NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.AND SUBSIDIARY


                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q
(Mark One)

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

For the quarterly period  ended December 31, 1999

                                       OR

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

For the transition period from                        to

Commission file number         000-26749

                   NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
             (Exact name of Registrant as Specified in Its Charter)

                  New York                            11-2581812
(State or Other Jurisdiction of         (IRS Employer Identification No.)
Incorporation or Organization)


 26 Harbor Park Drive, Port Washington, NY                 11050
  (Address of Principal Executive Offices)               (Zip Code)

Registrant's Telephone Number, Including Area Code - (516) 626-0007

(Former Name, Former Address and Former Fiscal Year,
 if Changed Since Last Report)

     Indicate by check whether the registrant: (1) filed all reports required to
be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during
the past 12 months (or for such shorter  period that the registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days.   Yes X    No

              APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
                     PROCEEDINGS DURING THE PAST FIVE YEARS

     Indicate by check mark whether the  registrant  has filed all documents and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
by a court. Yes No

                      APPLICABLE ONLY TO CORPORATE ISSUERS

         The number of shares  outstanding  of each of the  issuer's  classes of
common equity, as of February 10, 2000 was 6,912,496 shares.



<PAGE>


           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES


                                      INDEX
                                                                        Page

PART I        -   FINANCIAL INFORMATION

Item 1        -   FINANCIAL STATEMENTS:                                   3

                  CONSOLIDATED BALANCE SHEETS as of June 30, 1999         3
                  and December 31, 1999 (unaudited)

                  CONSOLIDATED STATEMENTS OF INCOME (unaudited)           4
                  for the three months and six months
                  ended December 31, 1998 and 1999

                  CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)       5
                  for the six months ended December 31, 1998 and 1999

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS              6

Item 2        -   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL      11
                  CONDITION AND RESULTS OF OPERATIONS

Item 3        -   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT         15
                  MARKET RISK

PART II       -   OTHER INFORMATION

Item 1        -   LEGAL PROCEEDINGS                                      16

Item 2        -   CHANGES IN SECURITIES AND USE OF PROCEEDS              16

Item 3        -   DEFAULTS UPON SENIOR SECURITIES                        16

Item 4        -   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS    16

Item 5        -   OTHER INFORMATION                                      16

Item 6        -   EXHIBITS AND REPORTS ON FORM 8-K                       16








<PAGE>



                           CONSOLIDATED BALANCE SHEETS



<TABLE>
<S>                                                                                  <C>               <C>
                                                                                        June 30,            December 31,
                                                                                          1999                 1999
                                                                                                            (Unaudited)
ASSETS
Current Assets:
       Cash and cash equivalents                                                     $  2,815,863      $ 10,823,938
       Accounts receivable,
                less allowance for possible losses of $846,344 and $76,721             13,233,760        14,066,648
       Rebates receivable                                                               5,303,786         5,746,873
       Deferred income tax                                                                530,000            75,000
       Other current assets                                                               283,694           661,518
Total Current Assets                                                                   22,167,103        31,373,977

       Property, equipment and software development costs, net                          2,754,522         3,543,753
Due from affiliates                                                                     4,579,280         3,854,440
       Other assets                                                                        15,728            15,728
       Deferred income tax                                                                166,000               ---
       Deferred offering costs                                                          1,163,378               ---
                                                                                     $ 30,846,011      $ 38,787,898

LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities:
Accounts payable and accrued expenses                                                $ 26,883,745      $ 24,211,105
       Current portion of long-term debt                                                    1,950            38,940
       Due to officer/stockholder                                                         390,000           420,000
       Due to affiliates                                                                  750,968            90,285
       Income taxes payable                                                               704,489               ---
       Other current liabilities                                                          116,544           148,034
Total Current Liabilities                                                              28,847,696        24,908,364

Long-term debt, less current portion                                                          ---           108,040
Deferred tax liability                                                                        ---           120,000
Total Liabilities                                                                      28,847,696        25,136,404

COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY :
       Preferred stock $.10 par value;
          10,000,000 shares authorized, none outstanding                                      ---               ---
       Common stock, $.001 par value;
          25,000,000 shares authorized,  5,312,496 and
          6,912,496 shares issued and outstanding                                           5,313             6,913
       Additional paid-in capital                                                       2,868,573        12,405,010
       Retained earnings                                                                  480,529         1,565,921
       Notes receivable - stockholders                                                 (1,356,100)         (326,350)
Total Stockholders' Equity                                                              1,998,315        13,651,494
                                                                                     $ 30,846,011      $ 38,787,898



           See accompanying notes to consolidated financial statements

</TABLE>
<PAGE>


                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)
<TABLE>
<S>                                                      <C>              <C>                  <C>               <C>


                                                              Three months ended                    Six months ended
                                                                 December 31,                         December 31,
                                                             1998             1999                 1998             1999

REVENUES                                                  $32,760,690      $45,746,710          $63,283,082       $85,273,760
Cost of claims                                             29,857,711       42,564,492           56,863,649        78,741,665

GROSS PROFIT                                                2,902,979        3,182,218            6,419,433         6,532,095

Selling, general and administrative expenses *              2,730,080        2,558,916            4,976,489         5,132,406

Operating income                                              172,899          623,302            1,442,944         1,399,689

Other income (expense):
       Other income, net                                      187,018          269,081              351,804           488,704
       Public Offering costs                                  190,492              ---              (36,904)              ---

Income before income taxes                                    550,409          892,383            1,757,844         1,888,393

Provision for income taxes                                    124,000          360,772              626,000           803,000

NET INCOME                                                   $426,409         $531,611           $1,131,844        $1,085,393

Earnings per common shares:
       Basic                                                    $0.08            $0.08                $0.22             $0.16
       Diluted                                                  $0.08            $0.08                $0.22             $0.16


Weighted average number of common shares outstanding:
       Basic                                                5,227,267        6,912,496            5,099,423         6,634,235
       Diluted                                              5,227,267        6,912,496            5,099,423         6,634,235


* Includes amounts charged by affiliates aggregating:        $705,815         $622,262           $1,364,381        $1,298,244


           See accompanying notes to consolidated financial statements
</TABLE>

<PAGE>


                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<S>                                                                                    <C>                     <C>
                                                                                                Six months ended
                                                                                                  December 31,
                                                                                          1998                    1999
CASH FLOWS FROM OPERATING ACTIVITIES:
       Net income                                                                      $1,131,844              $1,085,393
       Depreciation and amortization                                                      332,353                 535,422
       Bad debt expense                                                                   683,943                     ---
       Bonus accrued to officers/stockholders                                             170,850                     ---
       Compensation expenses accrued to officer/stockholder                               180,000                  30,000
       Deferred income taxes                                                               19,000                 741,000
       Interest accrued on stockholders' loans                                            (56,950)                 (6,375)
       Changes in assets and liabilities:
           (Increase) decrease in:
              Accounts receivable                                                      (2,673,917)               (832,888)
              Other current assets                                                        (65,515)               (377,824)
              Rebates receivable                                                         (256,950)               (443,087)
              Due to/from affiliates                                                     (309,136)                 64,157
           Increase (decrease) in:
              Accounts payable and accrued expenses                                       258,872              (2,672,640)
              Income taxes payable                                                        481,194                (704,489)
              Other liabilities                                                           114,477                  31,490

Net cash provided by (used in) operating activities                                        10,065              (2,549,841)

CASH FLOWS FROM INVESTING ACTIVITIES:
       Capital expenditures                                                              (882,585)             (1,173,816)
       Loans to stockholders                                                              (90,100)                    ---
           Repayment of note by stockholder                                                   ---               1,036,125

Net cash used in investing activities                                                    (972,685)               (137,691)

