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

                                   FORM 10-QSB

 [Mark One]

X   Quarterly report under Section 13 or 15 (d) of the Securities Exchange Act
of 1934

For the quarterly period ended June 30, 1999

___ Transition report under Section 13 or 15 (d) of the Securities Exchange Act
of 1934 For the transition period from __________to__________

Commission file number  333-1700

                          COMMUNITY CARE SERVICES, INC.
                  ---------------------------------------------
        (Exact Name of Small Business Issuer as Specified in its Charter)

                  New York                            13-3677548
           -----------------------              -----------------------
          (State or other Jurisdiction             (I.R.S. Employer
          Incorporation or Organization).         Identification No.)


                                18 Sargent Place
                          Mount Vernon, New York 10550
             ------------------------------------------------------
                    (Address of Principal Executive Offices)

                                (914) 665 - 9050
                               -------------------
                           (Issuer's Telephone Number)

                                      NONE
             ------------------------------------------------------
              (Former Name, Former Address and Former Fiscal Year,
                         if Changed Since Last Report)




          APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
                        DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documented and reports required to be
filed by Section 13 or 15 (d) of the Exchange Act after the distribution of
securities under a Plan confirmed by a court.

Yes  ________     No  ________

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 7,217,851

Transitional Small Business Disclosure Format (check one):

Yes     x     No  ________
<PAGE>   2
                  COMMUNITY CARE SERVICES, INC. AND SUBSIDIARY
                       FIRST QUARTER REPORT ON FORM 10-QSB
                       FOR THE QUARTER ENDED JUNE 30, 1999


                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                             Page
                                                                             ----
<S>                                                                        <C>
PART I.  FINANCIAL INFORMATION

         Item 1. Financial Statements

                 Condensed Consolidated Balance Sheets at
                 June 30, 1999 (unaudited) and March 31, 1999                 2

                 Condensed Consolidated Statements of Operations for the
                 Three Months Ended June 30, 1999 (unaudited) and 1998
                 (unaudited)                                                  3

                 Condensed Consolidated Statements of Cash Flows for
                 the Three Months Ended June 30, 1999 (unaudited)
                 and 1998 (unaudited)                                       4-5

                 Notes to Condensed Consolidated Financial Statements       6-8

         Item 2. Management's Discussion and Analysis of Financial
                 Condition and Results of  Operations                      9-14

PART II. OTHER INFORMATION

         Item 1. Legal Proceedings                                           15
         Item 2. Changes in Securities                                       15
         Item 3. Defaults Upon Senior Securities                             15
         Item 4. Submission of Matters to a Vote of Security Holders         15
         Item 5. Other Information                                           15
         Item 6. Exhibits and Reports on Form 8-K                            15


Signatures                                                                   16
</TABLE>
<PAGE>   3
                COMMUNITY CARE SERVICES, INC. AND SUBSIDIARY
                    CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                               AS AT               AS AT
                                                                              JUNE 30,            MARCH 31,
                                                                                1999                1999
                                                                            ------------        ------------
                                                                             (UNAUDITED)
<S>                                                                         <C>                 <C>
                                     ASSETS
CURRENT ASSETS:
    Cash and cash equivalents                                               $    117,000        $     84,000
    Accounts receivable, net of allowance for doubtful
       accounts of $1,738,000 and $1,852,000                                   4,285,000           4,662,000
    Inventory, net                                                               507,000             459,000
    Prepaid expenses and other current assets                                     43,000             116,000
    Deferred tax asset, net                                                      433,000             453,000
                                                                            ------------        ------------
                TOTAL CURRENT ASSETS                                           5,385,000           5,774,000

Rental equipment, net                                                          2,015,000           2,256,000
Property and equipment, net                                                    1,599,000           1,474,000
Excess of purchase price over fair value of  net assets acquired, net          2,120,000           2,151,000
Covenants not to compete, net                                                    310,000             345,000
Accounts and customer list, net                                                  252,000             262,000
Other assets                                                                      35,000              32,000
                                                                            ------------        ------------
                TOTAL  ASSETS                                               $ 11,716,000        $ 12,294,000
                                                                            ============        ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                   LIABILITIES
CURRENT LIABILITIES:
    Accounts payable                                                           2,493,000        $  2,611,000
    Accrued expenses                                                             468,000             738,000
    Note payable - Bank                                                        2,500,000           2,500,000
    Current portion of long term debt                                            868,000           1,372,000
    Current portion of capital lease obligations                                  76,000             115,000
                                                                            ------------        ------------
                TOTAL CURRENT LIABILITIES                                      6,405,000           7,336,000

