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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

|     |  |                                                                                         
|---- |  | ----------------------------------------------------------------------------------------
|[X]  |  | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
|     |  |                                                                                         
|     |  | For the period ended November 30, 2002.                                                 
|     |  |                                                                                         
|[  ] |  | 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 of incorporation
or organization) |  | (IRS Employer Identification No.)

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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [X]

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 January 7, 2003
|                                       |  |                               
|Common Stock, par value $.01 per share |  |                                | 3,899,051 | 





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TABLE OF CONTENTS



|                                |                                                                                                |                                                     |  |  |  |  |  | 
|------------------------------- | ---------------------------------------------------------------------------------------------- | --------------------------------------------------- |  |  |  |  |  | 
|PART I.  FINANCIAL INFORMATION
|                                | Item 1  Consolidated Financial Statements                                                    
|                                |                                                                                                | Consolidated Balance Sheets                        
|                                |                                                                                                | Consolidated Statements of Operations              
|                                |                                                                                                | Consolidated Statements of Cash Flows              
|                                |                                                                                                | Note 1  Summary of Significant Accounting Policies
|                                | Item 2  Managements discussion and analysis of financial condition and Results of operations
|                                | Item 4  Controls and Procedures                                                              
|PART II  OTHER INFORMATION    
|                                | Item 1  LEGAL PROCEEDINGS                                                                    
|                                | Item 4  Submission of Matters to a Vote of Security Holders                                  
|                                | Item 6  Exhibits and Reports on Form 8-K                                                     
|                                | SIGNATURES                                                                                    
|CEO Certification              
|CFO Certification              



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##### Table of Contents



Index

|                               |  |                                                                                                |                                                                                                     |  |       |      | 
|------------------------------ |  | ---------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- |  | ----- | ---- | 
|                               |  |                                                                                                |                                                                                                     |  | Page 
|PART I  FINANCIAL INFORMATION |  |                                                                                                |                                                                                                     | 
|                               |  | Item 1
Consolidated Financial Statements                                                      |                                                                                                     |  |       |     
|                               |  |                                                                                                | Consolidated Balance Sheets,
November 30, 2002 and May 31, 2002                                     |  |       | 3    | 
|                               |  |                                                                                                | Consolidated Statements of Operations for
the Three and Six months ended November 30, 2002 and 2001 |  |       | 4    | 
|                               |  |                                                                                                | Consolidated Statements of Cash Flows for
the Six months ended November 30, 2002 and 2001           |  |       | 5    | 
|                               |  |                                                                                                | Notes to Consolidated Financial Statements                                                          |  |       | 6-10 | 
|                               |  | Item 2  Managements discussion and analysis of financial condition and
Results of operations |                                                                                                     |  | 10-16 |     
|                               |  | Item 4  Controls and Procedures                                                               |                                                                                                     |  | 16    |     
|                               |  |                                                                                                |                                                                                                     | 
|PART II  OTHER INFORMATION    |  |                                                                                                |                                                                                                     | 
|                               |  | Item 1 Legal Proceedings                                                                      |                                                                                                     |  | 16-17 |     
|                               |  | Item 4  Submission Of Matters To A Vote Of Security Holders                                   |                                                                                                     |  | 17-18 |     
|                               |  | Item 6 Exhibits and Reports on Form 8-K                                                       |                                                                                                     |  | 18    |     
|                               |  | Signatures                                                                                     |                                                                                                     |  | 19    |     
|                               |  | Certifications                                                                                 |                                                                                                     |  | 19-20 |     

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COMPREHENSIVE CARE CORPORATION AND SUBSIDIARIES




PART I.  FINANCIAL INFORMATION




Item 1  Consolidated Financial Statements




Consolidated Balance Sheets

|                                              |                                                                                                             |   |                        |         |         |   |         |         |  
|--------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | - | ---------------------- | ------- | ------- | - | ------- | ------- | -
|                                              |                                                                                                             |   | November 30,           |         | May 31,
|                                              |                                                                                                             |   | 2002                   |         | 2002   
|                                              |                                                                                                             |   |                        |         |        
|                                              |                                                                                                             |   | (unaudited)            |         |         |   |        
|                                              |                                                                                                             |   | (Amounts in thousands)
|ASSETS                                        |                                                                                                             |   |                        |         |         |   |         |        
|Current assets:                               |                                                                                                             |   |                        |         |         |   |         |        
|                                              | Cash and cash equivalents                                                                                   |   | $                      | 4,254   |         |   | $       | 5,340   |  
|                                              | Accounts receivable, less allowance for doubtful accounts of $9 and $8                                      |   |                        | 1,131   |         |   |         | 324     |  
|                                              | Accounts receivable  managed care reinsurance contract                                                     |   |                        | 637     |         |   |         | 575     |  
|                                              | Other receivable                                                                                            |   |                        | 2,548   |         |   |         | 2,548   |  
|                                              | Other current assets                                                                                        |   |                        | 576     |         |   |         | 591     |  
|                                              |                                                                                                             |   |                        |         |         |   |         |        
|Total current assets                          |                                                                                                             |   | 9,146                  |         |         |   | 9,378   |        
|Property and equipment, net                   |                                                                                                             |   | 204                    |         |         |   | 291     |        
|Notes receivable                              |                                                                                                             |   | 157                    |         |         |   | 159     |        
|Goodwill, net                                 |                                                                                                             |   | 991                    |         |         |   | 991     |        
|Restricted cash                               |                                                                                                             |   | 431                    |         |         |   | 430     |        
|Other assets                                  |                                                                                                             |   | 143                    |         |         |   | 150     |        
|                                              |                                                                                                             |   |                        |         |         |   |         |        
|Total assets                                  |                                                                                                             | $ | 11,072                 |         |         | $ | 11,399  |        
|                                              |                                                                                                             |   |                        |         |         |   |         |        
|LIABILITIES AND STOCKHOLDERS DEFICIT         |                                                                                                             |   |                        |         |         |   |         |        
|Current liabilities:                          |                                                                                                             |   |                        |         |         |   |         |        
|                                              | Accounts payable and accrued liabilities                                                                    |   | $                      | 1,826   |         |   | $       | 2,891   |  
|                                              | Accrued claims payable                                                                                      |   |                        | 4,544   |         |   |         | 4,635   |  
|                                              | Accrued reinsurance claims payable                                                                          |   |                        | 2,561   |         |   |         | 2,019   |  
|                                              | Unbenefitted tax refunds received                                                                           |   |                        | 12,092  |         |   |         | 12,092  |  
|                                              | Income taxes payable                                                                                        |   |                        | 14      |         |   |         | 16      |  
|                                              |                                                                                                             |   |                        |         |         |   |         |        
|Total current liabilities                     |                                                                                                             |   | 21,037                 |         |         |   | 21,653  |        
|                                              |                                                                                                             |   |                        |         |         |   |         |        
|Long-term liabilities:                        |                                                                                                             |   |                        |         |         |   |         |        
|                                              | Long-term debt                                                                                              |   |                        | 2,244   |         |   |         | 2,244   |  
|                                              | Other liabilities                                                                                           |   |                        | 15      |         |   |         | 21      |  
|                                              |                                                                                                             |   |                        |         |         |   |         |        
|Total long-term liabilities                   |                                                                                                             |   | 2,259                  |         |         |   | 2,265   |        
|                                              |                                                                                                             |   |                        |         |         |   |         |        
|Total liabilities                             |                                                                                                             |   | 23,296                 |         |         |   | 23,918  |        
|                                              |                                                                                                             |   |                        |         |         |   |         |        
|Commitments and Contingencies (Notes 4 and 6) |                                                                                                             |   |                        |         |         |   |         |        
|Stockholders deficit:                        |                                                                                                             |   |                        |         |         |   |         |        
|                                              | Preferred stock, $50.00 par value; authorized 60,000 shares; none issued                                    |   |                        |        |         |   |         |        |  
|                                              | Common stock, $0.01 par value; authorized 12,500,000 shares; issued
and outstanding 3,899,051 and 3,878,552 |   |                        | 39      |         |   |         | 39      |  
|                                              | Additional paid-in-capital                                                                                  |   |                        | 51,862  |         |   |         | 51,842  |  
|                                              | Deferred compensation                                                                                       |   |                        |        |         |   |         | (1      | )
|                                              | Accumulated deficit                                                                                         |   |                        | (64,125 | )       |   |         | (64,399 | )
|                                              |                                                                                                             |   |                        |         |         |   |         |        
|Total stockholders deficit                   |                                                                                                             |   | (12,224                | )       |         |   | (12,519 | )      
|                                              |                                                                                                             |   |                        |         |         |   |         |        
|Total liabilities and stockholders deficit   |                                                                                                             | $ | 11,072                 |         |         | $ | 11,399  |        
|                                              |                                                                                                             |   |                        |         |         |   |         |        

See accompanying notes.