CASH FLOWS FROM FINANCING ACTIVITIES:
           Sale of common stock                                                         2,000,000              10,701,415
           Repayment of debt                                                               (4,198)                 (5,808)

Net cash provided by financing activities                                               1,995,802              10,695,607

Net increase  in cash and cash equivalents                                              1,033,182               8,008,075
Cash and cash equivalents, beginning of period                                          1,305,792               2,815,863
Cash and cash equivalents, end of period                                               $2,338,974             $10,823,938

Non cash investing activities:

During the six months  ended  December 31, 1999,  the Company  incurred  capital
lease obligations for equipment in the amount of $150,837.



           See accompanying notes to consolidated financial statements

</TABLE>

<PAGE>


           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


1.    BASIS OF PRESENTATION

The unaudited consolidated financial statements include the accounts of National
Medical Health Card Systems,  Inc. and its wholly owned  subsidiaries,  National
Medical Health Card IPA, Inc. and Specialty Pharmacy Care, Inc., (the "Company")
and have been prepared as if the entities had operated as a single  consolidated
group since inception.  All material intercompany balances and transactions have
been eliminated in the consolidation.

The accompanying  unaudited consolidated financial statements have been prepared
by the Company in accordance with generally accepted  accounting  principles for
interim  financial  information and  substantially in the form prescribed by the
Securities and Exchange  Commission in  instructions to Form 10-Q and Article 10
of Regulation S-X.  Accordingly,  they do not include all of the information and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements.  In the opinion of the Company's management,  the December
31,  1999  and  1998  unaudited   interim  financial   statements   include  all
adjustments,  consisting of normal recurring  adjustments,  necessary for a fair
presentation  of  results  for these  interim  periods.  In the  opinion  of the
Company's  management,  the disclosures contained in this Form 10-Q are adequate
to make the information  presented not misleading when read in conjunction  with
the Notes to Consolidated  Financial  Statements  included in the Company's Form
10-K for the year ended June 30, 1999.  The results of operations  for the three
and six month periods ended December 31, 1999 are not necessarily  indicative of
the results to be expected for the full year or for any future period.

2.     PUBLIC OFFERING

The registration statement for the Company's Public Offering became effective on
July 28,  1999 ("the  Public  Offering").  The  Company  consummated  the Public
Offering  on August 2, 1999 and issued  1,600,000  shares of common  stock at an
offering price of $7.50 per share.  The Company granted the  underwriters of the
Public Offering 200,000 warrants for nominal consideration. The warrants entitle
the  underwriters to purchase 200,000 shares of common stock from the Company at
$9.00 per share.  The warrants are exercisable for four years commencing on July
29, 2000. In addition,  the underwriters were granted an overallotment option by
the Company to buy 300,000 shares of common stock at $7.50 per share exercisable
by September 11, 1999. The underwriters did not exercise this option. Concurrent
with the Public Offering,  the Selling Stockholder sold 400,000 shares of common
stock from its  holding at $7.50 per share.  The  Company  received  proceeds of
$12,883,100  representing  payment for the sale of the 1,600,000 shares plus 73%
of the proceeds from the sale of the 400,000  shares by the Selling  Stockholder
for repayment of $1,992,900 of indebtedness owed by the Selling  Stockholder and
affiliates to the Company. Such proceeds were net of underwriting  discounts and
commissions,  a non-accountable  expense allowance and a financial  advisory fee
paid to the underwriters plus certain fees and expenses paid by the Company.


3.    STOCK OPTIONS

On August 3, 1999, and after, the Company granted incentive options to employees
under the 1999 Stock Option Plan (the "Plan") to purchase shares of common stock
at $7.50 per share.  These  options vest and become  exercisable  within a three
year period  commencing  upon the completion of one year of employment  with the
Company.  These  options  terminate  after five years.  As of December 31, 1999,
139,700 options had been granted.