Long term portion of debt                                                        436,000              99,000
Long term portion of capital lease obligations                                   123,000             140,000
                                                                            ------------        ------------
                TOTAL LIABILITIES                                              6,964,000           7,575,000
                                                                            ------------        ------------

COMMITMENTS AND CONTINGENCIES

                            STOCKHOLDERS' EQUITY

Preferred stock, $.01 par value; 1,000,000 shares none issued
Common stock, $.01 par value; authorized 20,000,000 shares,
    issued and outstanding  7,200,009 shares                                      72,000              72,000
Additional paid in capital                                                    10,213,000          10,206,000
Accumulated deficit                                                           (5,533,000)         (5,559,000)
                                                                            ------------        ------------
                TOTAL STOCKHOLDERS' EQUITY                                     4,752,000           4,719,000
                                                                            ------------        ------------

                TOTAL  LIABILITIES AND STOCKHOLDERS' EQUITY                 $ 11,716,000        $ 12,294,000
                                                                            ============        ============
</TABLE>


              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.


                                        2
<PAGE>   4
                  COMMUNITY CARE SERVICES, INC. AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  - UNAUDITED -

<TABLE>
<CAPTION>
                                                                    FOR THE
                                                              THREE MONTHS ENDED
                                                                   JUNE 30,
                                                         ---------------------------
                                                            1999              1998
                                                         ----------       ----------
<S>                                                      <C>              <C>
NET REVENUES                                             $4,351,000       $4,432,000
                                                         ----------       ----------
COST AND EXPENSES:
    Cost of net revenues
       Product and supply costs                           1,436,000        1,589,000
       Rental equipment depreciation                        301,000          247,000
                                                         ----------       ----------

       COST OF NET REVENUES                               1,737,000        1,836,000

    Selling, general and administrative                   1,871,000        2,133,000
    Provision for doubtful accounts                         390,000          213,000
    Amortization of intangible assets                        76,000           77,000
    Merger expense                                          124,000             --
                                                         ----------       ----------
    TOTAL COST AND EXPENSES                               4,198,000        4,259,000
                                                         ----------       ----------

    OPERATING  INCOME                                       153,000          173,000

    Interest expense, net                                   107,000          108,000
                                                         ----------       ----------

    Income before provision for income taxes                 46,000           65,000

    Provision  for income taxes                              20,000           20,000
                                                         ----------       ----------

NET  INCOME                                              $   26,000       $   45,000
                                                         ==========       ==========

Per share data :

    Net income per common share:
        Basic                                            $     0.00       $     0.01
                                                         ==========       ==========

        Diluted                                          $     0.00       $     0.01
                                                         ==========       ==========

    Weighted average number of shares outstanding:
        Basic                                             7,200,009        7,145,049
                                                         ==========       ==========

        Diluted                                           7,208,342        7,145,049
                                                         ==========       ==========
</TABLE>


              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.


                                        3
<PAGE>   5
                  COMMUNITY CARE SERVICES, INC. AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  - UNAUDITED -