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COMPREHENSIVE CARE CORPORATION AND SUBSIDIARIES




Consolidated Statements of Operations
(Unaudited)
(Amounts in thousands, except per share amounts)

|                                                                  |                                     |         |       |                    |       |                  |       |       |       |      |        |        |       |   |        |        |       | 
|----------------------------------------------------------------- | ----------------------------------- | ------- | ----- | ------------------ | ----- | ---------------- | ----- | ----- | ----- | ---- | ------ | ------ | ----- | - | ------ | ------ | ----- | 
|                                                                  |                                     |         |       | Three months Ended |       | Six Months Ended
|                                                                  |                                     |         |       | November 30,       |       | November 30,    
|                                                                  |                                     |         |       |                    |       |                 
|                                                                  |                                     |         |       | 2002               |       | 2001             |       | 2002  |       | 2001
|                                                                  |                                     |         |       |                    |       |                  |       |       |       |     
|Operating revenues                                                |                                     | $       | 8,631 |                    |       | $                | 6,470 |       |       | $    | 16,938 |        |       | $ | 12,596 |       
|Costs and expenses:                                               |                                     |         |       |                    |       |                  |       |       |       |      |        |        |       |   |        |       
|                                                                  | Healthcare operating expenses       |         |       | 7,760              |       |                  |       | 5,524 |       |      |        | 15,113 |       |   |        | 10,734 |      
|                                                                  | General and administrative expenses |         |       | 952                |       |                  |       | 873   |       |      |        | 1,840  |       |   |        | 1,699  |      
|                                                                  | Recovery of doubtful accounts       |         |       | (6                 | )     |                  |       | (71   | )     |      |        | (14    | )     |   |        | (85    | )    
|                                                                  | Depreciation and amortization       |         |       | 63                 |       |                  |       | 87    |       |      |        | 131    |       |   |        | 188    |      
|                                                                  |                                     |         |       |                    |       |                  |       |       |       |      |        |        |       |   |        |       
|                                                                  |                                     |         | 8,769 |                    |       |                  | 6,413 |       |       |      | 17,070 |        |       |   | 12,536 |       
|                                                                  |                                     |         |       |                    |       |                  |       |       |       |      |        |        |       |   |        |       
|Operating (loss) income before items shown below                  |                                     |         | (138  | )                  |       |                  | 57    |       |       |      | (132   | )      |       |   | 60     |       
|Other income (expense):                                           |                                     |         |       |                    |       |                  |       |       |       |      |        |        |       |   |        |       
|                                                                  | Gain on sale of assets              |         |       | 1                  |       |                  |       |      |       |      |        | 4      |       |   |        |       |      
|                                                                  | Loss on disposal of assets          |         |       |                   |       |                  |       |      |       |      |        | (5     | )     |   |        |       |      
|                                                                  | Interest income                     |         |       | 13                 |       |                  |       | 20    |       |      |        | 29     |       |   |        | 53     |      
|                                                                  | Interest expense                    |         |       | (44                | )     |                  |       | (44   | )     |      |        | (90    | )     |   |        | (89    | )    
|                                                                  | Other non-operating income          |         |       | 478                |       |                  |       | 2     |       |      |        | 478    |       |   |        | 17     |      
|                                                                  |                                     |         |       |                    |       |                  |       |       |       |      |        |        |       |   |        |       
|Income before income taxes                                        |                                     |         | 310   |                    |       |                  | 35    |       |       |      | 284    |        |       |   | 41     |       
|Income tax expense                                                |                                     |         | 3     |                    |       |                  | 2     |       |       |      | 10     |        |       |   | 9      |       
|                                                                  |                                     |         |       |                    |       |                  |       |       |       |      |        |        |       |   |        |       
|Income before cumulative effect of change in accounting principle |                                     | $       | 307   |                    |       | $                | 33    |       |       | $    | 274    |        |       | $ | 32     |       
|Cumulative effect of change in accounting principle               |                                     |         |      |                    |       |                  |      |       |       |      |       |        |       |   | 55     |       
|                                                                  |                                     |         |       |                    |       |                  |       |       |       |      |        |        |       |   |        |       
|Net income attributable to common stockholders                    |                                     | $       | 307   |                    |       | $                | 33    |       |       | $    | 274    |        |       | $ | 87     |       
|                                                                  |                                     |         |       |                    |       |                  |       |       |       |      |        |        |       |   |        |       
|Earnings per common share  basic:                                |                                     |         |       |                    |       |                  |       |       |       |      |        |        |       |   |        |       
|Income before cumulative effect of change in accounting principle |                                     | $       | 0.08  |                    |       | $                | 0.01  |       |       | $    | 0.07   |        |       | $ | 0.01   |       
|Cumulative effect of change in accounting principle               |                                     |         |      |                    |       |                  |      |       |       |      |       |        |       |   | 0.01   |       
|                                                                  |                                     |         |       |                    |       |                  |       |       |       |      |        |        |       |   |        |       
|Net income                                                        |                                     | $       | 0.08  |                    |       | $                | 0.01  |       |       | $    | 0.07   |        |       | $ | 0.02   |       
|                                                                  |                                     |         |       |                    |       |                  |       |       |       |      |        |        |       |   |        |       
|Earnings per common share  diluted:                              |                                     |         |       |                    |       |                  |       |       |       |      |        |        |       |   |        |       
|Income before cumulative effect of change in accounting principle |                                     | $       | 0.07  |                    |       | $                | 0.01  |       |       | $    | 0.07   |        |       | $ | 0.01   |       
|Cumulative effect of change in accounting principle               |                                     |         |      |                    |       |                  |      |       |       |      |       |        |       |   | 0.01   |       
|                                                                  |                                     |         |       |                    |       |                  |       |       |       |      |        |        |       |   |        |       
|Net income                                                        |                                     | $       | 0.07  |                    |       | $                | 0.01  |       |       | $    | 0.07   |        |       | $ | 0.02   |       
|                                                                  |                                     |         |       |                    |       |                  |       |       |       |      |        |        |       |   |        |       
|Weighted average common shares outstanding:                       |                                     |         |       |                    |       |                  |       |       |       |      |        |        |       |   |        |       
|                                                                  |                                     | Basic   |       |                    | 3,898 |                  |       |       | 3,867 |      |        |        | 3,892 |   |        |        | 3,851 | 
|                                                                  |                                     |         |       |                    |       |                  |       |       |       |      |        |        |       |   |        |       
|                                                                  |                                     | Diluted |       |                    | 4,254 |                  |       |       | 3,989 |      |        |        | 3,984 |   |        |        | 3,991 | 
|                                                                  |                                     |         |       |                    |       |                  |       |       |       |      |        |        |       |   |        |       

See accompanying notes.