On August 3, 1999, the Company  granted  non-statutory  options to three outside
directors  under the Plan to purchase an  aggregate  of 30,000  shares of common
stock at $7.50 per share.  These  options vest and become  exercisable  within a
three year period commencing August 3, 1999 and terminate on August 3, 2004.

4.    EMPLOYMENT AGREEMENT

The Company entered into an employment  agreement with the majority  stockholder
effective July 1, 1999. Pursuant to this agreement, the majority stockholder has
agreed to serve as Chairman  of the Board of  Directors  at an annual  salary of
$200,000,  subject  to  adjustment  by the  Board of  Directors.  The  agreement
commenced on July 1, 1999 and has a term of two years,  unless terminated by the
Company for cause, or in the event the stockholder becomes permanently disabled.
The agreement  provides for certain fringe  benefits  payable to or on behalf of
the majority  stockholder,  such as the use of an automobile.  In addition,  the
agreement  provides  for certain  termination  benefits  payable to the majority
stockholder,  which depending upon the reason for  termination,  can equal up to
two years salary.


5.    EARNINGS PER SHARE

     Outstanding  options and warrants  issued by the Company are excluded  from
     the calculation of diluted  earnings per share for the three months and six
     months ended December 31, 1999 as they are antidilutive.  Options issued by
     the majority stockholder that were outstanding for the three and six months
     ended  December  31, 1999 and 1998 are  excluded  from the  computation  of
     diluted  earnings per share since,  upon exercise,  the  underlying  common
     stock would be issued by the majority  stockholder  in accordance  with the
     option agreements.

6.   ACCOUNTS PAYABLE AND ACCRUED EXPENSES

     Accounts payable and accrued expenses consist of the following:
                                            June 30,       December 31,
                                              1999             1999

     Claims payable                       $17,553,036      $17,912,709
     Rebates payable to sponsors            7,062,159        5,308,786
     Other payables                         2,268,550          989,610
                                          $26,883,745      $24,211,105

     During  September  1999 rebates  payable were reduced by $736,000  when the
     Company  reevaluated  its liability to a plan sponsor.  Cost of claims were
     decreased by the same amount.

7.   RELATED PARTY TRANSACTIONS

     Certain  costs  paid  to  the  affiliates  were   capitalized  as  software
     development  costs.  For the six months ended  December 31, 1999 the amount
     charged by affiliates and capitalized was $281,890.

     The Company  purchased  furniture and fixtures from an affiliate during the
     six months ended December 31, 1999 for  approximately  $111,864.  The price
     included a 20% purchasing and handling fee.

     For the  periods  presented,  certain  general,  administrative  and  other
     expenses  reflected in the  financial  statements  include  allocations  of
     certain  corporate  expenses from affiliates which take into  consideration
     personnel,  estimates  of the  time  spent  to  provide  services  or other
     appropriate  bases.  These  allocations  include  services and expenses for
     general management,  information systems maintenance, financial consulting,
     employee   benefits   administration,   legal   communications   and  other
     miscellaneous services.

     Management  believes the  foregoing  allocations  were made on a reasonable
     basis.  Although these  allocations do not necessarily  represent the costs
     which would have been or may be incurred by the Company on the  stand-alone
     basis,  management  believes  that  any  variance  in  costs  would  not be
     material.

     General and administrative expenses related to transactions with affiliates
     included in the statement of income are:
                                                Three  months ended December 31,
                                                        1998              1999

     Software maintenance and related services    $    176,290       $   230,252
     Management and consulting fees                    446,484           215,834
     Administrative and bookkeeping services            28,052            83,176
     Rent and utilities                                 54,989            93,000
                                                  $    705,815       $   622,262

                                                Six  months  ended  December 31,
                                                        1998              1999

     Software maintenance and related services    $    339,904       $   457,000
     Management and consulting fees                    797,271           524,644
     Administrative and bookkeeping services           119,935           130,600
     Rent and utilities                                107,271           186,000
                                                   $ 1,364,381       $ 1,298,244

<PAGE>
8.   MAJOR CUSTOMERS AND PHARMACIES

     For the three months ended  December 31, 1998 and 1999,  approximately  68%
     and 49%,  respectively,  of the  revenues  were from  three  plan  sponsors
     administering  multiple  plans.  For the six months ended December 31, 1998
     and 1999,  approximately  68% and 51%,  respectively,  of the revenues were
     from three plan sponsors  administering  multiple  plans.  Amounts due from
     these three customers at December 31, 1999 approximated $2,820,000.