<TABLE>
<CAPTION>
                                                                             FOR THE
                                                                        THREE MONTHS ENDED
                                                                             JUNE 30,
                                                                    --------------------------
                                                                      1999             1998
                                                                    ---------        ---------
<S>                                                                 <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                        $  26,000        $  45,000
  Adjustments to reconcile net income
    to net cash provided by operating activities:
    Depreciation and amortization expense                             438,000          380,000
    Write off of rental equipment                                       7,000           19,000
    Provision for doubtful accounts                                   390,000          213,000
    Deferred tax asset                                                 20,000           20,000
    Non cash compensation                                               7,000             --
    Changes in operating assets and liabilities:
    Accounts receivable                                               (13,000)         217,000
    Inventory                                                         (48,000)         114,000
    Prepaid expenses and other current assets                          73,000          (26,000)
    Other assets                                                       (3,000)          (6,000)
    Accounts payable and accrued expenses                            (388,000)        (321,000)
                                                                    ---------        ---------
          Net cash provided by operating activities                   509,000          655,000
                                                                    ---------        ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of rental equipment                                     (67,000)        (446,000)
  Acquisition of property and equipment                                (4,000)        (125,000)
                                                                    ---------        ---------
          Net cash (used in) investing activities                     (71,000)        (571,000)
                                                                    ---------        ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from promissory note                                        20,000          147,000
  Proceeds of bank borrowings under credit line                          --            150,000
  Exercise of underwriters warrants                                      --              6,000
  Repayments of credit line and term loan                                --            (53,000)
  Principal repayments of notes payable to suppliers                 (267,000)        (226,000)
  Repayments of former MRS stockholders notes                         (31,000)        (128,000)
  Principal repayments of notes payable to Adam
    Health Care Equipment Corp.                                       (71,000)         (71,000)
  Principal repayments of capital lease obligations                   (56,000)         (56,000)
                                                                    ---------        ---------
          Net cash (used in) provided by financing activities        (405,000)        (231,000)
                                                                    ---------        ---------

NET INCREASE  (DECREASE) IN CASH AND CASH EQUIVALENTS                  33,000         (147,000)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                       84,000          276,000
                                                                    ---------        ---------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                          $ 117,000        $ 129,000
                                                                    =========        =========
</TABLE>


                                   (continued)

                                        4
<PAGE>   6
                  COMMUNITY CARE SERVICES, INC. AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  - UNAUDITED -
                                   (CONTINUED)


<TABLE>
<CAPTION>
                                                                            FOR THE
                                                                       THREE MONTHS ENDED
                                                                            JUNE 30,
                                                                   -------------------------
                                                                     1999             1998
                                                                   --------         --------
<S>                                                                <C>              <C>
SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION:
    Cash paid during the period
        Interest                                                   $109,000         $104,000
                                                                   --------         --------
        Taxes                                                      $ 20,000         $   --
                                                                   --------         --------

SUPPLEMENTARY DISCLOSURES OF NON CASH ACTIVITIES:
       Rental equipment acquired under capital lease                   --               --
       Property and equipment acquired under capital lease          182,000            7,000
</TABLE>



              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.


                                        5
<PAGE>   7
                  COMMUNITY CARE SERVICES, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

(NOTE A) - BUSINESS AND BASIS OF PRESENTATION

         Community Care Services, Inc., ("CCS") and its wholly owned subsidiary,
Metropolitan Respirator Service, Inc. ("MRS"), (collectively, "The Company")
provide home health care services and products consisting primarily of
respiratory equipment, rental and sale of durable medical equipment and sell
home health care supplies primarily in the five boroughs of New York City, and
Westchester, Rockland and Nassau Counties in New York State, as well as northern
New Jersey. The condensed consolidated financial statements include CCS and its
wholly owned subsidiary, MRS. Intercompany balances and transactions have been
eliminated in consolidation.

         The condensed consolidated financial statements of the Company for the
three months ended June 30, 1999 and 1998 included herein have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management of the Company, the accompanying
unaudited condensed consolidated financial statements reflect all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly
the financial position at June 30, 1999, the results of operations, and the cash
flows for the three months ended June 30, 1999 and 1998.

         The results of operations for the three months ended June 30, 1999 and
1998 are not necessarily indicative of the operating results for the entire
respective years. These condensed consolidated financial statements should be
read in conjunction with the audited consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-KSB for the year
ended March 31, 1999 as filed with the Securities and Exchange Commission.

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Such amounts include, among others, the allowance for doubtful accounts, other
asset valuation allowances and certain liabilities. Management periodically
reevaluates the estimates inherent in certain financial statement amounts and
adjust them accordingly. Actual results could differ from these estimates.

(NOTE B) - EARNINGS PER SHARE

         Basic and diluted net income per share is determined by dividing net
income by the weighted average number of common shares outstanding during the
years. Potentially issuable common shares, upon exercise or conversion of
options, warrants and convertible notes are included in the diluted calculation
if their effect would be dilutive.


