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 QUARTERLY PERIOD ENDED JUNE 30, 1998

                                      OR

  [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES 
       EXCHANGE ACT OF 1934

            FOR THE TRANSITION PERIOD __________ TO _______________


                        COMMISSION FILE NUMBER 1-14472


                           CORNELL CORRECTIONS, INC.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

           DELAWARE                                     76-0433642
  (STATE OR OTHER JURISDICTION                        (I.R.S. EMPLOYER
 OF INCORPORATION OR ORGANIZATION)                   IDENTIFICATION NO.)


4801 WOODWAY, SUITE #100E, HOUSTON, TEXAS                   77056
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                 (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:    (713) 623-0790


Indicate by a check mark whether Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.

                               Yes  X   No

At July 31, 1998 Registrant had outstanding 9,550,916 shares of its Common
Stock.

                                   - 1 -
<PAGE>
PART I   FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                           CORNELL CORRECTIONS, INC.
                          CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)
                       (IN THOUSANDS, EXCEPT SHARE DATA)

                                                          JUNE 30,  DECEMBER 31,
                                                           1998         1997
                                                         ---------    ---------
                              ASSETS
CURRENT ASSETS:
   Cash and cash equivalents .........................   $   1,141    $  18,968
   Accounts receivable, net ..........................      22,462       20,137
   Deferred tax asset ................................         604          604
   Prepaids and other ................................       2,594        1,366
   Restricted assets .................................       1,699        1,564
                                                         ---------    ---------
      Total current assets ...........................      28,500       42,639
PROPERTY AND EQUIPMENT, net ..........................     126,454       52,516
OTHER ASSETS:
   Intangible assets, net ............................       5,904        6,104
   Deferred costs and other ..........................       3,941        2,850
                                                         ---------    ---------
      Total assets ...................................   $ 164,799    $ 104,109
                                                         =========    =========

               LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable and accrued liabilities ..........   $  20,350    $  13,576
   Deferred revenues .................................       2,187        2,549
   Current portion of long-term debt .................         239          294
                                                         ---------    ---------
      Total current liabilities ......................      22,776       16,419
LONG-TERM DEBT, net of current portion ...............      51,769          138
OTHER LONG-TERM LIABILITIES ..........................         810          822

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
   Preferred stock, $.001 par value, 10,000,000
     shares authorized, none outstanding .............        --           --
   Common stock, $.001 par value, 30,000,000
     shares authorized, 9,975,404 and 9,945,904
     shares issued and outstanding, respectively .....          10           10
   Additional paid-in capital ........................      89,859       89,684
   Stock option loans ................................        (455)        (455)
   Retained earnings (deficit) .......................       2,383         (156)
   Treasury stock (555,000 shares of common stock,
     at cost) ........................................      (2,353)      (2,353)
                                                         ---------    ---------
      Total stockholders' equity .....................      89,444       86,730
                                                         ---------    ---------
      Total liabilities and stockholders' equity .....   $ 164,799    $ 104,109
                                                         =========    =========

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

                                   - 2 -
<PAGE>
                            CORNELL CORRECTIONS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)



                                         THREE MONTHS ENDED    SIX MONTHS ENDED
                                         ------------------    -----------------
                                               JUNE 30,           JUNE 30,
                                         ------------------    -----------------
                                            1998      1997      1998    1997
                                           -------   ------    ------  ------
REVENUES.................................. $29,099  $14,840  $56,140  $28,041

OPERATING EXPENSES........................  23,618   11,759   45,734   22,556
DEPRECIATION AND AMORTIZATION.............     965      671    1,900    1,120
GENERAL AND ADMINISTRATIVE EXPENSES.......   2,034    1,149    3,631    2,218
                                            ------   ------   ------   ------

INCOME FROM OPERATIONS....................   2,482    1,261    4,875    2,147
INTEREST EXPENSE..........................     377      102      716      209
INTEREST INCOME...........................     (30)     (31)     (72)     (86)
                                            ------   ------   ------   ------