     In October 1999 the Company  entered into a new two year  arrangement  with
     one of its  major  sponsors.  As  consideration  for this  arrangement  the
     Company  settled  certain fees due from this sponsor and reduced revenue by
     $821,000 during September 1999.

     For the three months ended  December 31, 1998 and 1999,  approximately  28%
     and 42% of the cost of claims were from two  pharmacy  chains.  For the six
     months ended December 31, 1998 and 1999,  approximately  28% and 42% of the
     cost of claims were from the same two pharmacy  chains.  Amounts payable to
     these  two  pharmacy  chains  at  December  31,  1999  were   approximately
     $7,855,000.


9.   LITIGATION

     On February 9, 1999, the Company was informed by counsel that an action was
     brought  against it by the West Contra Costa Unified School District and an
     individual plaintiff in the State of California.  The case was subsequently
     removed to Federal court. The complaint alleges,  among other things,  that
     the parties  entered into a contract in November  1996,  for services to be
     provided  by  the  Company  and,  subsequently,  the  Company  unilaterally
     terminated the contract on December 16, 1996. The complaint further alleges
     that this termination was in violation of the terms of the contract and one
     or more statutory  provisions;  that the termination resulted in the school
     district  incurring  approximately  $150,000 in additional costs due to its
     having to enter  into a fee for  service  arrangement  with the  Company in
     order to continue providing  prescription benefits to its plan members; and
     that, due to the wrongful termination of the contract,  the school district
     was forced to secure a  replacement  for the benefits and the services that
     were to have  been  provided  under  the  contract  with  the  Company.  In
     connection  with this last  circumstance,  the  complaint  alleges that the
     school district incurred approximately $400,000 in additional expenses. The
     complaint  also seeks treble  damages.  If treble damages were allowable in
     this case and a  judgment  were to be  entered  against  the  Company,  the
     Company  would be liable for damages in excess of  $1,500,000.  The Company
     denies the allegations and intends to vigorously defend this action. In the
     opinion  of  management,  the  outcome of this  litigation  will not have a
     material adverse effect on the Company's  financial position or its results
     of operations.

10.  SUBSEQUENT EVENTS

     As of January 1, 2000 the Company will no longer be providing the employees
     of Suffolk County, a major customer, with pharmacy benefits. Final contract
     settlement with the County is being negotiated.

     This  customer  accounted  for 12.55% and 12.28% of total  revenues for the
     three months ended December 31, 1998 and 1999, respectively, and 14.17% and
     12.01% of total  revenues  for the six months  ended  December 31, 1998 and
     1999, respectively.










<PAGE>


           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES

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


Results of Operations

Three Months Ended December 31, 1999 Compared to Three Months Ended December 31,
1998

Revenues  increased $12.9 million,  or approximately 39%, from $32.8 million for
the three months ended  December 31, 1998 to $45.7  million for the three months
ended December 31, 1999. The increase  resulted  primarily from $10.9 million in
fees related to new sponsors. The remaining increase of approximately $2 million
was due  primarily  to other  existing  sponsors  as a result of higher  charges
relating to pharmaceuticals,  new drugs, plan participant growth and an increase
in the average number of claims per plan participant.

Cost of claims increased $12.7 million, or approximately 42%, from $29.9 million
for the three  months  ended  December  31, 1998 to $42.6  million for the three
months  ended  December 31, 1999.  As a percentage  of revenues,  cost of claims
increased  from 91% for the three months ended  December 31, 1998 to 93% for the
three months ended December 31, 1999, as a result of higher drug costs.