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Consolidated Statements of Cash Flows
(Unaudited)

|                                                                                            |                                                                      |   |                        |        |      |   |       |       |  
|------------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | - | ---------------------- | ------ | ---- | - | ----- | ----- | -
|                                                                                            |                                                                      |   | Six Months Ended      
|                                                                                            |                                                                      |   | November 30,          
|                                                                                            |                                                                      |   |                       
|                                                                                            |                                                                      |   | 2002                   |        | 2001
|                                                                                            |                                                                      |   |                        |        |     
|                                                                                            |                                                                      |   | (Amounts in thousands)
|Cash flows from operating activities:                                                       |                                                                      |   |                        |        |      |   |       |      
|Net income                                                                                  |                                                                      | $ | 274                    |        |      | $ | 87    |      
|Adjustments to reconcile net income to net cash (used in) provided by
operating activities: |                                                                      |   |                        |        |      |   |       |      
|                                                                                            | Depreciation and amortization                                        |   |                        | 131    |      |   |       | 188   |  
|                                                                                            | Cumulative effect of change in accounting principle                  |   |                        |       |      |   |       | (55   | )
|                                                                                            | Gain on sale of assets                                               |   |                        | (4     | )    |   |       |      |  
|                                                                                            | Compensation expense  stock issued                                  |   |                        | 20     |      |   |       |      |  
|                                                                                            | Compensation expense  stock options issued                          |   |                        | 1      |      |   |       |      |  
|                                                                                            | Other non-operating gain                                             |   |                        | (470   | )    |   |       |      |  
|                                                                                            | Loss on disposal of assets                                           |   |                        | 5      |      |   |       |      |  
|Changes in assets and liabilities:                                                          |                                                                      |   |                        |        |      |   |       |      
|                                                                                            | Accounts receivable                                                  |   |                        | (807   | )    |   |       | (149  | )
|                                                                                            | Accounts receivable  managed care reinsurance contract              |   |                        | (62    | )    |   |       | 54    |  
|                                                                                            | Other current assets, restricted funds, and other non-current assets |   |                        | 21     |      |   |       | 532   |  
|                                                                                            | Accounts payable and accrued liabilities                             |   |                        | (621   | )    |   |       | (330  | )
|                                                                                            | Accrued claims payable                                               |   |                        | (91    | )    |   |       | 278   |  
|                                                                                            | Accrued reinsurance claims payable                                   |   |                        | 542    |      |   |       | 641   |  
|                                                                                            | Income taxes payable                                                 |   |                        | (2     | )    |   |       | 5     |  
|                                                                                            | Other liabilities                                                    |   |                        |       |      |   |       | (9    | )
|                                                                                            |                                                                      |   |                        |        |      |   |       |      
|                                                                                            | Net cash (used in) provided by operating activities                  |   |                        | (1,063 | )    |   |       | 1,242 |  
|                                                                                            |                                                                      |   |                        |        |      |   |       |      
|Cash flows from investing activities:                                                       |                                                                      |   |                        |        |      |   |       |      
|                                                                                            | Net proceeds from sale of property and equipment                     |   |                        | 3      |      |   |       |      |  
|                                                                                            | Payments received on note receivable                                 |   |                        | 2      |      |   |       | 2     |  
|                                                                                            | Additions to property and equipment                                  |   |                        | (22    | )    |   |       | (12   | )
|                                                                                            |                                                                      |   |                        |        |      |   |       |      
|                                                                                            | Net cash used in investing activities                                |   |                        | (17    | )    |   |       | (10   | )
|                                                                                            |                                                                      |   |                        |        |      |   |       |      
|Cash flows from financing activities:                                                       |                                                                      |   |                        |        |      |   |       |      
|                                                                                            | Repayment of debt                                                    |   |                        | (6     | )    |   |       |      |  
|                                                                                            |                                                                      |   |                        |        |      |   |       |      
|                                                                                            | Net cash used in financing activities                                |   |                        | (6     | )    |   |       |      |  
|                                                                                            |                                                                      |   |                        |        |      |   |       |      
|Net (decrease) increase in cash and cash equivalents                                        |                                                                      |   | (1,086                 | )      |      |   | 1,232 |      
|Cash and cash equivalents at beginning of year                                              |                                                                      |   | 5,340                  |        |      |   | 2,891 |      
|                                                                                            |                                                                      |   |                        |        |      |   |       |      
|Cash and cash equivalents at end of period                                                  |                                                                      | $ | 4,254                  |        |      | $ | 4,123 |      
|                                                                                            |                                                                      |   |                        |        |      |   |       |      

See accompanying notes.

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COMPREHENSIVE CARE CORPORATION AND SUBSIDIARIES




Note 1  Summary of Significant Accounting Policies

The consolidated balance sheet as of November 30, 2002, and the related
consolidated statements of operations for the three and six months ended
November 30, 2002 and 2001, and cash flows for the six months ended November
30, 2002 and 2001 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 six months ended
November 30, 2002 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, 2002 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, 2002 are on file with the
Securities and Exchange Commission and 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  Basis of Presentation.

The Companys managed care activities are performed under the terms of
agreements with health maintenance organizations (HMOs), preferred provider
organizations (PPOs), and other health plans or payers to provide contracted
behavioral healthcare services to subscribing participants. Revenue under a
substantial portion of these agreements is earned monthly based on the number
of qualified participants regardless of services actually provided (generally
referred to as capitation arrangements). Such agreements accounted for 88.0%,
or $14.9 million, of revenue for the six months ended November 30, 2002 and
83.2%, or $10.5 million, of revenue for the six months ended November 30, 2001.
The balance of the Companys revenues is earned on a fee-for-service basis and
is recognized as services are rendered.

Restricted Cash

As of November 30, 2002 and May 31, 2002, non-current restricted accounts
include $0.3 million of cash held in trust in connection with the Companys
Directors and Officers liability insurance policy.

Accrued Claims Payable

The accrued claims payable liability represents the estimated ultimate net
amounts owed for all behavioral healthcare services provided through the
respective balance sheet dates, including estimated amounts for claims incurred
but not yet reported (IBNR) to the Company. 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. However, actual results could differ from the claims payable amount
reported as of November 30, 2002.

Note 2  Basis of Presentation

The accompanying consolidated financial statements are prepared on a going
concern basis. As of November 30, 2002, the Company has a stockholders
deficit of $12.2 million and a working capital deficiency of $11.9 million.
The working capital deficiency 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 4  Income Taxes).

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COMPREHENSIVE CARE CORPORATION AND SUBSIDIARIES

Management cannot state with any degree of certainty whether any required
additional equity or debt financing will be available to it during Fiscal 2003
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, which is dependent upon its ability to continue
to generate sufficient cash flow to meet its obligations on a timely basis,
successfully resolving the Internal Revenue Service audit, obtaining additional
financing as may be required and, ultimately, attaining an operating profit.
The accompanying consolidated financial statements do not include any
adjustments that may result from the outcome of this uncertainty.