INCOME BEFORE PROVISION FOR
  INCOME TAXES............................   2,135    1,190    4,231    2,024
PROVISION FOR INCOME TAXES................     854      395    1,692      729
                                            ------   ------   ------   ------
NET INCOME ...............................  $1,281   $  795   $2,539   $1,295
                                            ======   ======   ======   ======

NET EARNINGS PER SHARE:
  Basic...................................  $  .14   $  .12   $  .27   $  .19
                                            ======   ======   ======   ======
  Diluted.................................  $  .13   $  .11   $  .26   $  .18
                                            ======   ======   ======   ======

NUMBER OF SHARES USED IN PER SHARE
  CALCULATION:
  Basic...................................   9,416    6,843    9,407    6,804
                                            ======   ======   ======   ======
  Diluted.................................   9,813    7,171    9,854    7,139
                                            ======   ======   ======   ======

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

                                   - 3 -
<PAGE>
                            CORNELL CORRECTIONS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)


                                                             SIX MONTHS ENDED
                                                                  JUNE 30,
                                                             -----------------
                                                               1998      1997
                                                              ------   ------
                                                             
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income................................................  $2,539   $1,295
  Adjustments to reconcile net income to 
   net cash provided by operating activities --
   Depreciation.............................................   1,289      395
   Amortization.............................................     611      725
   Change in assets and liabilities, 
      net of effects from acquisitions:
      Accounts receivable...................................  (2,325)  (1,971)
      Restricted assets.....................................    (135)    (207)
      Other assets..........................................  (2,402)    (760)
      Accounts payable and accrued liabilities..............   3,158      559
      Deferred revenues and other liabilities...............    (374)   2,020
                                                              ------   ------
   Net cash provided by operating activities................   2,361    2,056
                                                              ------   ------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures......................................  (28,189) (1,795)
  Acquisition of businesses, less cash acquired.............  (43,750) (5,594)
                                                              -------  ------
   Net cash used in investing activities....................  (71,939) (7,389)
                                                              -------  ------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from long-term debt..............................  63,000    9,000
  Payments on long-term debt................................ (11,424)  (7,153)
  Proceeds from exercise of stock options...................     175      191
                                                              ------   ------
   Net cash provided by financing activities................  51,751    2,038
                                                              ------   ------

NET DECREASE IN CASH AND CASH EQUIVALENTS................... (17,827)  (3,295)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............  18,968    4,874
                                                              ------   ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..................  $1,141   $1,579
                                                              ======   ======

SUPPLEMENTAL CASH FLOW DISCLOSURE:
  Interest paid, net of amounts capitalized.................  $1,290   $  294
                                                              ======   ======
  Income taxes paid.........................................  $1,831   $  412
                                                              ======   ======

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


                                   - 4 -
<PAGE>
                           CORNELL CORRECTIONS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

   The accompanying unaudited consolidated financial statements 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, all adjustments and disclosures
necessary for a fair presentation of these financial statements have been
included. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's 1997 Annual
Report on Form 10-K as filed with the Securities and Exchange Commission.

2. ACQUISITIONS

   On January 6, 1998, the Company purchased the Great Plains Correctional
Facility ("Great Plains"), located in Hinton, Oklahoma. The Company paid an
aggregate purchase price of $43.8 million comprised of $43.0 million in cash and
$750,000 of transaction costs. The Company financed the purchase with $18.8
million of borrowings under its 1997 Credit Facility and the remainder with
cash. The aggregate purchase price included the 812 bed facility and all
surrounding infrastructure, a 30 year operating contract with four five year
renewals between the Hinton Economic Development Authority ("HEDA") and the
Company, plus an additional 20 adjacent acres of land for potential future
expansion of the facility.

   Great Plains is currently operated pursuant to a one-year contract with nine
one-year renewal options between the Oklahoma Department of Corrections and
HEDA; HEDA in turn currently subcontracts the daily operations of the prison to
the operator. The Company immediately began the transition from the prior
operator and assumed complete operation of the prison on July 7, 1998.