Gross profit increased  approximately  $300,000, from $2.9 million for the three
months  ended  December  31,  1998 to $3.2  million for the three  months  ended
December 31, 1999, primarily as a result of the increase in revenues,  offset by
the increase in the cost of claims.

Selling,  general and administrative  expenses, which include amounts charged by
affiliates,  decreased $100,000,  or approximately 4%, from $2.7 million for the
three months ended  December 31, 1998 to $2.6 million for the three months ended
December 31, 1999. The decrease  resulted  primarily from a decrease of $684,000
of bad debt expense,  offset by increases in compensation,  benefits,  sales and
marketing and other expenses related to the expansion of the Company's business.

General and administrative  expenses charged by affiliates decreased $84,000, or
approximately 12%, from $706,000 for the three months ended December 31, 1998 to
$622,000 for the three months ended December 31, 1999.

Other  income  decreased  $109,000,  from  $378,000  for the three  months ended
December 31, 1998 to of $269,000  for the three months ended  December 31, 1999,
due to a $190,000  decrease  in the  overaccrual  of Public  Offering  costs,  a
$42,000  decrease in  shareholder  and affiliate  interest  income,  offset by a
$123,000 increase in interest income earned on short-term investments.

The provision for income taxes increased  $237,000,  from $124,000 for the three
months ended  December 31, 1998 to $361,000 for the three months ended  December
31, 1999, as a result of increased taxable income.

Six Months Ended December 31, 1999 Compared to Six Months Ended
December 31, 1998

     Revenues  increased $22 million,  or approximately  35%, from $63.3 million
for the six months ended  December 31, 1998 to $85.3  million for the six months
ended December 31, 1999. The increase  resulted  primarily from $18.7 million in
fees related to new  sponsors.  The  remaining  increase of  approximately  $4.1
million  was due  primarily  to other  existing  sponsors  as a result of higher
charges relating to  pharmaceuticals,  new drugs, plan participant growth and an
increase in the average number of claims per plan participant.  Revenues for the
six months ended December 31, 1998 included a one-time rate increase of $500,000
from a major client.  The revenue for the six months ended December 31, 1999 was
net of an $821,000  reduction in revenue when the Company  settled  certain fees
due from a major sponsor as  consideration  for a new two year  arrangement with
this sponsor.

Cost of claims increased $21.8 million, or approximately 38%, from $56.9 million
for the six months ended  December 31, 1998 to $78.7  million for the six months
ended December 31, 1999. As a percentage of revenues,  cost of claims  increased
from 90% for the six months  ended  December  31, 1998 to 92% for the six months
ended December 31, 1999, as a result of higher drug costs. During the six months
ended  December  31, 1999  rebates  payable  were  reduced by $736,000  when the
Company reevaluated its liability to a plan sponsor.  Cost of claims for the six
months were decreased by the same amount.

Gross profit  increased  approximately  $100,000,  from $6.4 million for the six
months ended December 31, 1998 to $6.5 million for the six months ended December
31,  1999,  primarily  as a result of the  increase in  revenues,  offset by the
increase in the cost of claims.

Selling,  general and administrative  expenses, which include amounts charged by
affiliates, increased $100,000, or approximately 2%, from $5 million for the six
months ended December 31, 1998 to $5.1 million for the six months ended December
31, 1999.  The  increase  resulted  primarily  from  increases in  compensation,
benefits, sales and marketing and other expenses related to the expansion of the
Company's business, offset by a $684,000 decrease in bad debt expense.

General and administrative expenses charged by affiliates decreased $100,000, or
approximately  7%, from $1.4 million for the six months ended  December 31, 1998
to $1.3 million for the six months ended December 31, 1999.