                                        6
<PAGE>   8
                  COMMUNITY CARE SERVICES, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

(NOTE C) - MERGER WITH LTTR HOME CARE, LLC

         The Company and LTTR Home Care, LLC ("LTTR") executed a letter of
intent effective April 6, 1999 providing for the purchase by LTTR or one of its
affiliates of all of the Company's issued and outstanding Common Stock for the
price of $1.20 per share, conditioned upon the successful negotiation of a
definitive written agreement, which was executed on June 14, 1999 and further
described below, and the approval of the Company's shareholders. LTTR had
previously acquired 2,126,250 shares of the Company's Common Stock from Alan T.
Sheinwald, the Company's former President and Chief Executive Officer. Also
effective April 6, 1999, Dean L. Sloane, Mary Sloane, Joshua Sloane, Craig V.
Sloane and The Sloane Family Foundation executed a letter of intent pursuant to
which they agreed, for a period of forty-five business days, or such earlier
time as negotiations on a definitive merger agreement between LTTR and the
Company terminated, not to transfer, encumber, or engage in any discussions or
negotiations with respect to their shares of Common Stock.

         On June 14, 1999, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Landauer Hospital Supplies, Inc. ("LHS"), a
New York corporation and LHS Merger Sub, Inc., a wholly owned subsidiary of LHS
("Merger Sub"). LHS is an affiliate of LTTR and is controlled by the Chairman of
the Company's Board of Directors. LTTR had previously acquired 2,126,250 shares
of the Company's Common Stock from the Company's former President and Chief
Executive Officer. The Merger Agreement provides for the merger of the Company
with Merger Sub, with the Company being the surviving entity ("the Merger"). As
part of the Merger each shareholder (other than LHS and its affiliates) will
receive $1.20 in cash in exchange for each share of Common Stock owned by them.
The Merger is subject to the approval of the holders of at least two-thirds of
the Company's issued and outstanding Common Stock. If the Merger is approved and
consummated, the Company will become a wholly-owned subsidiary of LHS. The
Company has agreed that if the Merger is not consummated, the Company will pay
LHS a termination fee of $350,000, plus certain other costs.

         On June 17, 1999, the Company filed a preliminary proxy statement with
the Securities and Exchange Commission soliciting shareholder approval for the
proposed Merger. On August 9, 1999, the Company filed an amendment to the
preliminary proxy statement in response to comments received from the Securities
and Exchange Commission.

          Costs related to the Merger, consisting mainly of professional fees,
were approximately $124,000 for the three month period ended June 30, 1999.

(NOTE D) - COMMITMENTS AND CONTINGENCIES

          On June 4, 1997, a search warrant was executed at the Company's
executive offices. The Company was informed that its then Chief Executive
Officer and Chief Operating Officer and the Company itself are targets of a
U.S. Department of Justice criminal investigation for allegedly improper
payments relating to a contract to provide healthcare services outside of New
York State involving Medicare. If it is determined that the Company engaged in
criminal wrongdoing, the Company will be subject to criminal penalties, which
may include a fine of $1,000,000 or more and an order of restitution, would be
terminated as a Medicaid and Medicare services provider, and could also


                                        7
<PAGE>   9
                  COMMUNITY CARE SERVICES, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

be at the risk of having its contracts with private insurers and other
non-governmental agencies terminated. Additionally, even if the Company is not
charged with criminal wrongdoing itself, but one or more past or present
officers or employees are convicted of crimes related to their employment the
Company could be terminated as a Medicaid and Medicare provider. In these
circumstances, although the Company would not be subject to automatic exclusion
from such programs, it could be at risk of having its contracts with private
insurers and other non-governmental agencies terminated. If such occurred, it
would have a material adverse effect on the Company's business, results of
operations, and financial condition and the Company may not be able to continue
as a going concern. The Company has cooperated with the government in the
Department of Justice criminal investigation.

         The Company is currently subject to review by the New York State
Attorney General's Medicaid Fraud Control Unit. In response to a subpoena duces
tecum issued by the Medicaid Fraud Control Unit in September 1996, the Company
has produced a substantial number of documents and provided its full
cooperation. The review is pending and the Company has not been advised of any
determination by the Medicaid Fraud Control Unit.

          The Company currently has a $2,800,000 line of credit with the Bank of
New York with interest payable at the prime rate. As of June 30, 1999,
approximately $2,500,000 was drawn down under the line. In July 1997, The Bank
of New York notified the Company that it put a $2,500,000 cap on borrowings
until the uncertainty surrounding the Federal Investigation of the Company is
completed. The Bank has transferred the administration of the credit facility
within the Bank to its Asset Recovery Department.