   The unaudited consolidated results of operations on a pro forma basis as
though the January 1998 purchase of the Great Plains Correctional Facility and
the September 1997 acquisition of Abraxas had occurred as of the beginning of
the Company's 1997 fiscal year is as follows (amounts in thousands, except per
share data):


                                                     SIX MONTHS ENDED
                                                       JUNE 30, 1997
                                                     ----------------
        Total revenues..................................$52,642
        Net income......................................  2,039
        Earnings per share:
           Basic........................................    .22
           Diluted......................................    .21

   In June 1998, the Company entered into an Asset Purchase Agreement to acquire
substantially all of the Alaskan assets of Allvest, Inc. ("Allvest"), a
privately held company based in Anchorage, Alaska. Allvest currently operates
five pre-release facilities with a total offender capacity of 540 beds in
Anchorage, Fairbanks and Bethel, Alaska and generates approximately $10 million
in annual revenues. In addition, the Company and Allvest have agreed to enter
into a cooperative venture to jointly develop a possible private prison in Delta
Junction, Alaska. Closing of the transaction is subject to various conditions,
including the completion of due diligence and receipt of required governmental
and other consents. The Company expects to complete the transaction during the
third quarter of 1998.


                                   - 5 -
<PAGE>
3. LONG-TERM DEBT

   As of June 30, 1998, the Company had borrowings outstanding under the 1997
Credit Facility of $51.8 million. Under the 1997 Credit Facility, the Company
has a $60.0 million revolving line of credit, the availability of which is
determined by the Company's projected pro forma cash flow. The 1997 Credit
Facility matures in 2003 and bears interest, at the election of the Company, at
either the prime rate plus a margin of 0% to .5% or a rate which is 1.75% to
2.50% above the applicable LIBOR rate.

   On July 15, 1998 the Company completed a private placement of $50.0 million
of senior secured notes ("Senior Secured Notes"). The notes, which bear interest
at a fixed interest rate of 7.74%, mature on July 15, 2010. Under the note
purchase agreement, the Company is required to make eight annual principal
repayments of $6.25 million beginning July 15, 2003. Earlier repayments of
principal are allowed subject to certain prepayment provisions. Interest is
payable semi-annually. 

4. EARNINGS PER SHARE

   The Company, as required, adopted SFAS No. 128, "Earnings Per Share"
effective December 31, 1997. SFAS No. 128 revised the historical methodology
used in computing earnings per share (EPS) such that the computations required
for primary and fully diluted EPS were replaced with basic and diluted EPS.
Basic EPS is computed by dividing net income by the weighted average number of
shares of common stock outstanding during the year. Diluted EPS is computed in
the same manner as fully diluted EPS, except that, among other changes, the
average share price for the period is used in all cases when applying the
treasury stock method to potentially dilutive outstanding options. All earnings
per share amounts presented herein have been restated to reflect the adoption of
SFAS No. 128.

5. SEGMENT REPORTING

   The Company will adopt SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information" in 1998. SFAS No. 131 provides revised
disclosure guidelines for segments of an enterprise based on a management
approach to defining operating segments.

6. DEFERRED COSTS

   In April, 1998, Statement of Position 98-5, Reporting on the Costs of
Start-Up Activities ("SOP 98-5") was issued. SOP 98-5 requires entities to
expense start-up costs as incurred and to expense previously capitalized
start-up costs as a cumulative effect of a change in accounting principle. SOP
98-5 is effective for fiscal years beginning after December 15, 1998. At June
30, 1998, the Company's unamortized start-up costs were approximately $2.3
million.