Other income increased $174,000, from $315,000 for the six months ended December
31,  1998 to $489,000  for the six months  ended  December  31,  1999,  due to a
$207,000  increase in interest  income  earned on short-term  investments  and a
$37,000  decrease  in Public  Offering  costs  offset by a $70,000  decrease  in
shareholder and affiliate interest income.

The provision  for income taxes  increased  $177,000,  from $626,000 for the six
months ended December 31, 1998 to $803,000 for the six months ended December 31,
1999, as a result of increased taxable income.

Liquidity and Capital Resources

The  Company's  primary  cash  requirements  are for  capital  expenditures  and
operating  expenses  including  cost of  pharmaceuticals,  software and hardware
upgrades and the funding of accounts  receivable.  As of December 31, 1999,  the
Company  had  working  capital  of $6.5  million.  Net  cash  used in  operating
activities was $2.5 million for the six months ended December 31, 1999 resulting
primarily  from  increases  in  accounts  receivable  due to the  growth  of the
Company's business,  and a decrease in accounts payable and accrued expenses due
to the Company's  improved working capital position.  Net cash used by investing
activities  was $138,000 for the six months  ended  December 31, 1999  resulting
primarily  from  a  repayment  of  a  note  by  stockholder  offset  by  capital
expenditures  associated with the expansion of the Company's  computer  systems.
Net cash  provided  by  financing  activities  was $10.7  million  and  resulted
primarily from the Public Offering.

The registration statement for the Company's Public Offering became effective on
July 28,  1999 ("the  Public  Offering").  The  Company  consummated  the Public
Offering  on August 2, 1999 and issued  1,600,000  shares of common  stock at an
offering price of $7.50 per share.  The Company granted the  underwriters of the
Public Offering 200,000 warrants for nominal consideration. The warrants entitle
the  underwriters to purchase 200,000 shares of common stock from the Company at
$9.00 per share.  The warrants are exercisable for four years commencing on July
29, 2000. In addition,  the underwriters were granted an overallotment option by
the Company to buy 300,000 shares of common stock at $7.50 per share exercisable
by September 11, 1999. The underwriters did not exercise this option. Concurrent
with the Public Offering,  the Selling Stockholder sold 400,000 shares of common
stock from its  holding at $7.50 per share.  The  Company  received  proceeds of
$12,883,100  representing  payment for the sale of the 1,600,000 shares plus 73%
of the proceeds from the sale of the 400,000  shares by the Selling  Stockholder
for repayment of $1,992,900 of indebtedness owed by the Selling  Stockholder and
affiliates to the Company. Such proceeds were net of underwriting  discounts and
commissions,  a non-accountable  expense allowance and a financial  advisory fee
paid to the underwriters plus certain fees and expenses paid by the Company.

The Company  anticipates  that the net  proceeds of the Public  Offering and the
repayment of certain affiliate and shareholder  debt,  together with anticipated
cash  flow  from  operations,  will  be  sufficient  to  satisfy  the  Company's
contemplated  cash  requirements  for at least  24  months.  This is based  upon
current levels of capital expenditures and anticipated operating results for the
next 24 months.  Alternatively,  revolving  credit lines and debt  financing are
being  evaluated  as backups to  anticipated  cash needs.  In the event that the
Company's plans change or its assumptions prove to be inaccurate or the proceeds
of the Public Offering  otherwise  prove to be insufficient to fund  operations,
the  Company  could  be  required  to  seek  additional  financing  sooner  than
anticipated.

Other Matters

Inflation

Management does not believe that inflation has had a material  adverse impact on
the Company's net income.

Year 2000

By December  1999,  the Company had  carefully  reviewed and upgraded all of its
management  and  information  systems,  using  internal  staff and outside firms
specializing in computer  systems,  networking,  telecommunications,  accounting
software  and  associated  products,  in an effort to minimize any impact of the
year 2000. While the Company's  project to assess and correct Y2K related issues
regarding the year 2000 has been completed,  and the Company has not experienced
any Y2K related  events,  interactions  with other  companies'  systems  make it
difficult  to  conclude  there  will  not be  future  effects.  The  Company  is
monitoring the situation  carefully and at this time,  management  believes that
the impact of the year 2000 will have no material  effect on its  operations  or
financial results.