         In March 1998, the Company entered into an agreement to finance a new
computer system with BNY Leasing ("BNY") formerly Tokai Financial Services, Inc.
The agreement initially allowed the Company to draw down $600,000 under a line
of credit. BNY had capped the line at $480,000 until the Federal Investigation,
as discussed above was resolved. The Company has drawn down approximately
$472,000 under the line of credit, and converted the line of credit into a
master lease agreement payable over thirty six months, with monthly payments of
approximately $16,000. The master lease agreement bears interest at 11.6%. As of
June 30, 1999, the outstanding balance of the master lease agreement is
approximately $461,000. The master lease is collaterized by a lien on all of the
Company's assets, subordinate to prior lienholders.

         In April 1999, the Company entered into restated and amended employment
agreements with two officers providing for base annual compensation of $225,000
and expiring on May 10, 2004, but which may be extended for additional one year
terms upon mutual written agreement.

         In June 1999, the Company borrowed $20,000 from LHS evidenced by a note
bearing interest at 6.0%. The interest and principal is due June 2000.


                                        8
<PAGE>   10
                  COMMUNITY CARE SERVICES, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


PART 1 - ITEM 2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

FORWARD LOOKING STATEMENTS

         From time to time the Company may publish forward-looking statements
related to such matters as anticipated financial performance and similar
matters. The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements. These statements are typically identified
by the inclusion of phrases such as "the Company anticipates," "the Company
believes", "Management believes", and other phrases of similar meaning. Such
forward-looking statements involve known and unknown risks, uncertainties, and
other factors that may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. The
Company is subject to significant external factors which could significantly
impact its business, including changes in Medicare, Medicaid, and private pay
reimbursement, government fraud and abuse initiatives and other such factors
which are beyond the control of the Company. Certain of these factors are
discussed herein. These factors, as well as future changes in reimbursement and
changes in interpretations of regulations, could cause future results to differ
materially from historical trends and management's current expectations.

RECENT DEVELOPMENTS

         On March 23, 1999, Mr. Bruce L. Ansnes, Co-Chairman of the Board, and
Dr. Bernard M. Kruger resigned from the Board of Directors of the Company for
personal reasons.

         On April 8, 1999, Mr. Alan J. Landauer was elected Director and
Chairman of the Board of the Company. The nominees proposed by Mr. Landauer,
Messrs. Thomas C. Blum and Gary J. Spirgel, were elected to the Board of
Directors, together with incumbent directors Dean L. Sloane and Louis Rocco. Mr.
Blum and Mr. Landauer are first cousins.

         The Company and LTTR executed a letter of intent effective April 6,
1999 providing for the purchase by LTTR or one of its affiliates of all of the
Company's issued and outstanding Common Stock for the price of $1.20 per share,
conditioned upon the successful negotiation of a definitive written agreement,
which was executed on June 14, 1999 and further described below, and the
approval of the Company's shareholders. LTTR had previously acquired 2,126,250
shares of the Company's Common Stock from Alan T. Sheinwald, the Company's
former President and Chief Executive Officer. Also effective April 6, 1999,
Dean L. Sloane, Mary Sloane, Joshua Sloane, Craig V. Sloane and The Sloane
Family Foundation executed a letter of intent pursuant to which they agreed,
for a period of forty-five business days, or such earlier time as negotiations
on a definitive merger agreement between LTTR and the Company terminated, not
to transfer, encumber, or engage in any discussions or negotiations with
respect to their shares of Common Stock.


                                        9
<PAGE>   11
                  COMMUNITY CARE SERVICES, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

         On June 14, 1999, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Landauer Hospital Supplies, Inc. ("LHS"), a
New York corporation and LHS Merger Sub, Inc., a wholly owned subsidiary of LHS
("Merger Sub"). LHS is an affiliate of LTTR and is controlled by the chairman of
the Company's Board of Directors. LTTR had previously acquired 2,126,250 shares
of the Company's Common Stock from the Company's former President and Chief
Executive Officer. The Merger Agreement provides for the merger of the Company
with Merger Sub, with the Company being the surviving entity ("the Merger"). As
part of the Merger each shareholder (other than LHS and its affiliates) will
receive $1.20 in cash in exchange for each share of Common Stock owned by them.
The Merger is subject to the approval of the holders of at least two-thirds of
the Company's issued and outstanding Common Stock. If the Merger is approved and
consummated, the Company will become a wholly-owned subsidiary of LHS. The
Company has agreed that if the Merger is not consummated, the Company will pay
LHS a termination fee of $350,000, plus certain other costs.