7. STOCKHOLDER RIGHTS PLAN

   On May 1, 1998, the Company adopted a stockholder rights plan. Under the
plan, each stockholder of record at the close of the business day on May 11,
1998 received one Preferred Stock Purchase Right ("Right") for each share of
common stock held. The Rights expire on May 1, 2008. Each Right initially
entitles the stockholder to purchase one one-thousandth of a Series A Junior
Participating Preferred Share for $120.00. Each Preferred Share has terms
designed to make it economically equivalent to one thousand common shares. The
Rights will become exercisable only in the event a person or group acquires 15%
or more of the Company's common stock or commences a tender or exchange offer
which, if consummated, would result in that person or group owning 15% or more
of the Company's common stock. If a person or

                                   - 6 -
<PAGE>
group acquires a 15% or more position in the Company, each Right (except those
held by the acquiring party) will then entitle its holder to purchase, at the
exercise price, common stock of the Company having a value of twice the exercise
price. The effect will be to entitle the holder to buy the common stock at 50%
of the market price. Also, if following an acquisition of 15% or more of the
Company's common stock, the Company is acquired by that person or group in a
merger or other business combination transaction, each Right would then entitle
its holder to purchase common stock of the acquiring company having a value of
twice the exercise price. The effect will be to entitle the Company's
stockholder to buy stock in the acquiring company at 50% of the market price.
The Company may redeem the Rights at $0.01 per Right at any time prior to the
acquisition of 15% or more of its common stock by a person or group.


                                   - 7 -
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS

GENERAL

   The Company provides integrated facility development, design, construction
and operational services to governmental agencies within three operating
divisions: (i) secure institutional correctional and detention services; (ii)
juvenile correctional and detention services and (iii) pre-release correctional
services. The following table sets forth the number of facilities, offender
capacity and beds under contract or award at the end of the periods shown.


                                                       JUNE 30,   DECEMBER 31,
                                                        1998         1997
                                                      ---------   -----------
        Facilities in operation (1)...................      42        39
        Total offender capacity:
           Residential................................   8,293     6,172
           Non-residential community based............     935       900
             Total....................................   9,228     7,072
        Contracted offender capacity in operation   
          (end of period).............................   6,042     5,061   
        Contracted beds in operation (end of 
          period)(2)..................................   5,107     4,161
        Average occupancy based on contracted beds 
          in operation(2)(3) .........................    98.4%     97.6%


(1) As of June 30, 1998, the Company had 40 facilities in operation and
    contracts to operate two additional facilities under development. Of the 42
    facilities, 10 are non-residential community-based facilities.
(2) Based on contracted offender capacity of residential facilities in
    operation. Since certain facilities have offender capacities that exceed
    contracted capacities, occupancy percentages can exceed 100% of contracted
    capacity.
(3) For any applicable facilities, includes reduced occupancy during the
    start-up phase.

   The Company derives substantially all its revenues from operating
correctional, detention and pre-release facilities for federal, state and local
governmental agencies in the United States. Revenues for the operation of
correctional, detention and pre-release facilities are generally recognized on a
per diem rate based upon the number of occupant days for the period.

   The Company's operating expenses consist primarily of facility personnel
costs and related employment taxes and costs, lease expense, insurance,
utilities, food, medical services, supplies and clothing. Depreciation and
amortization includes amortization of prepaid facility use costs pertaining to
the Big Spring Complex, amortization of intangible assets including goodwill,
amortization of facility start-up costs and depreciation of buildings and other
property and equipment. General and administrative expenses consist primarily of
salaries and related overhead of the Company's corporate and administrative
personnel who provide senior management, accounting, finance, personnel,
information systems and other services, and costs of developing new contracts.


                                   - 8 -
<PAGE>
RESULTS OF OPERATIONS

   The following table sets forth for the periods indicated the percentages of
total revenue represented by certain items in the Company's consolidated
statements of operations.