Forward-Looking Statements

This  report  contains  or may  contain  forward-looking  statements  within the
meaning  of  Section  21E of the  Securities  Exchange  Act  of  1934  including
statements of the Company's and management's expectations, intentions, plans and
beliefs, including those contained in or implied by "Management's Discussion and
Analysis of  Financial  Condition  and Results of  Operations"  and the Notes to
Consolidated Financial Statements.  These forward-looking statements, as defined
in Section 21E of the Securities  Exchange Act of 1934, are dependent on certain
events, risks and uncertainties that may be outside the Company's control. These
forward-looking  statements  may include  statements of  management's  plans and
objectives for the Company's future operations and statements of future economic
performance;  the Company's capital budget and future capital requirements,  and
the Company's meeting its future capital needs; and the assumptions described in
this report  underlying  such  forward-looking  statements.  Actual  results and
developments  could differ materially from those expressed in or implied by such
statements  due to a number of factors,  including,  without  limitation,  those
described in the context of such forward-looking statements, and the factors set
forth  in  the   Company's   Form  10-K.   All   subsequent   written  and  oral
forward-looking  statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by this section.

ITEM 3     -      QUANTITATIVE AND QUALITATIVE DISCLOSURES
                  ABOUT MARKET RISK

Not applicable.



<PAGE>


           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES


                           PART II - OTHER INFORMATION


Item 1  - LEGAL PROCEEDINGS

See Form 10-K for the period ended June 30, 1999.

Item 2  - CHANGES IN SECURITIES AND USE OF PROCEEDS

On August 3, 1999, and after, the Company granted incentive options to employees
under the 1999 Stock Option Plan (the "Plan") to purchase shares of common stock
at $7.50 per share.  These  options vest and become  exercisable  within a three
year period  commencing  upon the completion of one year of employment  with the
Company.  These  options  terminate  after five years.  As of December  31, 1999
139,700 options had been granted.

On August 3, 1999, the Company  granted  non-statutory  options to three outside
directors  under the Plan to purchase an  aggregate  of 30,000  shares of common
stock at $7.50 per share.  These  options vest and become  exercisable  within a
three year period commencing August 3, 1999 and terminate on August 3, 2004.

Item 3  - Defaults Upon Senior Securities

None.

Item 4  - Submission of Matters to a Vote of Security Holders

None.

Item 5  - Other Information

None.

Item 6  - Exhibits and Reports on Form 8-K

None.

Exhibit 27 - Financial Data Schedule (Electronic Filing Only)


<PAGE>







                                   SIGNATURES


Pursuant  to the  requirements  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.



                   NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
                                  (Registrant)



Date:    February 14, 2000                  By: /s/ Bert E. Brodsky
                                                Bert E. Brodsky
                                                Chairman of the Board
                                                and Chief Executive Officer




<PAGE>





                                   SIGNATURES


Pursuant  to the  requirements  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.



                   NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
                                  (Registrant)



Date:    February 14, 2000                  By:
                                                Bert E. Brodsky
                                                Chairman of the Board
                                                and Chief Executive Officer




<PAGE>








                                                           February 14, 2000



Securities and Exchange Commission 450 5th Street, N.W.
Washington, D.C.  20549

                                Re: National Medical Health Card Systems, Inc.
                                    File No: 000-26749

Dear Sir or Madam:

Transmitted  herewith  through  the EDGAR  system  is Form 10-Q for the  quarter
ending December 31, 1999 for National  Medical Health Card Systems,  Inc. If you
have any questions or comments,  please contact me at (516) 484-4400,  extension
215.



                                                           Very truly yours,




                                                           Linda Scarpantonio
                                                           Legal Coordinator