Note 3  Major Customers/Contracts



|(1) |  | During the six months ended November 30, 2002, the Company had three
contracts with one HMO to provide behavioral healthcare services to
Florida members. The combined revenue from these contracts accounted for
18.9%, or $3.2 million, of the Companys operating revenues during the six
months ended November 30, 2002 compared to 16.2%, or $2.0 million, for the
six months ended November 30, 2001. Additionally, the Company has one
major contract with an affiliate of this HMO (see Item 2 below). This HMO
has been our customer since November 1998. On September 24, 2002, the
Company received a written, 90-day termination notice, dated September 20,
2002, from this client. Such notice followed an agreed upon price
increase that the Company had recently obtained from this client. The
price increase was effective August 1, 2002 and was necessitated by an
increase in utilization specific to this account as well as increases in
the rates paid by the Company in response to demands from a group of
providers who service this account. On September 25, 2002, the HMO
verbally advised the Company that its termination notice was due in part
to the recent price increase. Following such advisement, the Company held
discussions with this client, but was unsuccessful in its attempts to
resolve the pricing issue as the HMO was seeking a price reduction below
the original contracted rate. As such, these contracts covering Florida
members terminated effective January 1, 2003. The Company believes that
it will be able to reduce its internal costs of servicing this account to
minimize any effect on future results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The Company has one contract to provide behavioral healthcare services to
Connecticut members under contract with one HMO. For the six months ended
November 30, 2002, this contract represented approximately 8.4%, or $1.4
million, of the Companys operating revenue compared to 13.6%, or $1.7
million for the six months ended November 30, 2001. Additionally, this
contract provides that the Company, through its contract with this HMO,
receives additional funds directly from a state reinsurance program.
During the six months ended November 30, 2002, the Company filed
reinsurance claims totaling approximately $1.6 million. Such claims
represent cost reimbursements and, as such, are not included in the
reported operating revenues and are accounted for as reductions of
healthcare operating expenses. As of November 30, 2002, the Company has
reported $0.6 million as accounts receivable  managed care reinsurance
contracts, with $2.6 million reported as accrued reinsurance claims
payable, in the accompanying balance sheet. In the event that the Company
does not collect these reinsurance amounts, the Company could remain
liable for the costs of the specific services provided to members that
qualify for such reimbursements. For non-reinsurance claims incurred but
not reported under this contract, the Company estimates its claims payable
using a similar method as that used for other existing contracts. This HMO
has been a customer since March 2001. The original contract term expires
December 31, 2002 and provides for automatic one-year renewals unless
terminated by either party. In December 2002, the Company participated in
a bid that was submitted to the State of Connecticut in response to its
request for proposal for administrative services only (ASO) in
connection with a contract that is expected to begin in October 2003. If
selected, the Companys existing contract would terminate and a new
contract would be negotiated between the Company and the State of
Connecticut covering significantly more members than are covered under the
current fee-for-service arrangement. If the State of Connecticut were to
select another behavioral healthcare company to service this membership,
the Companys existing contracts may terminate effective September 30,
2003. There can be no assurance that the Companys existing contract will
be renewed or that the Company will be successful in its bid to provide
ASO services to Connecticut members.
|   
|(3) |  | During the six months ended November 30, 2002, the Company had one
contract with one HMO, covering five lines of business, to provide
behavioral healthcare services to Florida members. This agreement
represented approximately 23.5%, or $4.0 million, and 20.1%, or $2.5
million, of the Companys operating revenue for the six months ended
November 30, 2002 and 2001, respectively. This HMO has been a customer
since July 2000. On December 24, 2002, the Company entered into a
contract, effective January 1, 2003, with another HMO to continue
providing behavioral services to Medicaid members associated with three of
these business lines after the existing client HMO sold its Medicaid
business to the Companys new HMO customer. On October 4, 2002,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

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COMPREHENSIVE CARE CORPORATION AND SUBSIDIARIES



| |  | the Company had reported that it had received a termination notice from the
existing client having an effective termination date of December 31, 2002
and specific to the existing clients Medicaid business, which accounted for
17.4%, or $3.0 million, and 18.2%, or $2.3 million, of the Companys
operating revenues during the six months ended November 30, 2002 and 2001,
respectively, due to the sale of the customer HMO to the Companys new HMO
client. Additionally, effective December 31, 2002, the Company received a
formal termination notice from the existing HMO client that the commercial
and Medicare lines of business, which accounted for 6.1%, or approximately
$1.0 million, and 1.8%, or $0.2 million, of the Companys operating revenues
during the six months ended November 30, 2002 and 2001, respectively, will
terminate effective February 28, 2003.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Although the loss of the customer listed under (1) above and the commercial and
Medicare business under (3) above could have a material, adverse effect on the
Companys financial condition and future results of operations, the Company
believes that it will be able to reduce its internal cost of servicing this
account to minimize any effect on future results of operations.

In general, the Companys contracts with its customers are typically for
initial one-year terms, with automatic annual extensions. Such contracts
generally provide for cancellation by either party with 60 to 90 days written
notice.

Note 4  Income Taxes

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
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 $11.5 million
through November 30, 2002. In this event, 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. The Company filed a protest letter with the IRS
Appeals Office on November 6, 1998. This filing commenced the administrative
appeals process.

On July 11, 2000, the Company submitted an Offer in Compromise (the
Offer) and, on March 13, 2002, submitted an amended Offer in Compromise
(Amended Offer) to the IRS Appeals Office to resolve the controversy with
respect to the refunds at a substantially reduced amount than the IRS has
asserted as indicated above. To assist the IRS in evaluating the Amended
Offer, the Company is providing additional documents to the IRS and is
continuing its discussions with the IRS. The Amended Offer must be reviewed and
approved by the IRS, with the ultimate decision determined by the IRS Appeals
Office. Pending the resolution of the Amended Offer, the IRS generally
suspends any collection activities. There can be no assurance that the IRS
will accept the Amended Offer.

If the IRS Appeals Office were to accept the Amended Offer, the IRS would
require that the net operating loss carryforwards are no longer available to
the Company.

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COMPREHENSIVE CARE CORPORATION AND SUBSIDIARIES

Note 5  Basic and Diluted Earnings Per Share

Net earnings per share is computed using the weighted average number of
common shares outstanding during the period. Convertible debentures were not
included in the calculation of earnings per share as they are antidilutive.
The following table sets forth the computation of basic and diluted earnings
per share in accordance with Statement No. 128, Earnings Per Share (amounts in
thousands, except per share data):