                                            THREE MONTHS       SIX MONTHS
                                            ENDED JUNE 30,    ENDED JUNE 30,
                                          ----------------  ----------------
                                            1998     1997    1998      1997
                                          -------  -------  ------    ------
Total revenues...........................  100.0%   100.0%   100.0%   100.0%
Operating expenses.......................   81.2     79.2     81.5     80.4
Depreciation and amortization............    3.3      4.6      3.4      4.0
General and administrative expenses......    7.0      7.7      6.5      7.9
                                          ------   ------   ------     ----
Income from operations...................    8.5      8.5      8.6      7.7
Interest expense, net....................    1.2      0.5      1.1      0.5
                                          ------   ------   ------     ----
Income before provision for income taxes.    7.3      8.0      7.5      7.2
Provision for income taxes...............    2.9      2.6      3.0      2.6
                                          ------   ------   ------     ----
Net income...............................    4.4%     5.4%     4.5%     4.6%
                                          ======   ======   ======     ====


THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997

   REVENUES. Revenues increased 96% to $29.1 million for the three months ended
June 30, 1998 from $14.8 million for the three months ended June 30, 1997. The
increase in revenues of approximately $14.3 million was due principally to the
acquisition of Abraxas in September 1997 and the purchase of the Great Plains
Correctional Facility in January 1998. In addition, the Company assumed the
operation of the Santa Fe County Detention Center in July 1997.

   OPERATING EXPENSES. Operating expenses increased 101% to $23.6 million for
the three months ended June 30, 1998 from $11.8 million for the three months
ended June 30, 1997. The increase in operating expenses was due principally to
the acquisition of Abraxas in September 1997 and the purchase of the Great
Plains Correctional Facility in January 1998. In addition, the Company assumed
the operation of the Santa Fe County Detention Center in July 1997. As a
percentage of revenues, operating expenses increased to 81.2% from 79.2%
primarily due to an increase in operations from juvenile facilities, which
typically generate a lower relative operating margin, and the Santa Fe County
Detention Center.

   DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased 44% to
$965,000 for the three months ended June 30, 1998 from $671,000 for the three
months ended June 30, 1997. Amortization costs for the three months ended June
30, 1997 included approximately $187,000 to expense start-up costs related to
the non-renewal of a 120 bed juvenile contract as of June 30, 1997. Excluding
this charge, depreciation and amortization expense increased 99% or $481,000 due
principally to the depreciation of buildings and equipment acquired from Abraxas
in September 1997 and depreciation of the Great Plains Correctional Facility
purchased in January 1998.

   GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 77% to $2.0 million for the three months ended June 30, 1998 from $1.1
million for the three months ended June 30, 1997. The increase in general and
administrative expenses resulted from additional corporate, development and
administrative personnel needed to manage the increased bidding volume and
business of the Company. As a percentage of revenues, general and administrative
expenses decreased to 7.0% from 7.7% due principally to the larger revenue base.

                                   - 9 -
<PAGE>
   INTEREST. Interest expense, net of interest income, increased to $347,000 for
the three months ended June 30, 1998 from $71,000 for the three months ended
June 30, 1997. The increase was due principally to borrowings under the
Company's 1997 Credit Facility for the purchase of the Great Plains Correctional
Facility in January 1998. During the three months ended June 30, 1998, the
Company capitalized interest totaling $499,000 related to costs of facilities
currently under construction and development including the Big Spring Complex
expansion and the Charlton County Facility.

   INCOME TAXES. For the three months ended June 30, 1998, the Company
recognized a provision for income taxes at an estimated effective rate of 40%
compared to 33% for the three months ended June 30, 1997. The effective tax rate
applied in 1997 included a benefit for the reversal of previously deferred tax
assets resulting from prior net operating losses.

SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997

   REVENUES. Revenues increased by 100% to $56.1 million for the six months
ended June 30, 1998 from $28.0 million for the six months ended June 30, 1997.
The increase in revenues of approximately $28.1 million was due principally to
the acquisition of Abraxas in September 1997 and the purchase of the Great
Plains Correctional Facility in January 1998. In addition, the Company assumed
the operation of the Santa Fe County Detention Center in July 1997.