INVESTIGATIONS BY U.S. DEPARTMENT OF JUSTICE AND NEW YORK STATE DEPARTMENT OF
HEALTH

         If it is determined in the investigations by the U.S. Department of
Justice and the New York Department of Health, that the Company engaged in
criminal wrongdoing, the Company would be subject to criminal penalties. In
addition, if it is determined that the Company engaged in criminal wrongdoing,
the Company would be terminated as a Medicaid and Medicare services provider,
and will be at risk of having its contracts with private insurers and other
non-governmental agencies terminated. Additionally, even if the Company is not
charged with criminal wrongdoing itself, but one of its past or present officers
or employees are convicted of crimes relating to their employment, the Company
could be terminated as a Medicaid and Medicare provider. In these circumstances,
although the Company would not be subject to automatic exclusion from such
programs, it could be at risk of having its contracts with private insurers and
other non-governmental agencies terminated. If such occurred, it would have a
material adverse effect on the Company's business, results of operations, and
financial condition and the Company may not be able to continue as a going
concern.

MEDICAL REIMBURSEMENT FOR OXYGEN THERAPY SERVICES

         The Balanced Budget Act (the "Budget Act") was signed by President
Clinton on August 5, 1997. The Budget Act provides for reductions in Medicare
reimbursement rates for oxygen and certain oxygen equipment. Oxygen
reimbursement rates were reduced to seventy five percent (75%) of their 1997
levels, beginning January 1, 1998 and to seventy percent (70%) of their 1997
levels beginning January 1, 1999. In addition, Consumer Price Index increases in
oxygen reimbursement rates will not resume until the year 2003. The results for
the three months ended June 30, 1999 reflect the reduction for the
aforementioned Medicare reimbursement rates as compared to the three months
ended June 30, 1998.


                                       10
<PAGE>   12
                  COMMUNITY CARE SERVICES, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

THREE MONTHS ENDED JUNE 30, 1999 VERSUS THREE MONTHS ENDED JUNE 30, 1998

         NET REVENUES - Net revenues decreased by approximately $81,000 or 1.8%
to $4,351,000 for the three months ended June 30, 1999 from $4,432,000 for the
three months ended June 30, 1998. The decrease in net revenues was primarily
attributable to certain external factors that continued to impact the Company
including, additional reductions in the oxygen reimbursements rates as a result
of the Budget Act, reductions in reimbursement rates by certain third party
payors and a reduction in referral based business.

         COST OF NET REVENUES - Cost of net revenues decreased by approximately
$99,000 or 5.4% to $1,737,000 for the three months ended June 30, 1999 from
$1,836,000 for the three months ended June 30, 1998. Cost of net revenues
decreased as a percentage of net revenues to 39.9% for the three months ended
June 30, 1999 from 41.4% for the three months ended June 30, 1998. The decrease
in cost of net revenues as a percentage of net revenues for the period ended
June 30, 1999 is primarily attributable to the Company's ability to negotiate
better pricing from its major suppliers.

         SELLING, GENERAL AND ADMINISTRATIVE - Selling, general and
administrative expenses decreased by approximately $262,000 or 12.3% to
$1,871,000 for the three months ended June 30, 1999 from $2,133,000 for the
three months ended June 30, 1998, and also decreased as a percentage of net
revenues to 43.0% from 48.1%. The reduction in selling, general and
administrative expenses is primarily attributable to cost reduction programs and
a reduction in personnel. Included in selling, general and administrative for
the three months ended June 30, 1999 and 1998, is approximately $2,000 and
$23,000, respectively, of legal expenses related to the investigation by the
U.S. Department of Justice (See Note D).