|                                                                                                                                                   |  |                                                                           |                                                                                                       |                                                   |     |                                               |      |                  |    |       |      |      |     |       |      |   |    |       |           | 
|-------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | ------------------------------------------------- | --- | --------------------------------------------- | ---- | ---------------- | -- | ----- | ---- | ---- | --- | ----- | ---- | - | -- | ----- | --------- | 
|                                                                                                                                                   |  |                                                                           |                                                                                                       |                                                   |     | Three Months Ended                            |      | Six Months Ended
|                                                                                                                                                   |  |                                                                           |                                                                                                       |                                                   |     | November 30,                                  |      | November 30,    
|                                                                                                                                                   |  |                                                                           |                                                                                                       |                                                   |     |                                               |      |                 
|                                                                                                                                                   |  |                                                                           |                                                                                                       |                                                   |     | 2002                                          |      | 2001             |    | 2002  |      | 2001
|                                                                                                                                                   |  |                                                                           |                                                                                                       |                                                   |     |                                               |      |                  |    |       |      |     
|                                                                                                                                                   |  |                                                                           |                                                                                                       |                                                   |     | (Amounts in thousands, except per share data)
|Numerator:                                                                                                                                         |  |                                                                           |                                                                                                       |                                                   |     |                                               |      |                  |    |       |      |      |     |       |      |  
|                                                                                                                                                   |  | Income before cumulative effect of change in accounting principle         |                                                                                                       | $                                                 | 307 |                                               |      | $                | 33 |       |      | $    | 274 |       |      | $ | 32 |      
|                                                                                                                                                   |  | Cumulative effect of change in accounting principle                       |                                                                                                       |                                                   |    |                                               |      |                  |   |       |      |      |    |       |      |   | 55 |      
|                                                                                                                                                   |  |                                                                           |                                                                                                       |                                                   |     |                                               |      |                  |    |       |      |      |     |       |      |  
|                                                                                                                                                   |  | Numerator for diluted earnings per share available to Common
Stockholders |                                                                                                       | $                                                 | 307 |                                               |      | $                | 33 |       |      | $    | 274 |       |      | $ | 87 |      
|                                                                                                                                                   |  |                                                                           |                                                                                                       |                                                   |     |                                               |      |                  |    |       |      |      |     |       |      |  
|Denominator:                                                                                                                                       |  |                                                                           |                                                                                                       |                                                   |     |                                               |      |                  |    |       |      |      |     |       |      |  
|                                                                                                                                                   |  |                                                                           | Weighted average shares                                                                               |                                                   |     | 3,898                                         |      |                  |    | 3,867 |      |      |     | 3,892 |      |   |    | 3,851 |          
|                                                                                                                                                   |  |                                                                           | Effect of dilutive securities:                                                                        |                                                   |     |                                               |      |                  |    |       |      |      |     |       |      |   |    |       |          
|                                                                                                                                                   |  |                                                                           | Employee stock options                                                                                |                                                   |     | 356                                           |      |                  |    | 122   |      |      |     | 92    |      |   |    | 140   |          
|                                                                                                                                                   |  |                                                                           |                                                                                                       |                                                   |     |                                               |      |                  |    |       |      |      |     |       |      |  
|                                                                                                                                                   |  |                                                                           | Denominator for diluted earnings per share-adjusted weighted
average shares after assumed conversions |                                                   |     | 4,254                                         |      |                  |    | 3,989 |      |      |     | 3,984 |      |   |    | 3,991 |          
|                                                                                                                                                   |  |                                                                           |                                                                                                       |                                                   |     |                                               |      |                  |    |       |      |      |     |       |      |  
|Basic earnings per share:                                                                                                                          |  |                                                                           |                                                                                                       |                                                   |     |                                               |      |                  |    |       |      |      |     |       |      |  
|Income before cumulative effect of change in accounting principle                                                                                  |  | $                                                                         | 0.08                                                                                                  |                                                   |     | $                                             | 0.01 |                  |    | $     | 0.07 |      |     | $     | 0.01 |  
|Cumulative effect of change in accounting principle                                                                                                |  |                                                                           |                                                                                                      |                                                   |     |                                               |     |                  |    |       |     |      |     |       | 0.01 |  
|                                                                                                                                                   |  |                                                                           |                                                                                                       |                                                   |     |                                               |      |                  |    |       |      |      |     |       |      |  
|Net income                                                                                                                                         |  | $                                                                         | 0.08                                                                                                  |                                                   |     | $                                             | 0.01 |                  |    | $     | 0.07 |      |     | $     | 0.02 |  
|                                                                                                                                                   |  |                                                                           |                                                                                                       |                                                   |     |                                               |      |                  |    |       |      |      |     |       |      |  
|Diluted earnings per share:                                                                                                                        |  |                                                                           |                                                                                                       |                                                   |     |                                               |      |                  |    |       |      |      |     |       |      |  
|Income before cumulative effect of change in accounting principle                                                                                  |  | $                                                                         | 0.07                                                                                                  |                                                   |     | $                                             | 0.01 |                  |    | $     | 0.07 |      |     | $     | 0.01 |  
|Cumulative effect of change in accounting principle                                                                                                |  |                                                                           |                                                                                                      |                                                   |     |                                               |     |                  |    |       |     |      |     |       | 0.01 |  
|                                                                                                                                                   |  |                                                                           |                                                                                                       |                                                   |     |                                               |      |                  |    |       |      |      |     |       |      |  
|Net income                                                                                                                                         |  | $                                                                         | 0.07                                                                                                  |                                                   |     | $                                             | 0.01 |                  |    | $     | 0.07 |      |     | $     | 0.02 |  
|                                                                                                                                                   |  |                                                                           |                                                                                                       |                                                   |     |                                               |      |                  |    |       |      |      |     |       |      |  
|Authorized shares of common stock reserved for possible issuance for
convertible debentures and stock options are as follows at November 30, 2002: |  |                                                                           |                                                                                                       |                                                   |     |                                               |      |                  |    |       |      |      |     |       |      |  
|                                                                                                                                                   |  |                                                                           |                                                                                                       | Convertible debentures                            |     |                                               |      |                  |    |       |      |      |     |       |      |   |    |       | 9,044     | 
|                                                                                                                                                   |  |                                                                           |                                                                                                       | Outstanding stock options                         |     |                                               |      |                  |    |       |      |      |     |       |      |   |    |       | 1,041,941 | 
|                                                                                                                                                   |  |                                                                           |                                                                                                       | Possible future issuance under stock option plans |     |                                               |      |                  |    |       |      |      |     |       |      |   |    |       | 549,018   | 
|                                                                                                                                                   |  |                                                                           |                                                                                                       |                                                   |     |                                               |      |                  |    |       |      |      |     |       |      |  
|                                                                                                                                                   |  |                                                                           |                                                                                                       | Total                                             |     |                                               |      |                  |    |       |      |      |     |       |      |   |    |       | 1,600,003 | 
|                                                                                                                                                   |  |                                                                           |                                                                                                       |                                                   |     |                                               |      |                  |    |       |      |      |     |       |      |  

Note 6  Commitments and Contingencies



|(1) |  | Effective January 1, 2003, the Company began servicing a major account
for one new client who acquired existing Medicaid business from another of
the Companys clients. In connection with the contract, the
Company is required to maintain a $1,200,000 performance bond throughout
the term of the contract.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | During the fiscal year ended May 31, 2001, the Company implemented a
major contract for one new client requiring that the Company maintains a
$600,000 performance bond throughout the term of the contract.                                                                                                    
|   
|(3) |  | 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 term of the contract.                                                                                                           

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|(4) |  | On February 19, 1999, 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 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 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.                                                                                                                                                                                                                
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | In July 2002, the Company entered into a Repayment Agreement with the
Department to resolve this liability at a substantially reduced amount.
The terms of the Repayment Agreement required the Company to either 1)
pay one lump sum of $450,000 to the Department on or before September 1,
2002 or 2) beginning September 1, 2002, the Company would be required to
make three monthly installment payments of $160,000 each, with the last
payment being due on or before November 1, 2002, for a total of $480,000
as full and complete satisfaction of the outstanding liability. As of
November 30, 2002, after making three installment payments to the
Department of $160,000 each, the Company had fully satisfied its
obligations under the terms of the settlement agreement. As a result,
the Company recorded a non-operating gain of $470,000 during the quarter
ended November 30, 2002.
|   
|(5) |  | With respect to the contingency related to prior years income taxes, see
Note 4, Income Taxes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(6) |  | The Company would remain liable to perform the services covered under
subcapitation agreements if the parties with which the Company
subcapitates were unable to fulfill their responsibilities under such
agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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.




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 13).

General

Introduction

The Company has provided managed behavioral healthcare services and
products since 1992. Current services include a broad spectrum of inpatient
and outpatient mental health and substance abuse therapy, counseling, and
supportive interventions. The Companys chief focus is its managed care
business.

Recent Developments



| |  | On December 24, 2002, the Company was successful in entering into an
agreement, effective January 1, 2003, with a new HMO client to
continue providing behavioral healthcare services to Medicaid members
who were previously serviced by the Company in connection with its
agreements with another HMO customer. On October 4, 2002, the Company
had reported that it had received a termination notice from the
existing client having an effective termination date of December 31,
2002 and specific to the existing clients Medicaid business, which
accounted for 17.4%, or $3.0 million, and 18.2%, or $2.3 million, of
the Companys operating revenues during the six months ended November
30, 2002 and 2001, respectively, and was due to the sale of the
customer HMO to the Companys new HMO client. Additionally, effective
December 31, 2002, the Company received a formal termination notice
from the existing HMO client that the commercial and Medicare lines of
business, which accounted for 6.1%, or approximately $1.0 million, and
1.8%, or $0.2 million, of the Companys operating revenues during the
six months ended November 30, 2002 and 2001, respectively, will
terminate effective February 28, 2003.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  | During the six months ended November 30, 2002, the Company had three
contracts with one HMO to provide behavioral healthcare services to
Florida members. The combined revenue from these contracts accounted
for 18.9%, or $3.2 million, of the Companys operating revenues during
the six months ended November 30, 2002 compared to 16.2%, or $2.0
million, for the six months ended November 30, 2001. On September 24,
2002, the Company received a written, 90-day termination notice, dated
September 20, 2002, from this client. Such notice followed an agreed
upon price increase that the Company had recently obtained from this
client. The price increase was effective August 1, 2002 and was
necessitated by an increase in utilization specific to this account as
well as increases in the rates paid by the Company in response to
demands from a group of providers who service this account. On
September 25, 2002, the HMO verbally advised the Company that its
termination notice was due in part to the recent price increase.
Following such advisement, the Company held discussions with this
client, but was unsuccessful in its attempts to resolve the pricing
issue as the HMO was seeking a price reduction below the original
contracted rate. As such, these contracts covering Florida members
terminated effective January 1, 2003. The Company believes that it
will be able to reduce its internal costs of servicing this account to
minimize any effect on future results of operations.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Results of Operations