   OPERATING EXPENSES. Operating expenses increased 103% to $45.7 million for
the six months ended June 30, 1998 from $22.6 million for the six months ended
June 30, 1997. The increase in operating expenses was due principally to the
acquisition of Abraxas in September 1997 and the purchase of the Great Plains
Correctional Facility in January 1998. In addition, the Company assumed the
operation of the Santa Fe County Detention Center in July 1997. As a percentage
of revenues, operating expenses increased to 81.5% from 80.4% due to an increase
in operations from certain juvenile facilities, which typically generate a lower
relative operating margin, and the Santa Fe County Detention Center.

   DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased 70% to
$1.9 million for the six months ended June 30, 1998 from $1.1 million for the
six months ended June 30, 1997. Amortization costs for the six months ended June
30, 1997 included approximately $187,000 to expense start-up costs related to
the non-renewal of a 120 bed juvenile contract as of June 30, 1997. Excluding
this charge, depreciation and amortization increased 104% or $967,000 due
principally to depreciation of buildings and equipment acquired from Abraxas in
September 1997 and depreciation of the Great Plains Correctional Facility
purchased in January 1998.

   GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 64% to $3.6 million for the six months ended June 30, 1998 from $2.2
million for the six months ended June 30, 1997. The increase in general and
administrative expenses resulted from additional corporate, development and
administrative personnel needed to manage the increased bidding volume and
business of the Company. As a percentage of revenues, general and administrative
expenses decreased to 6.5% from 7.9% due principally to the larger revenue base.

   INTEREST. Interest expense, net of interest income, increased to $644,000 for
the six months ended June 30, 1998 from $123,000 for the six months ended June
30, 1997. The increase in net interest expense was principally due to borrowings
under the Company's 1997 Credit Facility for the purchase of the Great Plains
Correctional Facility in January 1998. For the six months ended June 30, 1998,
the Company capitalized interest totaling $738,000 related to costs of
facilities under construction and development including the Big Spring Complex
expansion and the Charlton County Facility.


                                   - 10 -
<PAGE>
   INCOME TAXES. For the six months ended June 30, 1998, the Company recognized
a provision for income taxes at an estimated effective annual rate of 40%
compared to 36% for the six months ended June 30, 1997. The effective income tax
rate applied in 1997 included a benefit for the reversal of previously reserved
deferred tax assets resulting from prior net operating losses.

LIQUIDITY AND CAPITAL RESOURCES

   GENERAL. The Company's primary capital requirements are for working capital,
start-up costs related to new operating contracts, furniture, fixtures and
equipment, supply purchases, new facility renovations, acquisitions and new
facility construction. Working capital requirements generally increase
immediately prior to the Company commencing management of a new facility as the
Company incurs start-up costs and purchases necessary equipment and supplies
before facility management revenue (through occupancy fees) is realized. Some of
the Company's management contracts have required and will require the Company to
make substantial initial expenditures of cash in connection with the opening or
renovating of a facility. Substantially all these start-up expenditures are
fully or partially recoverable as pass-through costs or are reimbursable from
the contracting governmental agency over the term of the contract.

   WORKING CAPITAL. The Company's working capital decreased to $5.7 million at
June 30, 1998 from $26.2 million at December 31, 1997. This decrease was
principally due to the use of cash to fund a portion of the Great Plains
Correctional Facility purchase in January 1998.

   CASH PROVIDED BY OPERATING ACTIVITIES. The Company had net cash provided by
operating activities of $2.4 million for the six months ended June 30, 1998.
Significant sources of cash include $4.4 million of net income plus depreciation
and amortization and an increase in accounts payable and accrued liabilities.
Significant uses of operating cash during the period include an increase in
accounts receivable due to the Great Plains Correctional Facility and certain
juvenile operations and start-up costs for facilities under development.

   EXISTING CREDIT FACILITIES. Under the 1997 Credit Facility, which matures in
2003, the Company has a $60.0 million revolving line of credit, the availability
of which is determined by the Company's projected pro forma cash flow. As of
June 30, 1998 the Company had borrowings outstanding under the 1997 Credit
Facility of $51.8 million.

