 8-K, dated March 2,
                  2001, to report under Item 5 that the Company's principal
                  operating subsidiary, Comprehensive Behavioral Care, Inc.
                  ("CBC") had been selected by one HMO to manage behavioral
                  healthcare benefits for its Connecticut members.

                  Additionally, the Company reported that on February 2, 2001,
                  CBC entered into a new, five-year lease agreement for premises
                  located at 200 South Hoover Blvd., Suite 200, Tampa, Florida
                  33609 and that these new premises would be occupied by both
                  CBC and the Company and will serve as the principal business
                  and executive offices of both CBC and the Company.



                                       16
<PAGE>   17


                                   SIGNATURE

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

                               COMPREHENSIVE CARE CORPORATION




April  13, 2001                By /s/   ROBERT J. LANDIS
                                  --------------------------------
                                        Robert J. Landis
                                        Chairman of the Board of Directors,
                                        Chief Financial Officer, and Treasurer





                                       17