The Company reported net income of $307,000, or $0.07 earnings per share,
for the quarter ended November 30, 2002 compared to $33,000, or $0.01 earnings
per share, for the quarter ended November 30, 2001. Results for the quarter
ended November 30, 2002 include a $470,000, non-operating gain related to one
settlement (see Note 6  Commitments and Contingencies to the unaudited,
consolidated financial statements). Net income for the six months ended
November 30, 2002 was $274,000, or $0.07 earnings per share, compared to net
income of $87,000 or $0.02 earnings per share, for the six months ended
November 30, 2001. The following tables summarize the Companys financial data
for the three and six months ended November 30, 2002 and 2001 (in thousands):

The three months Ended November 30, 2002 Compared To The three months Ended
November 30, 2001:

|                                |  |                    |       |                    |  |   |       | 
|------------------------------- |  | ------------------ | ----- | ------------------ |  | - | ----- | 
|                                |  | Consolidated       |       | Consolidated      
|                                |  | Operations         |       | Operations        
|                                |  | Three Months Ended |       | Three Months Ended
|                                |  | November 30, 2002  |       | November 30, 2001 
|                                |  |                    |       |                   
|Operating revenues              |  | $                  | 8,631 |                    |  | $ | 6,470 | 
|Healthcare operating expenses   |  |                    | 7,760 |                    |  |   | 5,524 | 
|General/administrative expenses |  |                    | 952   |                    |  |   | 873   | 
|Other operating expenses        |  |                    | 57    |                    |  |   | 16    | 
|                                |  |                    |       |                    |  |   |       | 
|                                |  |                    | 8,769 |                    |  |   | 6,413 | 
|                                |  |                    |       |                    |  |   |       | 
|Operating (loss) income         |  | $                  | (138  | )                  |  | $ | 57    | 
|                                |  |                    |       |                    |  |   |       | 

The Company reported net income of $307,000 and an operating loss of
$138,000 for the quarter ended November 30, 2002 compared to net income of
$33,000 and operating income of $57,000 for the quarter ended November 30,
2001. Operating revenues increased by 33.4%, or $2.2 million, to $8.6 million
for the quarter ended November 30, 2002 compared to $6.5 million for the
quarter ended November 30, 2001. This increase is primarily attributable to
membership growth from existing business and one new contract implemented
during the fourth quarter of Fiscal 2002.

Healthcare operating expenses increased by approximately $2.2 million, or
40.5%, for the quarter ended November 30, 2002 as compared to the quarter ended
November 30, 2001. This increase is directly attributable to revenue growth as
described above. Healthcare operating expense as a percentage of operating
revenue increased by 4.5% from 85.4% for the quarter ended November 30, 2001 to
89.9% for the quarter ended November 30, 2002. This increase is primarily
attributable to a change in revenue mix resulting in increased Medicaid and
Medicare membership during Fiscal 2003 compared to Fiscal 2002.

General and administrative expenses increased by approximately $79,000, or
9.0%, for the quarter ended November 30, 2002 as compared to the quarter ended
November 30, 2001. This increase is primarily attributable to staffing
additions necessary to support new revenue. General and administrative expense
as a percentage of operating revenue decreased from 13.5% for the quarter ended
November 30, 2001 to 11.0% for the quarter ended November 30, 2002.

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Other operating expenses increased by $41,000 for the quarter ended
November 30, 2002 compared to the quarter ended November 30, 2001. This
increase is primarily attributable to a $66,000 bad debt recovery during the
quarter ended November 30, 2001 specific to one contract that terminated in
Fiscal 1999.

The Six months Ended November 30, 2002 Compared To The Six months Ended
November 30, 2001:

|                                |  |                   |        |                   |  |   |        | 
|------------------------------- |  | ----------------- | ------ | ----------------- |  | - | ------ | 
|                                |  | Consolidated      |        | Consolidated     
|                                |  | Operations        |        | Operations       
|                                |  | Six Months Ended  |        | Six Months Ended 
|                                |  | November 30, 2002 |        | November 30, 2001
|                                |  |                   |        |                  
|Operating revenues              |  | $                 | 16,938 |                   |  | $ | 12,596 | 
|Healthcare operating expenses   |  |                   | 15,113 |                   |  |   | 10,734 | 
|General/administrative expenses |  |                   | 1,840  |                   |  |   | 1,699  | 
|Other operating expenses        |  |                   | 117    |                   |  |   | 103    | 
|                                |  |                   |        |                   |  |   |        | 
|                                |  |                   | 17,070 |                   |  |   | 12,536 | 
|                                |  |                   |        |                   |  |   |        | 
|Operating (loss) income         |  | $                 | (132   | )                 |  | $ | 60     | 
|                                |  |                   |        |                   |  |   |        | 

The Company reported net income of $274,000 and an operating loss of
$132,000 for the six months ended November 30, 2002 compared to net income of
$87,000 and operating income of $60,000 for the six months ended November 30,
2001. Results for the six months ended November 30, 2002 include a $470,000,
non-operating gain related to one settlement (see Note 6  Commitments and
Contingencies to the unaudited, consolidated financial statements). Operating
revenues increased by 34.5%, or $4.3 million, to $16.9 million for the six
months ended November 30, 2002 compared to $12.6 million for the six months
ended November 30, 2001. This increase is primarily attributable to membership
growth from existing business and one new contract implemented during the
fourth quarter of Fiscal 2002.

Healthcare operating expenses increased by approximately $4.4 million, or
40.8%, for the six months ended November 30, 2002 as compared to the six months
ended November 30, 2001. This increase is directly attributable to revenue
growth as described above. Healthcare operating expense as a percentage of
operating revenue increased by 4.0% from 85.2% for the six months ended
November 30, 2001 to 89.2% for the six months ended November 30, 2002. This
increase is primarily attributable to a change in revenue mix resulting in
increased Medicaid and Medicare membership during Fiscal 2003 compared to
Fiscal 2002.

General and administrative expenses increased by approximately $0.1
million, or 8.3%, for the six months ended November 30, 2002 as compared to the
six months ended November 30, 2001. This increase is primarily attributable to
staffing additions necessary to support new revenue. General and
administrative expense as a percentage of operating revenue decreased from
13.5% for the six months ended November 30, 2001 to 10.9% for the six months
ended November 30, 2002.

Other operating expenses increased by $14,000 for the six months ended
November 30, 2002 compared to the six months ended November 30, 2001. This
increase is attributable to a $66,000 bad debt recovery during the six months
ended November 30, 2001 specific to one contract that terminated in Fiscal 1999
and a $57,000 decrease in depreciation expense in Fiscal 2003 compared to
Fiscal 2002.

CAUTIONARY STATEMENT FOR THE PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Certain information included
in this quarterly report on Form 10-Q and in other Company reports, SEC
filings, statements, and presentations is forward looking within the meaning of
the Private Securities Litigation Reform Act of 1995, including, but not
limited to, statements concerning the Companys anticipated operating results,
financial resources, increases in revenues, increased profitability, interest
expense, growth and expansion, and the ability to obtain new behavioral
healthcare contracts. Such forward-looking information involves important
risks and uncertainties that could significantly affect actual results and
cause them to differ materially from expectations expressed herein and in other
Company reports, SEC filings, statements, and presentations. These risks and
uncertainties include local, regional, and national economic and political
conditions, the effect of governmental regulation, the competitive environment
in which the Company operates, and other risks detailed from time to time in
the Companys SEC reports.

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COMPREHENSIVE CARE CORPORATION AND SUBSIDIARIES

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 (see Note
4 to the unaudited, consolidated financial statements   Income Taxes).