   On July 15, 1998 the Company completed a private placement of $50.0 million
of Senior Secured Notes. The notes, which bear interest at a fixed rate of
7.74%, mature on July 15, 2010. Under the note purchase agreement, the Company
is required to make eight annual principal repayments of $6.25 million beginning
on July 15, 2003. Earlier repayments of principal are allowed subject to certain
prepayment provisions. Interest is payable semi-annually. Of the total principal
amount, $25.0 million was issued on July 15, 1998 and was used by the Company to
repay outstanding borrowings under the 1997 Credit Facility. The remaining $25.0
million will be issued no later than October 15, 1998 and will also be used by
the Company to repay outstanding borrowings under the 1997 Credit Facility.

   CAPITAL EXPENDITURES. Capital expenditures for the six months ended June 30,
1998 were $28.2 million and related principally to construction-in-progress for
the 560 bed expansion of the Big Spring Complex, the 1,600 bed Charlton County
Facility and various facility expansions and improvements. The Company
anticipates spending an additional $16.0 million through 1998 to complete the
Charlton County Facility.

   In January 1998, the Company acquired the Great Plains Correctional Facility.
The Company financed the $43.0 million purchase price with a combination of
$18.8 million in borrowings under the 1997 Credit Facility, and the remainder
with cash remaining from the October 1997 stock offering and cash generated from
operations.

                                   - 11 -
<PAGE>
   In June 1998, the Company entered into an Asset Purchase Agreement to acquire
substantially all of the Alaskan assets of Allvest, Inc. ("Allvest"), a
privately held company based in Anchorage, Alaska. Allvest currently operates
five pre-release facilities with a total offender capacity of 540 beds in
Anchorage, Fairbanks and Bethel, Alaska and generates approximately $10 million
in annual revenues. In addition, the Company and Allvest have agreed to enter
into a cooperative venture to jointly develop a possible private prison in Delta
Junction, Alaska. Closing of the transaction is subject to various conditions,
including the completion of due diligence and receipt of required governmental
and other consents. The Company expects to complete the transaction during the
third quarter of 1998.

   Management of the Company believes that the cash flows generated from
operations, together with the credit available under the 1997 Credit Facility
upon repayment with proceeds from the Senior Secure Notes, will provide
sufficient liquidity to meet the Company's working capital requirements for the
near term. It is not anticipated that the 1997 Credit Facility will provide
sufficient financing to fund construction costs related to future institutional
contract awards, expansions or significant future acquisitions. The Company
anticipates obtaining additional sources of financing to fund such activities.

YEAR 2000 ISSUE

   The Year 2000 issue exists because many computer systems and applications
currently use two-digit fields to designate a year. As the century date change
occurs, date-sensitive systems will recognize the year 2000 as 1900 or not at
all. The inability to recognize or properly treat the Year 2000 may cause
systems to process critical financial and operational information incorrectly.
Management of the Company has assessed the impact of the Year 2000 issue on the
Company's computer hardware and software systems. Based on this assessment,
management currently believes that the costs of resolving the Year 2000 issues
will not be material to the Company's results of operations or financial
condition.

NEW ACCOUNTING STANDARD

   In April 1998, Statement of Position 98-5, Reporting on the Costs of Start-Up
Activities ("SOP 98-5") was issued. SOP 98-5 requires entities to expense
start-up costs as incurred and to expense previously capitalized start-up costs
as a cumulative effect of a change in accounting principle. SOP 98-5 is
effective for fiscal years beginning after December 15, 1998. At June 30, 1998,
the Company's unamortized start-up costs were approximately $2.3 million.

INFLATION

   Management of the Company believes that inflation has not had a material
effect on the Company's results of operations during the past three years.
However, most of the Company's facility management contracts provide for
payments to the Company of either fixed per diem fees or per diem fees that
increase by only small amounts during the terms of the contracts. Inflation
could substantially increase the Company's personnel costs (the largest
component of facility management expense) or other operating expenses at rates
faster than any increases in occupancy fees.