         PROVISION FOR DOUBTFUL ACCOUNTS - The Company recorded a provision for
doubtful accounts of approximately $390,000 for the three months ended June 30,
1999 as compared with $213,000 for the three months ended June 30, 1998.

         MERGER EXPENSE - The Company also incurred approximately $124,000 of
professional fees related to the Merger for the three month period ended June
30, 1999.

         OPERATING INCOME - The Company generated operating income of
approximately $153,000 for the three months ended June 30, 1999 as compared to
an operating income of $173,000 for the three months ended June 30, 1998.

         INTEREST EXPENSE, NET - Interest expense, net decreased by
approximately $1,000 to $107,000 for the three months ended June 30, 1999 from
$108,000 for the three months ended June 30, 1998.

         NET INCOME - The Company had a net income of approximately $26,000 for
the three months ended June 30, 1999 as compared with net income of $45,000 for
the three months ended June 30, 1998.


                                       11
<PAGE>   13
                  COMMUNITY CARE SERVICES, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

LIQUIDITY AND CAPITAL RESOURCES

         Working capital decreased to a deficiency of approximately $1,020,000
at June 30, 1999 from working capital deficiency of $1,562,000 at March 31,
1999. The current ratio increased to $.84 at June 30, 1999 from $.79 at March
31, 1999.

         Net cash provided by operating activities was approximately $509,000
for the three months ended June 30, 1999 compared with net cash provided by
operating activities of approximately $655,000 for the three months ended June
30, 1998. The decrease of approximately $146,000 was primarily attributable to
the increase in inventory and decreases in accounts payable and accrued
expenses.

         Net cash used in investing activities was approximately $71,000 for the
three months ended June 30, 1999, compared with approximately $571,000 for the
three months ended June 30, 1998. The decrease of approximately $500,000 is
primarily attributable to a reduction in the acquistion of equipment.

         Net cash used in financing activities was approximately $405,000 for
the three month ended June 30, 1999, compared with net cash used in financing
activities of approximately $231,000 for the three months ended June 30, 1998.
The decrease of approximately $174,000 was primarily attributable to a decrease
in borrowings by the Company.

         The Company's future liquidity will continue to be dependent upon the
relative amounts of current assets (principally cash, accounts receivable and
inventories) and current liabilities (principally accounts payable and accrued
expenses). In that regard, accounts receivable can have a significant impact on
the Company's liquidity. The Company has various types of accounts receivable,
such as receivables from patients and contracts. Accounts receivable are
generally outstanding for longer periods of time in the health care industry
than many other industries because of requirements to provide third party payors
with additional information subsequent to billing and the time required by such
payors to process claims. Certain accounts receivable frequently are outstanding
for more than 90 days.

         Recently there has been consolidation within the New York Metropolitan
area in the industry in which the Company operates. Such recent consolidation
may limit the Company's ability to maintain or increase its market share and
could materially adversely affect its business, results of operations and
financial condition.

          The Company currently has a $2,800,000 line of credit with the Bank of
New York with interest payable at the prime rate. As of June 30, 1999,
approximately $2,500,000 was drawn down under the line. In July 1997, The Bank
of New York notified the Company that it put a $2,500,000 cap on borrowings
until the uncertainty surrounding the Federal Investigation of the Company is
completed (See Note D). The Bank has transferred the administration of the
credit facility within the Bank to its Asset Recovery Department.



                                       12
<PAGE>   14
                  COMMUNITY CARE SERVICES, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

         The Company believes that internally generated funds will provide
sufficient liquidity and enable it to meet its currently foreseeable working
capital requirements for at least the next twelve months. However, the Company
may need to obtain additional financing to continue its operations. There can be
no assurance that additional financings will be available if and when needed by,
or on terms acceptable to, the Company. Potential sources for any such
financings have not yet been identified. Furthermore, as indicated above, if in
connection with the Federal Investigation, the Company is found to have engaged
in criminal wrongdoing and/or is terminated as a Medicaid and Medicare provider,
it would have a material adverse effect on the Company's business, results of
operations and financial condition, and the Company may not be able to continue
as a going concern.

SEASONALITY

         The Company generally has not experienced seasonal fluctuation.

INFLATION

         The Company has not experienced large increases in either the cost of
supplies or operating expenses due to inflation. Because of restrictions by
government and private medical insurance programs and the pressures to contain
the growth in the costs of such programs, the Company bears the risk that
reimbursement rates set by such programs will not keep pace with inflation.