Concentration of Risk

The Company currently has contracts with four health plans to provide
behavioral healthcare services under commercial, Medicaid, and Medicare plans,
to contracted members in Connecticut, Florida, and Texas. These combined
contracts represent approximately 62.2% and 61.3% of the Companys operating
revenue for the six months ended November 30, 2002 and November 30, 2001,
respectively, and include contracts that terminated effective January 1, 2003,
which accounted for a combined 18.9% and 16.2% of the Companys operating
revenue for the six months ended November 30, 2002 and November 30, 2001,
respectively (see Note 3(1) to the unaudited, consolidated financial statements
 Major Customers/Contracts) and agreements that will terminate effective
February 28, 2003, which accounted for 6.1% and 1.8% of the Companys operating
revenues during the six months ended November 30, 2002 and 2001, respectively
(see Note 3(3) to the unaudited, consolidated financial statements  Major
Customers/Contracts). 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. The loss of any one of these customers could have a
material, adverse effect on the Companys working capital and future results of
operations.

Uncertainty of Future Profitability

As of November 30, 2002, the Company had a stockholders deficit of $12.2
million and a working capital deficiency of approximately $11.9 million. The
Company had net income for the six months ended November 30, 2002 of
approximately $274,000, which included a $470,000 non-operating gain. There can
be no assurance that the Company will be able to achieve and sustain an
operating profit 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 recent fiscal years, a principal source of liquidity has been the
sale of hospital facilities. During Fiscal 1999, the Company completed its
plan to dispose of its hospital business segment and as such, does not
currently own any hospital facilities. Subject to various market conditions,
an additional source of liquidity could be the issuance of additional equity
securities, which 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 Item 1-(2)  Legal
Proceedings, below).

Taxes

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
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)
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COMPREHENSIVE CARE CORPORATION AND SUBSIDIARIES

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 $11.5 million
through November 30, 2002. In this event, 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. The Company filed a protest letter with the IRS
Appeals Office on November 6, 1998. This filing commenced the administrative
appeals process.

On July 11, 2000, the Company submitted an Offer in Compromise (the
Offer) and, on March 13, 2002, submitted an amended Offer in Compromise
(Amended Offer) to the IRS Appeals Office to resolve the controversy with
respect to the refunds at a substantially reduced amount than the IRS has
asserted as indicated above. To assist the IRS in evaluating the Amended
Offer, the Company is providing additional documents to the IRS and is
continuing its discussions with the IRS. The Amended Offer must be reviewed and
approved by the IRS, with the ultimate decision determined by the IRS Appeals
Office. Pending the resolution of the Amended Offer, the IRS generally
suspends any collection activities. There can be no assurance that the IRS
will accept the Amended Offer.

If the IRS Appeals Office were to accept the Amended Offer, the IRS would
require that the net operating loss carryforwards are no longer available to
the Company.

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 Company typically contracts with small to medium sized HMOs who may
be adversely affected by the continuing efforts of governmental and third party
payers to contain or reduce the costs of healthcare through various means. The
Companys clients may also be acquired by larger HMOs, in which case there can
be no assurance that the acquiring company would renew the Companys contract.
Additionally, changes specific to Medicaid and Medicare reimbursement could
have an effect on the profitability of the Companys contracts. 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

As of January 3, 2003, the Company has issued approximately 1,061,000
options, with option prices ranging from $0.25 to $4.00, of which 919,000
options are in the money and, accordingly, could be exercised and the shares
resold by the optionee.

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 November 30, 2002, there are 18,740 remaining
shares authorized and available to issue, and no outstanding shares of
Preferred Stock. The
14Table of Contents

COMPREHENSIVE CARE CORPORATION AND SUBSIDIARIES

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 that 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. 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.

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.

Regulatory Monitoring and Compliance

The Company is subject to extensive and evolving state and federal
regulations as well as changes in Medicaid and Medicare reimbursement that
could have an effect on the profitability of the Companys contracts. 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
regulation of managed care companies and for providers of behavioral healthcare
treatment services. The Company holds licenses or certificates to perform
utilization review and third party administrator (TPA) services in certain
states. Certain of the services provided by the Companys managed behavioral
healthcare subsidiaries may be subject to such licensing requirements in other
states. There can be no assurance that additional utilization review or TPA
licenses will not be required or, if required, that the Company will qualify to
obtain such licenses. In many states, entities that assume risk under contract
with licensed insurance companies or health plans have not been considered by
state regulators to be conducting an insurance or HMO business. As a result,
the Company has not sought licensure as either an insurer or HMO in certain
states. If the regulatory positions of these states were to change, the
Companys business could be materially affected until such time as the Company
meets the regulatory requirements. Currently, management cannot quantify the
potential effects of additional regulation of the managed care industry, but
such costs will have an adverse effect on further operations to the extent that
they are not able to be recouped in future managed care contracts.

As of November 30, 2002, the Company managed approximately 782,000 lives
in connection with behavioral and substance abuse services covered through
Medicaid in Connecticut, Florida, Michigan and Texas. The aggregate number of
Medicaid lives was reduced by approximately 164,000 effective January 1, 2003
due to the termination of the contracts described under Note 3(1)  Major
Contracts/Customers to the unaudited, consolidated financial statements. In
addition, the Company manages approximately 38,000 lives covered through
Medicare in Florida. However, the contract covering these Medicare lives will
terminate effective February 28, 2003 (see Note 3(3)  Major
Contracts/Customers to the unaudited, consolidated financial statements). Any
changes in Medicaid and Medicare reimbursement could ultimately affect the
Company through contract bidding and cost structures with the health plans
first impacted by such changes. At this time, the Company is unable to predict
what effect, if any, changes in Medicaid and Medicare legislation may have on
its business.