                                   - 12 -
<PAGE>
PART II  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

   The Company currently and from time to time is subject to claims and suits
arising in the ordinary course of business, including claims for damages for
personal injuries or for wrongful restriction of, or interference with, inmate
privileges. In the opinion of management of the Company, the outcome of the
proceedings to which the Company is currently a party will not have a material
adverse effect upon the Company's operations or financial condition.

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

   On April 9, 1998, the Company held its 1998 Annual Meeting of Stockholders.
The matters voted on at the meeting and the results thereof are as follows:

   Stockholders elected the persons listed below as directors whose terms expire
at the 1999 Annual Meeting of Stockholders. Results by nominee were:

                                                           AUTHORITY
                                             VOTED FOR      WITHHELD
                                            -----------   ----------- 
            David M. Cornell.................7,036,733       9,859
            Campbell A. Griffin, Jr..........7,036,733       9,859
            Richard T. Henshaw, III..........7,036,733       9,859
            Peter A. Leidel..................7,036,733       9,859
            Arlene R. Lissner................7,036,633       9,959
            Tucker Taylor....................7,036,733       9,859

   Stockholders ratified the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending December 31, 1998,
with 7,000,861 shares voted for, 37,561 shares voted against, 3,670 abstentions
and 4,500 shares not voted.

   Stockholders did not approve the proposed amendment to Article Fifth of the
Company's Restated Certificate of Incorporation to provide for the
classification of the Board of Directors into three classes, with members of
each class serving staggered three year terms. There were 3,397,885 shares voted
for, 3,187,282 shares voted against, 3,920 abstentions and 457,505 shares not
voted.

   Stockholders did not approve the proposed amendment to Article Eighth of the
Company's Restated Certificate of Incorporation that would have provided that
Article Fifth and Article Eighth of the Restated Certificate of Incorporation
could only be amended by the affirmative votes of at least 66 2/3% of the shares
entitled to vote for the election of directors. There were 3,048,518 shares
voted for, 3,536,824 shares voted against, 8,245 abstentions and 453,005 shares
not voted.

   Stockholders did not approve the proposed amendment to Article Eighth of the
Company's Restated Certificate of Incorporation that would have allowed
stockholders to adopt, amend or repeal the bylaws only by the affirmative votes
of at least 66 2/3% of the shares entitled to vote for the election of
directors. There were 3,058,623 shares voted for, 3,523,059 shares voted
against, 7,405 abstentions and 457,505 shares not voted.

   Stockholders approved the amendment and restatement of the 1996 Stock Option
Plan to increase the number of shares available for grant. There were 3,343,385
shares voted for, 3,231,365 shares voted against, 8,490 abstentions and 463,352
shares not voted.

                                   - 13 -
<PAGE>
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         a. Exhibits

            10.1  Note Purchase Agreement dated July 15, 1998

            11.1  Statement Re: Computation of Per Share Earnings

            27    Financial Data Schedule

         b. Reports on Form 8-K

               Form 8-K of the Company dated May 11, 1998 reporting the adoption
               of the Shareholder Rights Plan. Amendment No. 1 to that Form 8-K
               was filed on May 15, 1998.

                                   - 14 -

<PAGE>
                                   Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange 
Act of 1934, the Registrant has duly caused this report to be signed on its 
behalf by the undersigned, thereunto duly authorized. 

                                   CORNELL CORRECTIONS, INC.

Date:  August 12, 1998             By: /s/ DAVID M. CORNELL
                                           DAVID M. CORNELL
                                           Chairman of the Board, President
                                            and Chief Executive Officer
                                            (Principal Executive Officer)

Date:  August 12, 1998             By: /s/ KEVIN B. KELLY
                                           KEVIN B. KELLY
                                           Controller, Chief Accounting
                                            Officer and Secretary

                                      -15-