IMPACT OF THE YEAR 2000 ISSUE

         The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruption of operations, including,
among other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities.

         The Company determined that it would be required to replace significant
portions of its software and hardware so that its computer systems will properly
utilize dates beyond December 31, 1999. The company completed its hardware
update in April 1999. The Company presently believes that with the addition of
new software, the Year 2000 Issue will be remedied. The Company plans on
completing the software updates by September 30, 1999. However, if such
replacement is not made, or is not completed in a timely manner, the Year 2000
Issue could have a material impact on the operations of the Company.

         The Company is in the process of developing a contingency plan for the
Year 2000 Issue and expects to complete the plan by September 30, 1999.

         The Company has inquired with of its significant suppliers and large
customers to determine the extent to which the Company is vulnerable to those
parties' failure to remedy their own Year 2000 Issue. The Company's total Year
2000 project cost and estimates to complete include the estimated


                                       13
<PAGE>   15
                  COMMUNITY CARE SERVICES, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

costs and time associated with the impact of relevant other parties' Year 2000
Issue, and are based on presently available information. However, there can be
no guarantee that the systems of other companies on which the Company's systems
rely will be timely converted, or that a failure to convert by another company,
or a conversion that is incompatible with the Company's systems, would not have
a material adverse effect on the Company.

                  The Company has and will continue to utilize both internal and
external resources to develop and test the software on its systems. The Company
plans to complete the implementation by September 30, 1999. The total cost of
the Year 2000 compliance project and other hardware and software updates is
estimated at $1,115,000 and is being funded by a master lease agreement and
from operations. To date, the Company has incurred costs of $972,000.

                  The cost of the project and the date on which the Company
plans to complete the project are based on management's best estimates, which
were derived utilizing numerous assumptions of future events including the
continued availability of certain resources. However, there can be no guarantee
that these estimates will be achieved and actual results could differ materially
from those plans. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in this area.


                                                        14
<PAGE>   16
                  COMMUNITY CARE SERVICES, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


PART II -OTHER  INFORMATION

ITEM 1   - LEGAL PROCEEDINGS
Information concerning legal matters in incorporated by reference from Part I,
Note D of Notes to the Condensed Consolidated Financial Statements.

ITEM 2 - CHANGES IN SECURITIES
None

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Item 4 (Submission of Matters to a Vote of Security Holders) of the Company's
Annual Report on Form 10-KSB for the year ended March 31, 1999 is incorporated
herein by reference.

ITEM 5 - OTHER INFORMATION
None

ITEM 6 -  EXHIBITS AND REPORTS ON FORM 8K

(a)      Exhibits

10.27 Agreement and Plan of Merger dated as of June 14, 1999 among the Company,
Landauer Hospital Supplies, Inc. and LHS Merger Sub, Inc. (incorporated by
reference to the Company's Preliminary Proxy Statement filed on June 17, 1999)

(b)      Reports on Form 8-K

         The Company filed a Report on Form 8-K on April 20, 1999 to report (i)
a change in control of the Company resulting from the election of Alan J.
Landauer, Thomas C. Blum and Gary J. Sprigel as Directors of the Company on
April 8, 1999; (ii) the appointment of Alan J. Landauer as Chairman of the Board
of Directors; and (iii) the execution by the Company and LTTR of a non-binding
letter of intent effective April 6, 1999 pursuant to which LTTR or one of its
affiliates will acquire the Company by way of merger for consideration of $1.20
per share payable to the holders of the Company's common stock. No financial
statements or exhibits were attached to the Report.


                                       15
<PAGE>   17
                  COMMUNITY CARE SERVICES, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


                                   SIGNATURES


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



                                       COMMUNITY CARE SERVICES, INC.
                                   -----------------------------------------
                                               (Registrant)

Date:  August 16, 1999                       /s/ Saverio D. Burdi
                                   -----------------------------------------
                                              Saverio D. Burdi,
                                           Chief Operating Officer

Date:  August 16, 1999                       /s/ Elia C. Guarneri
                                   -----------------------------------------
                                              Elia C. Guarneri,
                                            Chief Financial Officer
                                   Principal Financial & Accounting Officer


                                                        16