The Company is subject to the requirements of the Health Insurance
Portability and Accountability Act of 1996 (HIPAA). The purpose of the HIPAA
provisions is to improve the efficiency and effectiveness of the healthcare
system through standardization of the electronic data interchange of certain
administrative and financial transactions and, also, to protect the security
and privacy of transmitted information. Entities subject to HIPAA include some
healthcare providers and all healthcare plans. To meet the specific
requirements of HIPAA, the Company will incur costs to insure the adequacy and
security of its healthcare information system and communication networks.
Additionally, the Company may incur costs to implement the specific transaction
codes required by HIPAA for claims, payment, enrollment, eligibility, or to
become compliant with security and privacy rules, which may be more stringent
for providers of certain behavioral healthcare services. The expected
timetable for the Company to be compliant is currently October 2003 for
transaction code changes due to the Companys filing in October 2002 of a
formal compliance plan, and April 2003 for compliance with the privacy rules.
The Company is currently evaluating its systems and policies that are impacted
by HIPAA. The Company has filed its Electronic Health Care Transactions
15Table of ContentsCOMPREHENSIVE CARE CORPORATION AND SUBSIDIARIESand Code Sets Standards Model Compliance Plan with the Centers for Medicare and
Medicaid Services. While these efforts will be ongoing, the Company expects to
meet all compliance rules and timetables with respect to the HIPAA regulations.
Failure to do so may result in penalties and have a material adverse effect on
the Companys ability to retain its customers or to gain new business.Sarbanes-Oxley Act of 2002The Company is subject to the various provisions of the Sarbanes-Oxley Act
of 2002, which include a requirement that the Company must have at least one
qualified, financial expert on its independent audit committee or be subject to
not having its stock included in the Over The Counter Bulletin Board listings.
Effective January 2, 2003, the Companys Board of Directors elected Eugene L.
Froelich to serve as a Class II Director and, also, as chairman of the Audit
Committee for a three-year term until the 2005 Annual Meeting. Mr. Froelich
has the requisite experience and meets the specific qualifications to act as
chairman of the Audit Committee and, as such, was appointment by the Board of
Directors to serve in this role effective January 2, 2003.
Item 4  Controls and ProceduresAs of November 30, 2002, an evaluation was performed under the supervision
and with the participation of the Companys management, including the Companys
CEO and CFO, of the effectiveness of the design and operation of the Companys
disclosure controls and procedures. Based on that evaluation, the Companys
management, including the CEO and CFO, concluded that the Companys disclosure
controls and procedures were effective as of November 30, 2002. There have
been no significant changes in the Companys internal controls or in other
factors that could significantly affect internal controls subsequent to
November 30, 2002.
PART II  OTHER INFORMATION
Item 1  LEGAL PROCEEDINGS(1)     On February 19, 1999, 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 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 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.In July 2002, the Company entered into a Repayment Agreement with the
Department to resolve this liability at a substantially reduced amount. The
terms of the Repayment Agreement required the Company to either 1) pay one lump
sum of $450,000 to the Department on or before September 1, 2002 or 2)
beginning September 1, 2002, the Company would be required to make three
monthly installment payments of $160,000 each, with the last payment being due
on or before November 1, 2002, for a total of $480,000 as full and complete
satisfaction of the outstanding liability. As of November 30, 2002, after
making three installment payments to the Department of $160,000 each, the
Company had fully satisfied its obligations under the terms of the settlement
agreement. As a result, the Company recorded a non-operating gain of $470,000
during the quarter ended November 30, 2002.(2)     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
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 recorded16Table of ContentsCOMPREHENSIVE CARE CORPORATION AND SUBSIDIARIESas 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 $11.5 million
through November 30, 2002. In this event, 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. The Company filed a protest letter with the IRS
Appeals Office on November 6, 1998. This filing commenced the administrative
appeals process.On July 11, 2000, the Company submitted an Offer in Compromise (the
Offer) and, on March 13, 2002, submitted an amended Offer in Compromise
(Amended Offer) to the IRS Appeals Office to resolve the controversy with
respect to the refunds at a substantially reduced amount than the IRS has
asserted as indicated above. To assist the IRS in evaluating the Amended
Offer, the Company is providing additional documents to the IRS and is
continuing its discussions with the IRS. The Amended Offer must be reviewed and
approved by the IRS, with the ultimate decision determined by the IRS Appeals
Office. Pending the resolution of the Amended Offer, the IRS generally
suspends any collection activities. There can be no assurance that the IRS
will accept the Amended Offer.If the IRS Appeals Office were to accept the Amended Offer, the IRS would
require that the net operating loss carryforwards are no longer available to
the Company.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.
Item 4  Submission of Matters to a Vote of Security HoldersOn November 1, 2002, the Company held its 2002 Annual Meeting of
Stockholders. The meeting was held to elect one (1) Class II Director to the
Companys Board of Directors and to obtain shareholder approval to adopt the
Companys 2002 Incentive Plan.Stockholders of the Companys Common Stock, $.01 par value, of record as
of September 19, 2002 (the Record Date) were entitled to notice of the Annual
Meeting and to vote at such meeting. As of the Record Date, there were
3,899,053 shares of Common Stock entitled to vote at the meeting. Shareholders
holding 3,369,818 shares of Common Stock, representing a majority of the Common
Stock and representing a quorum (approximately 86.4% of the total shares
entitled to vote), were represented at the meeting either in person or by
proxy.RESULTS OF ELECTION OF DIRECTORSShareholders were asked to elect one (1) Class II Director to the
Companys Board of Directors. Set forth below is the name of the person
nominated for and elected to serve on the Companys Board of Directors for a
term of three (3) years until the year 2005 Annual Meeting of Stockholders and
until his successor is duly elected and qualified as well as the results of the
voting for the nominee.

|                |  |           |                |  |  |  |        | 
|--------------- |  | --------- | -------------- |  |  |  | ------ | 
|Name            |  | Votes For | Votes Withheld
|                |  |           |               
|Howard A. Savin |  |           | 3,356,412      |  |  |  | 13,406 | 

The Board of Directors of the Company is now comprised of the following
four (4) directors: Mr. Howard A. Savin and Mr. Eugene L. Froelich, each a
Class II Director whose term expires at the 2005 Annual Meeting of
Stockholders, Mr. Robert J. Landis, the sole Class III Director whose term
expires at the 2004 Annual Meeting of Stockholders and Ms. Mary Jane Johnson,
the sole Class I Director whose term expires at the 2003 Annual Meeting of
Stockholders.

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COMPREHENSIVE CARE CORPORATION AND SUBSIDIARIES

RESULTS OF ADOPTION OF THE COMPREHENSIVE CARE CORPORATION 2002 INCENTIVE PLAN

Shareholders were asked to adopt the Comprehensive Care Corporation 2002
Incentive Plan (2002 Plan) for use in connection with the issuance of
stock, options and other stock purchase rights to executive officers, key
employees, directors and other persons who render significant services to
the Company and its subsidiaries. The holders of record of the following
number of shares entitled to vote, voted for or against the Companys
proposal to adopt the 2002 Plan.

NUMBER OF SHARES

|          |  |         |         |         |  |  |        | 
|--------- |  | ------- | ------- | ------- |  |  | ------ | 
|For       |  | Against |         | Abstain
|          |  |         |         |        
|3,050,011 |  |         | 307,022 |         |  |  | 12,785 | 

As a result of receiving shareholder approval and the adoption of the 2002
Plan, the Company will reserve and register 500,000 shares of Common Stock for
future issuance in the form of stock options to be granted to employees




Item 6  Exhibits and Reports on Form 8-K

(a) Exhibits 

|     |  |                                                                                                                        
|---- |  | -----------------------------------------------------------------------------------------------------------------------
|99.1 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|     |  |                                                                                                                        
|99.2 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|     |  |                                                                                                                        

(b) Reports on Form 8-K

During the quarter ended November 30, 2002, the following reports on Form
8-K were filed by the Registrant:

|                   |  |                      |  |                                                                                                     
|------------------ |  | -------------------- |  | ----------------------------------------------------------------------------------------------------
|Date of Report     |  | Item Reported        |  | Description                                                                                         
|                   |  |                      |  |                                                                                                     
|September 20, 2002 |  | Item 5. Other Events |  | Adoption of the Comprehensive Care Corporation
2002 Incentive Plan, subject to shareholder approval.

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COMPREHENSIVE CARE CORPORATION AND SUBSIDIARIES




SIGNATURES

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

|                 |  |    |  |                                                                                                                        
|---------------- |  | -- |  | -----------------------------------------------------------------------------------------------------------------------
|January 10, 2003 |  |    |  |                                                                                                                        
|                
|                 |  | By |  | /s/ MARY JANE JOHNSONMary Jane Johnson
President and Chief Executive Officer
(Principal Executive Officer)             
|                
|                 |  |    |  |                                                                                                                        
|                
|                 |  | By |  | /s/ ROBERT J. LANDISRobert J. Landis
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)

COMPREHENSIVE CARE CORPORATION AND SUBSIDIARIES
CERTIFICATIONS PURSUANT TO 18 U.S.C.
SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mary Jane Johnson, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Comprehensive Care
Corporation;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent
function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                       |  |                                                                             
|---------------------- |  | ----------------------------------------------------------------------------
|Date: January 10, 2003 |  |                                                                             
|                      
|                       |  |                                                                             
|                      
|                       |  | /s/ Mary Jane JohnsonMary Jane Johnson
President and Chief Executive Officer

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COMPREHENSIVE CARE CORPORATION AND SUBSIDIARIES

I, Robert J. Landis, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Comprehensive Care
Corporation;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent
function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                       |  |                                                                                      
|---------------------- |  | -------------------------------------------------------------------------------------
|Date: January 10, 2003 |  |                                                                                      
|                      
|                       |  |                                                                                      
|                      
|                       |  | /s/ Robert J. LandisRobert J. Landis
Chairman, Chief Financial Officer, and Treasurer

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##### Table of Contents



COMPREHENSIVE CARE CORPORATION AND SUBSIDIARIES

Exhibit Index

Six Months Ended November 30, 2002

|        |  |                                                                                                                                                           |  |             |    | 
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | -- | 
|EXHIBIT |  |                                                                                                                                                           |  |             |    | 
|NUMBER  |  | DESCRIPTION                                                                                                                                               |  | PAGE NUMBER
|        |  |                                                                                                                                                           |  |            
|99.1    |  | Comprehensive Care Corporation CEO Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  |             | 22 | 
|        |  |                                                                                                                                                           |  |             |    | 
|99.2    |  | Comprehensive Care Corporation CFO Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  |             | 23 | 

21